Charitable Gift Annuity - Immediate, Deferred, College, Flexible Annuity

For some people, a Charitable Gift Annuity (CGA) is a convenient way to donate funds to an educational, religious or other charitable organization. A Charitable Gift Annuity works very similar to other annuities you might purchase through your insurance company, but in this case you will receive an annuity payment directly from the organization. Typically, you donate a monetary amount to the organization of your choice and then begin receiving payments either immediately or at a predetermined date in the future.

Donations to charities are subject to the charitable tax deduction, and you are entitled to make this deduction on your income tax return for each year you make a new donation. You can choose to receive your annuity payments yearly, quarterly, or monthly, although most people choose quarterly payments. Quarterly payments from a Charitable Gift Annuity are received on the last day of the quarter, not the first.

Similar to other annuity options, Charitable Gift Annuities are subject to state and federal regulations. The American Council on Gift Annuities (ACGA) sets uniform gift annuity rates for use by charitable organizations. These rates set the recommended limits for payout rates to the donor.

If a charity stays at or below these rates, they are not required to justify that their rates are within state regulatory laws. If the charity chooses rates above those set by the ACGA then an actuary is necessary to ensure compliance to the individual state laws. Rates are determined by the age of the annuitant and when the withdrawal period for the annuity begins.

A charity may spend a portion of a donation immediately but must retain enough money in its reserve to satisfy its annuity agreement with the donor. The agreement for Charitable Gift Annuities states that the annuitant will receive fixed payment amounts for their lifetime only and not an additional period of time thereafter for their beneficiaries.

This means that once an annuitant dies, payments cease and the remainder of the annuity is absorbed by the charity. The donor can opt to extend the annuity agreement to an additional annuitant, as with the joint and survivor or two lives in succession options, but the annuity payments will be split between the two individuals and will cease after both parties have died.

DIFFERENT TYPES OF CHARITABLE GIFT ANNUITIES:

IMMEDIATE GIFT ANNUITY

1. If you choose an Immediate Gift Annuity, payments will begin in the payment period immediately following the final contribution date. As mentioned previously, the annuitant can choose to receive payments annually, quarterly, monthly, etc. Depending on when the contribution was made, you can request your first payment to be for the full, and not prorated amount.

DEFERRED GIFT ANNUITY

2. With a Deferred Gift Annuity, the annuitant is allowed to receive payments at a future date predetermined by the donor. The date chosen must be at least one year from the contribution date, but the payout schedule offers the same flexibility as the Immediate Gift Annuity.

COLLEGE ANNUITY

3. A parent or grandparent may want to establish a college fund for a child to offset the rising cost of higher education. In this case, they would donate money for a College Annuity which will only pay out over the lifetime of the child (annuitant). Payments usually begin at age eighteen, or when the child/annuitant is old enough to attend college. The annuitant may choose payments for life or receive larger payments spread out over the number of years they attend school.

FLEXIBLE ANNUITY

4. A Flexible Annuity allows the annuitant to decide the starting date for payments. Usually the annuitant chooses retirement or another date of importance to begin receiving payments. Keep in mind that one factor for the annuity payment rate is age, so you will receive larger payments if you wait until you are older.

HOW DOES A CHARITABLE GIFT ANNUITY WORK?

You may be asking how this works in a real life example. Let?s assume you just turned seventy-five and have $25,000 that you would like to donate to your alma mater as a Charitable Gift Annuity. You opt to receive immediate annuity payments on a yearly basis, and your calculated annuity rate is eight percent. Based on your annuity agreement with your alma mater, you will receive a payment for $2000 every year for the rest of your life, and an immediate tax deduction of over $9000!

This is only an estimate, and your actual deduction will vary according to changing tax laws and changing rates established by the ACGA. You should always consult with a knowledgeable financial advisor such as Estate Street Partners before donating or investing large sums of money to guarantee your rights are protected.

Author bio - Rocco Beatrice, CPA, MST, MBA
Award-winning estate planning & trust expert
MS - Taxation, Master of Science Taxation
MBA - Management / Taxation
BSBA - Management / Accounting
CPA - Certified Public Accountant
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Irrevocable Trust Asset Protection, Medicaid Asset Protection
Private Annuity Trust
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Structured Settlement Annuity: The Real Deal

Structured Settlement Annuities have been shown to provide a valuable, safe and guaranteed source of lifetime income to parties in personal injury or other cases. Today we look at situations where these special annuities would be helpful.

Personal injury.
This is obvious to most, but let's take a closer look at situations that might warrant such settlements.

Temporary or permanent disability.
A structured settlement can help here by making sure the cost, if any, of rehabilitation is covered.

Guardianship of minors or persons with diminished mental capacity.
We've seen before how dangerous mismanagement of a lump sum settlement for a child can seriously impact the future care of the child. Guaranteeing that care for the injured child will be covered will add greatly to the overall quality of life for the caretaker and the child.

Wrongful death, particularly when the surviving spouse and / or children need steady income.
When tragedy strikes the main money earner of a household loss to a family is felt in many ways. In some cases this can cause financial ruin to a family. A structured settlement can help replace the monthly income lost and provide a family piece of mind that the rent, bills etc will be paid for.

Severe injuries, especially those that result in shortened life expectancy.
Once again, protecting the financial future of the family or caregivers to make sure that specialized care is covered and monthly expenses are paid.

Cases where future needs can be determined today.
This is a bit more risky as it can be difficult to predict expenses in the future. However, certain costs may be fixed or are more easily anticipated like mortgages, tuition, and monthly bills.

If someone finds themselves in any of these situations, it's important to take these factors into consideration:

1-Significant, ongoing medical expenses
2-Rehabilitation or permanent care facility expenses
3-College tuition, retirement income, the down payment on a home or a mortgage payment
4-Replacement of monthly income, annual income or supplemental income

Though some of these may seem too far in the future to think about, ignoring these will cause more hardship than necessary.

Michael DeGeorge has done extensive research on structured settlements and shares a wealth of information on his website http://structsettle.gitgoingnow.com. Download your free Structured Settlement Annuity information today from http://structsettle.gitgoingnow.com.

Love The Thrill of Risk? Invest in an Annuity!

Love The Thrill of Risk? Invest in an Annuity!

 by: Stephen Bucaro

With the stock market in steep decline, people are looking for safe places to invest their savings. Many banks and investment companies are pushing annuities. Annuities offer a higher interest rate than CD's, but are they safe?

You could view an annuity as a tax deferred CD. You don't pay taxes on the interest until you start drawing from the annuity. But there are some important differences between an annuity and a CD.

An annuity is a product offered by an insurance company. With giant corporations like Enron, Kmart, Worldcom, and United Airlines going bankrupt, can you guarantee that the insurance company won't fold, leaving you with nothing? Insurance companies are insured by re-insurers, like General Re. But it seems no matter how large a company is, you can't be sure it won't fold. The bankruptcy of a large insurance company might cause the re-insurer to collapse along with it.

Bank CD's are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $100,000 per bank. The FDIC is a branch of the U.S. Government, who, as you know, are the people who print the money. If they go bankrupt, we'll have more to worry about than just losing our savings!

A new type of annuity called a charitable gift annuity has come on the market recently. These are issued by charity organizations. You give your money to the charity, you receive a tax benefit, and in exchange the charity promises you a fixed payment for life. Unfortunately, this scheme has become a mode of operation for con artists.

The charitable gift annuity has been added to top ten scam list of the North American Securities Administrators Association. They explain that charitable gift annuities are subject to virtually no federal regulation. Here in Arizona, 430 investors lost their savings in a ponzi scheme run by the Mid-America Foundation Inc.

Banks and investment companies hawking annuities promote the higher than CD interest rates, but they fail to reveal the hidden fees and high early withdrawal penalties. If you need to access your annuity before age 59, you could be subject to a 10 percent penalty.

With the recent bankruptcies, and discovery that many giant corporations have been cooking their books for years, I feel it's best to play it safe. If you love the thrill of risk, or if you have already purchased an annuity, I wish you luck. As Will Rogers said, "I am not as concerned about the return ON my money as I am about the return OF my money".

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