Charitable Gift Annuity: The Gift that Keeps on Giving Back
The fundamentals of CGAs and how they can enhance your charitable giving plans
Did you know your gift to Dartmouth can provide you with regular income during your lifetime while supporting the institution you love? Charitable gift annuities (CGAs) are a unique way to support your favorite institution while securing a reliable income stream for yourself and your family during your retirement years. A CGA provides income for life for one or two beneficiaries, and also enables you to take a charitable tax deduction in the year you make your gift.
This article aims to educate our Dartmouth alumni, families, and friends about the fundamentals of CGAs, their advantages, and how they can enhance your charitable giving plans, particularly in supporting Dartmouth.
What is a Charitable Gift Annuity?
A charitable gift annuity is a financial arrangement where a donor makes a gift to an institution in exchange for a guaranteed income stream for life. When a donor establishes a charitable gift annuity with Dartmouth, they agree to make a gift to the institution while Dartmouth promises to pay the donor (or their designated loved one) a fixed sum each year for the rest of their life.
Those who are eligible to receive annuity payouts include:
- Spouses
- Childre
- Parents
- Friend
- Other loved ones
The beneficiary payment amount is determined based on several factors, including the donor’s (and the income recipient’s) age at the time of the gift and current interest rates. This arrangement creates a reliable income source for the donor and their family while ensuring that Dartmouth will receive the remainder of the gift upon the donor’s passing.
Assets for CGAs are flexible and may be given in the form of:
- Cash
- Personal property
- Business interests
- Real estate
- Stocks
- IRA assets (for those over age 70.5, restrictions apply)
You Benefit from Dartmouth’s Resources and Expertise in Managing the Annuity
With a charitable gift annuity, the institution receiving the gift is responsible for administering the payments to the donor, managing the investment of the funds, and ensuring any requisite regulatory compliance. This mutually advantageous partnership allows Dartmouth to use the gift to further its vital educational mission and institutional priorities while ensuring expert professional management of the gift.
You Get Major Tax Benefits
Charitable gift annuities not only provide lifetime income but also offer significant tax benefits. Donors may receive an immediate charitable income tax deduction for a portion of the gift’s value during the year it is given. This deduction could significantly reduce—or ultimately eliminate—the estate taxes your family must pay. Furthermore, a portion of the annuity payments received may be tax-free, depending on the type of asset used for the donation as well as the donor’s age. These tax benefits make charitable gift annuities a compelling option for individuals looking to plan their future in a way that combines their philanthropic interests with savvy personal financial planning.
CGAs Are Resistant to Market Fluctuations
Another significant benefit of CGAs is their stability in an unpredictable market. The income payments are fixed and remain unaffected by the volatile market, providing consistent and reliable support for you and/or your designated income recipient during their lifetime. This dependable, market-independent income stream allows you to plan for the future with confidence while making a lasting impact on Dartmouth.
An Example of a Dartmouth Charitable Gift Annuity in Action
Example 1
Consider the case of Dennis, a devoted Dartmouth alumnus. At age 70, Dennis decides to establish a charitable gift annuity with Dartmouth, donating $100,000 from his savings. In return, he’s entitled to receive 6.3% of that amount in the annual payment $6300 for his lifetime, providing him with a reliable income source. Additionally, Dennis gets a charitable income tax deduction of approximately $37,000 in the year of his gift. This not only enhances his financial security but also allows him to support the institution and specific areas that played a significant role in his life.
Upon Dennis’s passing, the remaining balance of his annuity will go directly to Dartmouth, supporting future students and Dartmouth’s ongoing mission, including the Hopkins Center for the Arts where Dennis spent lots of time playing in music ensembles and working in the theater set workshop.
Example 2
Meet Linda, a long-time supporter of Dartmouth College. At the age of 65, she chooses to create a charitable gift annuity by contributing $150,000 from her investment portfolio. In return for her generosity, Linda is entitled to a 5.7% payout. This means that she’d receive $8550.00, annually, for the remainder of her life. Furthermore, she benefits from a charitable income tax deduction estimated at $51,000 in the year she makes her gift.
This arrangement not only supports Linda's financial future, but also enables her to make a lasting impact on the institution she loves. Upon her passing, any remaining funds from her annuity will be directed to Dartmouth to support the student experience and the needs of the institution.
These examples illustrate how a charitable gift annuity can provide donors with both financial benefits and a legacy that will impact future generations of Dartmouth alumni.
Conclusion: A Simple Solution with Complex Benefits
Charitable gift annuities represent a unique intersection of philanthropy and personal financial benefit. They are straightforward arrangements that simplify the often-complex decisions surrounding estate planning and charitable giving.
By establishing a charitable gift annuity, donors can safeguard their financial future while making an impact on the institution they love. The dual benefits of receiving income for life while supporting Dartmouth’s mission create a compelling case for considering this option.
As you contemplate your charitable giving strategies, we encourage you to consider a charitable gift annuity to support Dartmouth and support your future financial wellness. For more information on setting up a charitable gift annuity, please contact myself or any of my knowledgeable colleagues in the Gift Planning office.