Yes, indeed, it is possible to make a gift to many non-profit organizations and in return, receive an income tax deduction and cash for life with a charitable gift annuity (CGA). These annuities have supported charitable missions while providing a source of virtually guaranteed income to donors and/or their designated recipients since 1830. Allegheny has offered them since the 1990s, and we currently have 100-plus totaling about $11 million under management.
A gift annuity is a contract under which a charity, in return for a gift of cash or stock, agrees to make fixed annual payments for life to one or two people named at the time of the contribution. A person who receives payments is called an annuitant or beneficiary. Because you will receive money back from your gift, only part of the original payment is eligible for an income tax deduction (the charity will give you that figure).
One’s annual rate of income is set when the contribution is made and it never changes. The older the beneficiary/ies, the higher the rate. Rates are set so that at least 50 percent of the original contribution is expected to be left for charitable use at the income beneficiaries’ deaths. Payments are backed up by all of the charity’s assets: as our late colleague used to say, “They’d have to sell my desk before you did not receive your payment!”
In order to ensure that CGAs do not run out of money, charities set their own minimum age and gift amounts. At Allegheny, you must be 65 or older to begin receiving payments, but you can establish a deferred annuity for yourself or others at age 50 or older. The time between establishing a CGA and receiving income is the deferral period; the longer the deferral, the higher the payment rate. For example, a CGA with immediate payment for a 65 year old has a rate of 5.1%, but the rate for a 50 year old deferring payments until age 65 is 8.9%.
The minimum contribution for a regular CGA is $10,000 and $5,000 for one that is deferred for a year or more. It is not uncommon for women who are nearing or already at retirement age to establish a CGA while delaying payments for one to ten years in order to secure higher rates. Many donors fund multiple CGAs over a period of years as their rates increase with age.
Most donors fund CGAs for themselves (and spouses/partners), but you can also fund them for parents, family members, friends and others as long as they are at least 50 years old. You can share a CGA with people in these categories or have them be the sole beneficiaries. When there are two annuitants, payments continue until the death of the second with no reduction in the payment to the surviving annuitant. Funds remaining in a CGA at its termination may be designated towards the donor’s interest area or become part of the College’s general endowment. These gifts also count toward reunion class and campaign fundraising totals.