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Charitable Gift Annuities

An annuity is a financial product that you can use in your retirement or estate planning. You can purchase an annuity in advance of retirement, and then receive a steady stream of income from the annuity after you retire. There are many types of annuities, and many opinions regarding annuities, so discuss this option with your financial planner and/or insurance agent before investing.

There is one unique option in which you can use an annuity as a tool for making a charitable donation. This option is called a Charitable Gift Annuity (CGA). A CGA is established when you fund the annuity with your own assets, but give the annuity to a charitable organization. As with other annuities, a stream of income is paid to you, your spouse, or other designated person, but in the end, the remainder of the fund's value is given to your designated charity instead of going to the insurance company. In short, this is an annuity that provides a charitable gift in the end. CGAs can be particularly appealing to people who have appreciated assets and want to avoid capital gains taxes.

Here are a couple of examples:

Example 1: When they were younger, John and Susan purchased stock in ABC Company for $10,000. That stock has now grown to a value of $40,000. They realize if they sell the stock, they will be faced with some substantial capital gains. They decide to transfer the stock to a Charitable Gift Annuity. The charitable donation qualifies John and Susan for a tax deduction, and they avoid paying capital gains taxes.

The annuity is designed to provide quarterly payments which will continue throughout the lives of both John and Susan. After both of them die, they have designated the remaining value of the annuity to be split between their church and KML. This arrangement could help reduce probate costs and estate taxes, and is a wonderful way to support the Lord's work.

Example 2: James is a widower with one adult daughter, Sharon. James is ready to retire and wants to sell his farm to a local developer. The value of his land has increased dramatically, so he expects a large windfall of cash. James lives fairly modestly, and doesn't really need additional income to sustain his current lifestyle. He also wants to provide a continuous income for Sharon in her later years rather than leaving it all to her at his death.

James works with an attorney and the KML Foundation to set up a Charitable Gift Annuity. He designates Sharon as the sole annuitant with annual payments starting when she turns 60 years old. With this arrangement Sharon will receive regular payments from age 60 until she dies. Upon her death, the remaining assets go to the KML Foundation. That money will become part of the Foundation's endowment, and the interest that is earned will be used to support tuition assistance and other Foundation projects.

As with any investment option, it is always wise to consult with professionals who can advise you and design a plan that meets your financial and philanthropic goals.

 

To discuss a planned gift to KML, contact your KML Estate Plan and Deferred Gift Counselor, 
Paul Snamiska, at 262-677-4051 x1116 or paul.snamiska@kmlhs.org.

The information that is provided on this site is for educational purposes only. Consult your personal tax consultant, attorney, or financial planner for specifics that apply to your personal situation.