Charitable Gift Annuities: Getting Started
If you'd like to support our mission and receive steady payments during your retirement years, a charitable gift annuity may be right for you.
How It Works
Through a simple contract, you agree to make a donation of cash, stocks or other assets to The University of Massachusetts Amherst. In return, you (and someone else, if you choose) receive a fixed amount each year for the rest of your lifetime.
|Download a free guide to learn more about charitable gift annuities.|
In addition to providing a gift to The University of Massachusetts Amherst and receiving fixed payments for life, you also receive these benefits:
- Your initial gift is partially income tax–deductible.
- Your charitable gift annuity payments are partially income tax–free throughout your estimated life expectancy.
- Your payments are not affected by ups and downs in the economy.
- The gift annuity can be for one or two people, so your spouse or another loved one can also receive payments for life.
- If you use appreciated stock to make a gift, you can usually eliminate capital gains tax on a portion of the gift and spread the rest of the gain over your life expectancy.
|Calculate how a charitable gift annuity could benefit you.|
Generally, the older you are at the start of your payments, the higher your payments.
Rate of Return
The rate of return is slightly lower for two lives because the period of payment generally is longer.
After hearing about the benefits of charitable gift annuities though, Jane finds that she can make a charitable gift and receive a steady stream of payments. With a gift of $10,000 to The University of Massachusetts Amherst, she sets up an annuity that pays her $630 annually in quarterly installments (6.3 percent of her $10,000 gift).
As a result of her generosity, Jane will also be able to claim a charitable deduction of $4,170 on her income tax return in the year she makes the gift.1 At her 28 percent annual income tax rate, this saves her $1,168—making her out-of-pocket cost for the gift only $8,832. Taking into account her tax savings, with each annual annuity payment of $630, she is actually receiving 7.1 percent of her out-of-pocket cost.
Assuming she lives to age 87, her life expectancy, nearly three-fourths of the annuity installments she receives will be nontaxable. To realize the same after-tax amount to spend or reinvest, an all-taxable return would have to be 9.2 percent on net cost for these years.
These rates are the maximum rates recommended by the American Council on Gift Annuities and are adjusted periodically.
Not all organizations offer charitable gift annuities at the above ages and rates. Contact The University of Massachusetts Amherst for a personalized illustration or for more information.
Jill, 70, established a $20,000 charitable gift annuity. Based on her age, she was able to receive an annuity rate of 5.1 percent. This means that we will pay her $1,020 each year for the remainder of her life, of which $755 is tax-free to her throughout her life expectancy. She'll also receive a charitable deduction of $8,304 if she itemizes on her income taxes (assumes annual payments and a 2.4 percent charitable midterm federal rate—deductions vary based on income earned). After her lifetime, the remaining amount is used to support our mission.
To learn more about this way to support The University of Massachusetts Amherst, please contact Lawrence A. Osborn, JD at Main: 413-545-4200 Direct: 413-545-2796 or email@example.com.
Getting Started | If You Don't Need Extra Income Right Now... | Is This Gift Right for You? | Case Study | How to Complete Your Gift | Action Items
Charitable gift annuities may not be available in all states.
Copyright © The Stelter Company, All rights reserved.
The information on this website is not intended as legal or tax advice. For legal or tax advice, please consult an attorney. Figures cited in examples are for hypothetical purposes only and are subject to change. References to estate and income taxes apply to federal taxes only. State income/estate taxes or state law may impact your results.