Charitable Gift Annuities



What are Charitable Gift Annuities?

. . . A charitable gift annuity (CGA) is often a gift of choice when a guaranteed income is desired. A gift of cash or securities is transferred to a Trust Company in exchange for a contractual life income paid monthly or quarterly. The income is guaranteed by the issuing charity. A portion of the gift is invested and used to provide income for life, and the remaining portion qualifies as a present-interest gift to the charity of choice. Part of the annuity income may be received tax free. Any capital gains taxes due on the asset that was exchanged for the annuity are paid over the annuitant's life expectancy.



Procedures and Requirements for Charitable Gift Annuities

The company must file with the Director of Insurance:

1. Notice to the Department in writing the date on which it enters into the organization’s first qualified charitable gift annuity agreement. This notice must be:

a. Be signed by the officer or director of the charitable organization

b. Identify the charitable organization.

c. Certify that:

(i) The organization is a charitable organization;

(ii) The annuities issued by the charitable organization are qualified charitable gift annuities as defined in your State Code.

2. When entering into an agreement for a qualified charitable gift annuity, the charitable organization shall disclose in writing to the donor, in the annuity agreement:

“NOTICE”
“A charitable gift annuity is not insurance under state laws and is not subject to regulation by the State Department of Insurance or protected by a guaranty association related to the Department. The notice provisions of this subsection must be written in a separate paragraph in the annuity agreement in a print size no smaller than that employed in the annuity agreement generally.”

3. Failure of a charitable organization to comply with the notice requirements imposed by I.C. §41-120 may result in a fine in an amount not to exceed $1,000 per qualified charitable gift annuity agreement issued until the charitable organization complies with the rules.

More Info on Charitable Gift Annuity

A Charitable Gift Annuity is a contract between you and a charitable organization. You agree to make a gift to the charity and in return, the charity agrees to make income payments to you for the rest of your life.

  1. Can I make a gift to a charity of something other than cash?

    Yes, New York law permits a charity to receive gifts of “cash and other property” in return for its agreement to make annuity payments to you. You may give gifts of cash, negotiable securities, real estate, etc. However, the charity itself may restrict donations to a certain type. You should contact the charity directly to determine if it has such restrictions.

  2. Can I change my mind after I purchase a Charitable Gift Annuity?

    No, a Charitable Gift Annuity is irrevocable. Once you enter into the contract with the charity you can not later cancel it.

  3. Can I outlive the income payments from the Charitable Gift Annuity?

    No, income payments from a charitable gift annuity will continue for your entire lifetime, regardless of how long you live.

  4. Will the amount of the income payments from the Charitable Gift Annuity change?

    No, the amount of the income payments from a charitable gift annuity will remain the same throughout your lifetime. This can be both an advantage and a disadvantage to purchasing a charitable gift annuity. It is an advantage in that you know exactly how much income you will receive and can plan your expenses and other income streams accordingly. It is a disadvantage in that there is no cost-of-living adjustment. As the cost of things such as housing, food, clothing, utilities, etc. increases, the amount of income you receive to pay for those things does not.

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  6. How much income will I receive from a Charitable Gift Annuity?

    The amount of income you will receive depends on four factors:

    1. your age at the time you enter into the annuity agreement,
    2. the number of annuitants you designate to receive the income payments,
    3. the amount you donate, and
    4. the interest rate that the charity is crediting at the time you enter into the annuity agreement.

  7. Can I designate someone other than myself to receive the income payments from a Charitable Gift Annuity?

    Yes, you may designate someone other than yourself to receive the income payments. In that event, the payments would continue for the rest of that person’s life. However, you should be aware that if you designate someone other than yourself, the present value of the income payments payable to that other person may, under certain conditions, be considered a gift to that person and be subject to gift tax.

  8. What are the tax advantages associated with a Charitable Gift Annuity?



    Some possible tax advantages include: a federal income tax deduction for the donated assets, deferral of federal and state capital gains taxes upon the sale of donated appreciated assets, avoidance of taxes on future capital gains, and exclusion of the entire value of the gifted assets from the value of your estate for federal and state estate tax purposes.

  9. How is the amount of my income tax-deduction determined when I make a donation in exchange for a Charitable Gift Annuity?

    The income tax deduction you are entitled to for your charitable donation is less than you would be entitled to for an outright donation because you will be receiving a lifetime income from the gift. The deduction is based on your age and interest rates published by the IRS. The higher this interest rate, the higher your deduction.

  10. Will I have to pay income tax on the income payments from the Charitable Gift Annuity?

    Part of your income payment will be tax-free and part will be taxable. A tax advisor can assist you in figuring out how much of the payment will be tax-free.

  11. How do I know that the charitable organization I choose will be financially able to continue making the required income payments to me for as long as I live, or to the person I designate for as long as she/he lives?

All charitable organizations that wish to enter into charitable annuity agreements must first apply to the Department for a special permit. The Department may exempt some of these entities from the permit requirement based on specific criteria. However, by law, all charitable organizations that issue charitable annuities in New York must comply with certain financial requirements which are intended to ensure that they will be able to meet all of their obligations to make income payments under the charitable annuities they issue.

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