A Charitable Gift Annuity (CGA) Agreement is a powerful tool that benefits both donors and charities. It allows you to support a cause you care about while receiving a fixed income for life. Here are six key things to know about CGAs before making a decision.
1. What Is a Charitable Gift Annuity?
A Charitable Gift Annuity is a contract between you (the donor) and a charitable organization. In exchange for a charitable contribution, the charity agrees to pay you a fixed income for life. Upon your passing, the remaining funds support the charity’s mission. It’s a win-win: you receive steady payments, and the charity receives a lasting gift.
2. How It Works
When you contribute cash, stocks, or other assets to a charity through a CGA, the charity invests these funds and pays you (or a designated annuitant) a fixed amount regularly. Payments can be made monthly, quarterly, or annually. The amount you receive depends on factors like the size of your gift, your age, and the charity’s payout rates.
3. Tax Benefits for Donors
A Charitable Gift Annuity offers several tax advantages:
- Immediate Charitable Deduction: You can claim a charitable deduction on your federal income taxes for a portion of your gift.
- Partially Tax-Free Payments: A portion of each annuity payment may be tax-free, depending on your life expectancy.
- Avoid Capital Gains Tax: If you donate appreciated assets (like stocks), you may reduce or avoid capital gains taxes.
4. Fixed Income for Life
One of the biggest benefits of a CGA is the guaranteed fixed income for your lifetime. The amount is locked in at the time of the gift and does not fluctuate, providing financial security regardless of market conditions. This makes CGAs especially appealing for retirees seeking stable income.
5. Irrevocable but Flexible
A Charitable Gift Annuity is an irrevocable agreement, meaning once you make the gift, you cannot withdraw it. However, you have flexibility in how the residual funds are used by the charity. You can specify that the funds support a particular program or allow the charity to use them for its general mission.
6. It’s Not Just for You
You can structure a CGA to benefit someone else, such as a spouse or a loved one. This makes it a thoughtful way to provide income for another person while supporting a cause you care about. Upon the annuitant’s passing, the remaining gift goes to the charity.
Is a Charitable Gift Annuity Right for You?
A Charitable Gift Annuity can be a great option if you want to support a charity, need fixed income, and seek potential tax benefits. Consult with a financial advisor or the charity’s planned giving office to ensure it aligns with your financial and philanthropic goals.
By understanding these six key aspects of Charitable Gift Annuity Agreements, you can make an informed decision that benefits both you and the causes you care about. To learn more about Charitable Gift Annuities, including a charitable gift annuity template, visit our Planned Giving information hub.
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