How a Charitable Gift Annuity Benefits You

The concept of a gift annuity is simple: A person wishing to support our work makes a gift of cash or marketable property to your favorite charitable organizations. We reinvest the assets and agree to make fixed annual payments to the donor for life (and, if desired, for another beneficiary's lifetime). Upon the death of the last beneficiary, the funds are available for our use.

The transaction is partly a charitable gift and partly the purchase of the income interest. The annuity rate is the dollar amount returned to you annually as a percentage of the value of your gift, and these rates are related to the ages of the recipients. The contract specifies the frequency of payments and the date of the first payment.

What You Get Out of It

You have the benefit of lifetime payments, but there are numerous tax advantages, as well:

• Charitable deduction. The portion of the transaction that is considered a gift is eligible to be included as a charitable deduction if you itemize deductions on your federal income tax return.
• Income tax savings. Part of the amount you receive is considered a tax-free return of capital, excluding it from gross income until you reach your life expectancy.
• Estate tax savings. If you and/or your spouse are the only beneficiaries, the value of the annuity may not be taxed in your estates. (It may qualify as a marital deduction.)

Additionally, there are possible savings in investment charges, probate attorney fees and settlement costs.

How to Fund a Charitable Gift Annuity

Cash is the most common asset used to fund a CGA. If you contribute appreciated securities such as stocks, bonds and municipal bonds, you will need to pay some capital gains taxesóover your life expectancyóon the gain on the "sale" portion of the transaction. Funding a charitable gift annuity with real estate is another option.

Please contact Mary Ludwig, Development Director at 712-732-5127, for more information.

The information on this site is not intended as legal, tax or investment advice. For such advice, please consult an attorney, tax professional or investment professional.

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