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Create an Immediate Lifetime Payment
Giving a gift in the form of an immediate payout Charitable Gift Annuity is an effective way to provide lifetime payments with reduced taxes. In exchange for irrevocably transferring your cash or securities, we promise to pay you and/or another beneficiary a specified dollar amount on an annual or quarterly basis for as long as you or another beneficiary live. A large portion of your initial gift is tax deductible and a portion of the payments you receive also have tax advantages.
Example:
John is 85 years old and wants to conservatively invest $100,000 to generate income to supplement his pension. He also wishes to help the VFW National Home for Children. Compare these two choices:
Funding a charitable gift annuity with the VFW National Home for Children:
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Fixed Annuity rate for 85-year-old |
9.5%* |
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Discount rate (effective 7/2004) |
5% |
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Payment frequency |
quarterly |
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Charitable deduction |
$52,558.90 |
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Annual annuity payment |
$9,500.00* |
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Tax free portion of annual payment |
$6,976.63* |
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Ordinary Income portion of payment |
$2,523.37* |
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* Entire annual payment is fully taxable after 6.8 years |
Investing $100,000 using a certificate of deposit from his local bank:
|
Annual Interest rate for the term of the CD |
4% |
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Payment frequency |
monthly |
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Charitable deduction |
0 |
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Annual interest payment |
$4,000 |
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Tax free portion of annual payment |
0 |
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Ordinary Income portion of payment |
$4,000 |
John chooses a Charitable Gift Annuity because it results in a much larger annual payment that will be paid for life, provides tremendous tax benefits and helps the National Home.
Key points to remember:
- Charitable gift annuities are not FDIC insured; they are backed by the general assets of the charity.
- Charitable gift annuities have a fixed interest rate.
- Charitable gift annuity rates are based on age, the older the age - the higher the rate.
- Charitable gift annuities are part charitable gift and part purchase of an annuity contract. The gift portion of your transfer is deductible for income tax purposes.
You can also use a charitable gift annuity:
- To provide income jointly for an annuitant and/or your spouse for life;
- To defer receipt of income for a determinable number of years down the road;
- As a scholarship to help pay for a family member’s college education.
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