CFP

Charitable Transfers - Charitable Gift Annuities

Charitable Gift Annuities
A charitable gift annuity is another charitable option for a donor that promotes a charitable gift but also pays a fixed income stream to the donor for their lifetime. The charitable annuity is considered a direct obligation of the charity which allows them to pay a standardized lower income rate on the annuity stream than their commercial annuity counterpart in order to conserve the gift portion of the contract. The donor(s) are not required to start the income stream immediately, but when they do the annuity will pay the annuity income stream to the donor(s) for life.

Deduction and Taxation of Annuity Payments
Donors will receive a partial deduction for the amount of the donation transferred to the charitable annuity based on the present value of the retained interest. Annuity payments are considered both a return of principal and ordinary income; therefore, an exclusion ratio is used to calculate the taxable portion.


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