Investing with Faith / Elisa Smith

Frequently asked questions about charitable gift annuities

Last month, I shared with you that the American Council on Gift Annuities (ACGA) has increased suggested maximum payout rates for charitable gift annuities, effective on July 1, 2018, and the Catholic Community Foundation is honoring these new rates.

This column will address questions we receive from donors regarding charitable gift annuities.
 

Q. What is a charitable gift annuity?

A. A charitable gift annuity is a contract between an individual and a charitable organization in which the donor makes a contribution of property in exchange for fixed lifetime payments.
 

Q. Instead of cash, can I give stocks or other marketable securities to fund the charitable gift annuity?

A. Yes. In fact, there could be tax benefits from gifting appreciated securities because capital gains that would be due upon selling the property could be reduced or delayed.
 

Q. What determines the size of the annuity payment?

A. In addition to the dollar amount of the property gifted, the age(s) of the annuitant(s) at the time the annuity is created determines the payout amount.
 

Q. Are my annuity payments taxable?

A. During the annuitant’s life expectancy, a portion of the payout is considered ordinary income, and a portion is tax-free. If the annuitant exceeds their life expectancy, the payments are considered ordinary income. If a donor funds a gift annuity with appreciated property, the taxation of payouts will need to take into consideration the long-term capital gain.
 

Q. Are there any other tax benefits in establishing a charitable gift annuity?

A. Yes. The donor receives an immediate charitable income tax deduction for the gift portion.
 

Q. Can my spouse continue receiving the annuity after my death?

A. Instead of a single life agreement, a donor may establish a two-life agreement with their spouse whereby if the annuity is paid to the donor and the spouse survives the donor, the annuity is then paid to the spouse.
 

Q. In establishing a charitable gift annuity with the Catholic Community Foundation, what charity(ies) can I name as beneficiary?

A. A charitable gift annuity created with the Catholic Community Foundation can provide for your parish, school, other Catholic agency or ministry of the Archdiocese of Indianapolis.
 

Please contact the Catholic Community Foundation at 1-800-382-9836, ext. 1482, or ccf@archindy.org to obtain a free illustration showing your potential income tax charitable deduction and the amount of your annual payments for life. Or visit our website, www.archindy.org/CCF, for more information.
 

(Elisa Smith is director of the archdiocesan Catholic Community Foundation. Tax information or legal information provided herein is not intended as tax or legal advice and cannot be relied on to avoid statutory penalties. Always check with your legal, tax and financial advisors before implementing any gift plan.) †