If you are charitably inclined, you may wish to consider contributing to a charitable
gift annuity, which can combine the benefits of an immediate income tax deduction and
a lifetime income stream. Furthermore, your future taxable estate will be reduced for
the remainder value of the property transferred to the charity.
A charitable gift annuity is an arrangement in which you make a gift of cash or other
property to a charity in exchange for a guaranteed income annuity for life. This is
similar to buying an annuity in the commercial marketplace, except that you can claim
an immediate charitable deduction (subject to a 50% adjusted gross income limitation)
for the excess of the value of the property over the value of the annuity, based on
IRS tables. The charity must receive at least 10% of the initial net value of the
property transferred in order for you to claim a charitable deduction for a portion
of the purchase price.
The annuity may be payable to you over your life, or over the joint lives of you and
someone you have designated. The rate of return is typically set at the time of the
gift based on your age at that time. A portion of each annuity payment is tax-free,
because you're entitled to recover your original investment over your life expectancy.
The amount of your charitable deduction depends on a combination of your age and an
IRS-prescribed interest rate at the time of your purchase. Of course, your charitable
deduction will be less than the total value of your annuity purchase price because
your deduction can only be claimed for the present value of the property that the
charity will keep after your death, based on your life expectancy at the time of
purchasing the annuity.
This publication is distributed with the understanding that the author, publisher and
distributor are not rendering legal, accounting or other professional advice or
opinions on specific facts or matters, and, accordingly, assume no liability
whatsoever in connection with its use. The information contained in this newsletter
was not intended or written to be used and cannot be used for the purpose of (1)
avoiding tax-related penalties prescribed by the Internal Revenue Code or (2)
promoting or marketing any tax-related matter addressed herein. © 2015