Charitable Gift Annuities

Description

A contract with a nonprofit organization, in which you provide a gift and, in exchange, the nonprofit guarantees you income for life.

Key characteristics

  • Potential immediate (partial) tax deduction, based on your life expectancy and the anticipated income stream
  • Reduces capital gains tax liability for gifts of long-term appreciated assets
  • Tax is due on the income stream
  • You can often donate many types of assets

Details

A Charitable Gift Annuity is a contract under which a charity, in return for a transfer of cash, marketable securities or other assets, agrees to pay a fixed amount of money (payment) to one or two individuals (beneficiaries or annuitants), for their lifetime.

The contract is between the donors and the issuing charity, where the donors transfer property (cash, securities, and real property) in exchange for a fixed dollar payment during their lifetime. Tax deductions for this type of life-income gift vary with the number of recipients and the age of the donor at the time of the gift. The issuing institution guarantees the income, as it becomes a legal obligation of the charity.

By definition, a Charitable Gift Annuity is what is referred to as a split gift. Part of the gift is to be used by the charity immediately for its charitable purposes, and part of the gift is set aside in a reserve account to be invested and used to support the payments to the donor/annuitants. Such payments include the earnings on the reserve account and a part of the principal in the reserve account. The ratio of these parts, that is, the parts that are principal and earnings, depends upon the age of the annuitant.


Comments

Tell us what you think about this article.
Please note that when you submit a comment, it may be posted here.

The views and opinions of third-party content providers are solely those of the author and not Fidelity Charitable. Fidelity Charitable does not guarantee the accuracy of the information provided by such third parties. Information provided is general and educational in nature. It is not intended to be, and should not be construed as, legal or tax advice. Fidelity Charitable does not provide legal or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. Fidelity Charitable makes no warranties with regard to the information or results obtained by its use. Fidelity Charitable disclaims any liability arising out of your use of, or reliance on, the information. Consult an attorney or tax advisor regarding your specific legal or tax situation.