By: Barry G. Allen- President & CEO
If you have not retired and would like to supplement your income once you do retire when you might need the additional income, a deferred payment charitable gift annuity is worthy of your consideration.
The most common form of a charitable gift annuity allows you to make a gift that provides immediate payments to you for life. With a deferred payment annuity you can fund the gift arrangement now but choose to begin the payments at some future date. Because a portion of your gift will be used for the charitable purpose(s) of your choice upon your death, you will be entitled to a tax deduction in the year you make the gift. When you begin receiving payments in the future part of each payment will be tax free over your life expectancy.
The size of the payment you will receive is determined by the amount of your gift, your age at the time of the gift and how long your payments are deferred. Generally, the more time between the gift date and the first payment date the higher the payment will be.
You cannot outlive your payments, and the payment amount will not change regardless of changes in interest rates or the economy. Also, you can designate another person to receive payments with you, instead of you, or following your death, which is a great way to provide income for a spouse or other loved ones or a friend. Because the combined life expectancy of two typically is longer than one, the payment amount will be lower. You can fund this arrangement with cash, stocks, bonds or other securities. You can avoid or delay capital gain taxes by using appreciated securities.
If you are 60 and plan to retire at age 70, your deferred payout rate is 7.0%. For every $10,000 you give now, you will receive $700 each year beginning at age 70. For comparison, the immediate gift annuity rate is 5.1%, and the annual payment for every $10,000 given would be $510.
Call Laurie Valentine or me for a customized illustration of a deferred payment charitable gift annuity for you.
The information in this article is provided as general information and is not intended as legal or tax advice. For advice and assistance in specific cases, you should seek the advice of an attorney or other professional adviser.