Consult a financial planner about whether a charitable gift annuity is a suitable investment for your current situation. Also, the tax implications of gift annuities are complex. Do not rely on advertisements or sales representations about how this type of asset transfer will reduce your tax liability. Only a CPA or other tax professional familiar with your situation can properly advise on how a charitable gift annuity will affect your taxes and your estate.The laws applicable to charitable gift annuities vary by state. This makes the use of this type of planning vehicle highly beneficial for residents of some states, but not others. A financial planner and estate planning attorney can advise whether a charitable gift annuity is the best option to achieve your objectives.
For information on current charitable gift annuity rates and how these rates are determined, refer to the
American Council on Gift Annuities website. It is difficult to find websites that present unbiased facts about charitable gift annuities. Do your research before signing an annuity contract and making an investment.If you are considering putting money into an annuity, there is a significant chance you will make a poor financial decision, simply due to the complex nature of this type of investment. Sales people and foundation representatives may only tell you the advantages of an annuity. The best way to ensure you are making a sound decision is to educate yourself before signing an annuity contract.
Charitable Gift Annuity Advantages
For a list of several advantages of charitable gift annuities for estate planning purposes, as well as financial planning, see charitable gift annuities.
Charitable Gift Annuity Disadvantages
Whether you are motivated by a desire to support an important mission of your favorite charity or want to take advantage of high annuity payment rates, you may be anxious to sign on the dotted line of a charitable gift annuity contract. However, you should first consider the disadvantages of these types of annuities, including:
1. If you change your mind for any reason, you cannot get a refund of your principal. An asset transfer to a charitable gift annuity is irrevocable. If there is a possibility you or your heirs may need the property you plan to gift for any reason, do not transfer it to a gift annuity.Also, if you haven't fully researched the charitable organization, you should carefully consider whether to invest in the annuity. You cannot change your mind at a later date and get your money or property back if you no longer wish your gift to benefit the charitable organization.2. When you sign a charitable gift annuity contract, you lock in the rate and income amount that will be paid. Better rates may become available for other investments over time or inflation may result in the payment amount being inadequate to meet your expenses.3. When you invest in a charitable gift annuity, you are relying on the charitable organization's guarantee that payments will be made according to the contract. However, after you transfer assets to the charity, it sells them and reinvests the proceeds in its sole discretion. You have no input on how the gifted assets are invested. The amount of regulation and government oversight of charitable gift annuities varies significantly from state to state. For more facts about annuities, see annuities and your estate.
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