Charitable Gift Annuities
Charitable Gift Annuity Rates Have Decreased
Charitable gift annuity rates have just decreased for the second time in the past eight months, in response to declining federal interest rates. As always, this change does not affect gift annuities that were previously created. The new rates are still desirable for donors, but they have been lowered to protect Williams’ charitable interest in these gift arrangements. A 60-year-old can now lock in a 4.8% fixed payout. A 70-year-old can lock in 5.4%. An 80-year-old can lock in 6.7%. (Rates are lower for two-life annuities.) Gift annuities are still a great gift opportunity.
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What is a Charitable Gift Annuity?
One of the oldest and simplest life-income arrangements, a CGA is a simple contract between you and Williams College. In exchange for your irrevocable gift of cash or securities, Williams College agrees to pay up to two annuitants a fixed sum each year for life. Williams College CGA payments are based on rates previously recommended by the American Council on Gift Annuities and are not meant to be competitive with commercial annuities. The payments are guaranteed by the general resources of the College. A minimum gift of $15,000 is required.
Different Types of CGAs
There are three basic types of CGAs, and they each meet different needs:
Immediate Payment: With this type of gift annuity, your payments begin at the end of the quarter in which you make your gift. Annuitants must be age 60 or older.
Deferred Payment: This option allows the deferral of payments until a certain age. Because payments are deferred, you and/or your designated annuitants will receive income payments substantially higher than those associated with the immediate payment gift annuity. This option is particularly attractive to younger donors/annuitants planning for retirement. Moreover, you can still take a charitable deduction in the year you make the gift. 
Flexible Payment: This option allows you to retain some flexibility regarding the timing of annuity payments. Payments can start as early as one year after the gift, or they can continue to be deferred until later dates (specified in the gift annuity agreement). The advantage of this option is that you don't have to make this decision at the time of the gift but, rather, can make the decision in the future, when your financial position and goals are more clearly defined.
What Are The Advantages?
- Your income payments are fixed and guaranteed by the assets of the College.
- CGAs pay relatively high rates. Currently, rates go as high as 10% for immediate payment gift annuities and even higher for deferred gift annuities.
- You will be entitled to take a charitable income tax deduction in the year you make your gift, with up to 5 additional years to take any unused deduction.
- A portion of your annuity payments will be tax free.
- When using appreciated securities to make your gift, you will not incur capital gains tax liability at the time of your gift. Instead, some of the income that you would ordinarily receive tax-free will be taxed at the capital gains rate (15%). Under this taxation scheme, you will pay less capital gains tax than you would if you simply sold the assets (20%).
EXAMPLE 1: Immediate Payment CGA
(based on 2.6% Apr 2009 IRS discount rate)
You donate $25,000 of appreciated stock, originally purchased for $2,500, to a Single-Life Charitable Gift Annuity with quarterly payments that begin immediately:
| Annuitant Age at Gift |
Age 70
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Age 80
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| Annuity Rate |
5.4% |
6.7% |
| Annual Payment |
$1,350 |
$1,675 |
| Charitable Deduction |
$9,709 |
$12,775 |
EXAMPLE 2: Deferred Payment CGA
(based on 2.6% Apr 2009 IRS discount rate)
At age 70, you donate $25,000 of appreciated stock, originally purchased for $2,500, but this time you enter into a Deferred Gift Annuity Agreement, with payments deferred until age 75 (five year deferral):
| Annuitant Age at First Payment |
Age 75
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| Annuity Rate |
7.3% |
| Annual Payment |
$1,825 |
| Charitable Deduction |
$12,292 |
Important: These examples are for illustration 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.
How Do I Set Up A CGA?
Read Williams' Disclosure Statement, then just call 413-597-3538, email the Williams College Office of Gift Planning, or complete the personal illustration form. We will prepare a gift annuity agreement for you and provide information on transferring assets to the College.
Appreciated Securities
Bequests
Pooled Income Funds
Charitable Gift Annuities
Charitable Remainder Trusts
Charitable Lead Trusts
Real Estate
Gifts of Other Assets
How to give other assets, such as: Retirement Plans, Charitable Bargain Sales, Closely-Held Stock, Partnership Interests, Tangible Personal Property, and Life Insurance.
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