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Charitable Gift Annuity – The gift that gives back income
What is a charitable gift annuity?
A Charitable Gift Annuity (CGA) is a simple contract between you and Sam Houston State University. In exchange for your irrevocable gift of cash, securities or other assets, SHSU agrees to pay one or two annuitants you name a fixed sum each year for life. Gift Annuity payments are based on rates recommended by the American Council on Gift Annuities. Minimum initial gift is $10,000.
Different types of CGAs
There are two basic types of CGAs and they each meet different needs:
Immediate Payment
With this type of gift annuity, your payments begin as soon as the contract takes effect. For example, if quarterly payments are elected, payments begin at the end of the quarter in which you make your gift. Recommended age is 65 or older.
Deferred Payment
This option allows younger donors and annuitants to defer the start of payments until they have reached retirement age. Like an immediate payment gift annuity, you can take a charitable deduction in the year you make your gift. Because payments are deferred, however, you or your designated annuitants will receive substantially higher income payments later. This type of gift works best for income beneficiaries between the ages of 40 and 60. See Deferred Gift Annuities.
What are the advantages?
- Fixed income for life
- Rates of return up to 10% for single life (slightly less for two lives)
- Charitable income tax deduction for a portion of your gift
- Tax-advantaged income (your payments will be part tax-free under most circumstances)
- Reduced capital gains tax (you pay capital gains tax only on the gain attributed to your retained income interest)
- Potential reduction of estate tax liability
- The satisfaction of making a substantial gift to SHSU during your lifetime
Example
You donate $10,000 of appreciated stock, originally purchased for $2,500, to a Single-Life Gift Annuity with quarterly payments that begin
immediately. Assume IRS discount rate of 4.2%.
Annuitant
Age at Gift |
Age 65
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Age 70
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Age 75 |
Age 80 |
Age 85
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Annuity
rate |
5.7% |
6.1% |
6.7% |
7.6% |
8.9% |
Annual
payment |
$570 |
$610 |
$670 |
$760 |
$890 |
Charitable
deduction |
$3,455 |
$3,988 |
$4,484 |
$4,961 |
$5,408 |
PLEASE NOTE: These examples are for illustrative purposes
only and are not intended as legal or tax advice. Consult your own legal
and tax advisors prior to making any material decisions based on this data.
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For more information
E-mail us, complete the Personal Illustration form, or call us at (936) 294-3625 so that we can assist you.
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