Charitable Gift Annuity Examples

One Life

Sara Williams is 80 years old and has common stock in a company that pays her a dividend of 2% per year.  This means that $10,000 worth of stock provides Sara with a quarterly check of only $50.  Sara can transfer this stock to the Miller-Dwan Foundation for a charitable gift annuity.  With a gift annuity rate of 8% (based on her age at the time of the gift), she would receive $200 each quarter or $800 yearly.  And her payments are secured by all the assets of the Miller-Dwan Foundation!  Plus, Sara gets a charitable deduction of $4,695 in the year of her gift, and $197.40 of her yearly payment is tax-free.

Two Lives

John and Mary Jones are both 75.  They are interested in contributing to the work of the Miller-Dwan Foundation, but they need the security of a steady income.  John and Mary have some Certificates of Deposit coming due on which they get a low rate of return.  When their CDs mature, they decide to establish a $50,000 gift annuity with the Miller-Dwan Foundation.  Their two-life annuity rate is 6.3%, providing them an annuity of $3,150 (or $787.50 quarterly) for the rest of their lives.  Even after one of them dies, the remaining spouse will continue to receive the payments.  On top of this, the Joneses could receive a charitable income tax deduction of $16,529 in the year they establish the gift annuity, and $421.40 of their annuity payments are tax-free.

Deferred Gift Annuity

Don Smith maxes out his pension plan contributions each year.  He would like to set more aside for his retirement years, but the restrictions make that difficult.  Don is 40 and would like to retire at 62.  One year, he sends a check (or appreciated stock) to the Miller-Dwan Foundation for $10,000 to obtain a deferred payment gift annuity (DPGA), which will begin making quarterly payments to him when he reaches age 62.  The annuity payments will be $1,710 once payments begin, and $335.16 of that will be tax-free.  And because part of the $10,000 is considered a charitable gift, he could receive an immediate income tax charitable deduction of $2,486.30.

Don can obtain other DPGAs every year until he reaches retirement age, understanding that each year the deductible amount will decrease because there is less time between the gift and the benefit.  But he could also give more than $10,000 at any time because, unlike other retirement plans, there’s no upper limit. Most importantly, the payments Don will receive during retirement are fixed; they aren’t subject to the ups and downs of the economy.

Summary

In all these cases, donors are making wise financial decisions while still providing gifts to the Miller-Dwan Foundation.  Whatever remains of the gift upon their deaths will become part of their philanthropic legacy and part of the future good work of the Miller-Dwan Foundation.

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