Nancy StorkUniversity of Dayton
300 College Park
Dayton, OH 45469-2964
Charitable Gift Annuities
As the name suggests, a charitable gift annuity is part gift (a contribution of money or property to the charity of your choice) and part annuity (an arrangement under which the charity agrees to pay your designated annuitant(s) fixed payments for life. These payments are backed by the full assets of the charity. At the death of the last beneficiary, the charity receives the funds remaining in the annuity account.
Tax benefits and a high level of a steady, reliable stream of payments have long made charitable gift annuities a favorite giving vehicle of people who are past the "accumulation stage" of life, and who are not as concerned with increasing assets as with find ways to ensure an income they cannot outlive.
The gift component is very important because it generates two significant tax benefits:
- Since a portion of the gift is treated as a charitable contribution, the donor gets an immediate income-tax deduction to help offset current income.
- If long-term capital-gain property is used to fund the gift annuity, then part of the gain escapes taxation and the rest is spread over the donor or annuitant’s life expectancy.
In addition to the tax benefits, people are often attracted to the gift annuity for other, less obvious, reasons:
- A donor can establish a gift annuity at the University of Dayton with a minimum of $10,000.
- There is no need to make a new will. The procedure to establish a gift annuity is straightforward and uncomplicated.
- Because a donor can receive payments from his or her gift, the gift annuity enables a person of modest means to make a gift during his or her lifetime without financial sacrifice.
Other important features:
- A charitable gift annuity can be created to pay one or two annuitants for life.
- The University of Dayton follows the schedule of recommended rates as published by the American Council on Gift Annuities.
- The charitable deduction is equal to the difference between the amount of the contribution and the value of the payments to the annuitant(s).
What the gift annuity means to many donors is the security of a generous, regular, non-fluctuating stream of payments – an end to the dramatic swings the financial marketplace has seen in the last several years.