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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The Advantages of A Flexible Premium Deferred Annuity

People who are looking for insurance solutions and information to help them make informed decisions will benefit from this article, which covers flexible premium deferred annuity Insurance. Annuities can make for really good retirement tools you can use to defer paying taxes on money you don't use; furthermore annuities guarantee an income you will not outlive.

What Is Flexible Premium Deferred Annuity (FPDA)?

Insurance companies sell contracts which have variable premium payments and payments amounts. Premium payments can be monthly, quarterly, semi annually or annually throughout the life of the policy holder, for 2 or more people. It can also be for a predetermined time period.

Flexible premium deferred annuity accepts ongoing small deposits of even $50 per month. The interest rate guarantee period on each deposit is for one year; at the end of the guarantee period the depositor can benefit from competitive renewal rates, which are based on current market conditions.

The Advantages of Flexible Premium Deferred Annuity

- One of the main advantages is that each contract comes with a principal guarantee; this guarantee ensures that a client does not receive any amount which is less than the total premium payment due.

- Each contract has a 9 year surrender charge period and there are a number of ways by which the client can access funds before the 9 year surrender charge period. The distinct advantage to the client is the surrender charge does not have to be paid. At the end of the surrender charge period there is no fixed time period in which the client has to decide upon restarting the surrender charge or discontinuing the annuity.

- As a savings medium flexible premium deferred annuity is an ideal choice for anyone who is looking for flexibility on continuing premium deposits and tax deferred financial growth. It is a very good method by which to enhance retirement savings plans, which can be used to fund your IRAs, SEPs and other plans.

- A truly great advantage of this method is that irrespective of any economic fluctuations the client will never receive anything less than the total premium payment due (minus any loans or withdrawals). This type of annuity comes with a principal guarantee most investment mediums do not offer.

- No surrender charge will be levied for clients who wish to take early retirement provided they have held the annuity for a period of 5 years and reached the age of 59.5 years at the time of surrendering the annuity.

- Flexible premium deferred annuity is a dependable savings option for people who do not wish to take risks with their money for fear of losing a part or all of it.

- Annuities are one of the best methods by which you can provide a steady source of income for yourself after retirement, when the fear of your money running out begins to haunt you.

- With annuities your investments grow tax free - this is probably one of the best benefits for people in the retirement stage of their lives.

- Anyone can contribute any amount to the flexible premium deferred annuity plan as there are no restrictions on investments.

Robert Eldridge holds over a decade of experience as a multiline agent in multiple states and currently serves on the membership council of the National Association of Insurance and Financial Advisors. Robert has the unique blend of in-depth knowledge in the Medical, Life, Annuity and Mortgage industries. He is also a true philanthropist who works extensively to raise money and awareness for the Shriner's Hospital for Children.

Robert's clients value his insight into recognizing optimal solutions to their healthcare and financial needs in this evolving financial market. Staying current with changes in the industry, coupled with his experience and insight into excellent customer service, his philosophy is never selling a product unless it brings an added benefit and true value to you and your family. Please visit http://www.annuitycampus.com for more annuity information.

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