A CHARITABLE GIFT annuity is similar to a plain-vanilla, immediate fixed annuity purchased from an insurance company. You hand over a chunk of money to a charity, which then pays you income for the rest of your life. But there are five key differences from an insurance company’s annuity:
- A charitable gift annuity can give you an immediate tax deduction, which is based on how much the charity estimates it will have left upon your death.
- The annuity can be funded with appreciated property, such as stocks or mutual funds with large unrealized capital gains. This saves you selling the property and paying the capital gains tax bill. But if you fund the annuity with appreciated property, you will have to pay tax on a larger portion of each annuity payment.
- These annuities typically treat men and women equally, which is beneficial to women. With a commercial annuity, women usually receive less income than men of the same age, because the insurance company factors in their longer life expectancy.
- Whether you are a man or a woman, a charitable gift annuity will typically give you less monthly income than a commercial annuity. Yes, this is a charitable gift, so a charitable gift annuity shouldn’t be your first choice if you’re looking for maximum retirement income.
- If you die young, your untimely demise will benefit the charity, not an insurance company. This may make it a little more palatable to plunk down a large sum, knowing you would collect scant income from the annuity if you go under the next bus.
For further information, check out the website of the American Council on Gift Annuities at ACGA-web.org.
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