The use of charitable gift annuities in estate and financial planning is on the rise for a variety of reasons. Economic factors have resulted in interest rates on savings hitting record lows. Seniors are hard pressed to find a secure way to earn income from money in the bank. Investing in stocks for dividend income is too risky for some retirees due to a wildly volatile stock market. Most charitable gift annuities today pay rates that are difficult to obtain from any other financial planning product.
In addition to the income advantages of a charitable gift annuity, many Baby Boomers and seniors are transferring assets to these annuities for estate planning reasons. For those without any children or other heirs, leaving property to charity may be the most obvious option. Also, some testators with children are looking for alternative ways to distribute their estates because they wish to disinherit an heir or feel they have already adequately provided for their children.
Another reason the charitable gift annuity is rising in popularity is more people are using estate planning as a way to make a positive impact. Those who have identified charitable organizations to which they want to leave all or a portion of their estate can use a gift annuity to reap income and tax benefits during retirement. When legacy planning is a goal, the use of a charitable gift annuity may be an obvious choice.
Disadvantages of Charitable Gift Annuities
Before signing a contract to transfer assets to a charitable gift annuity, it is important to understand the disadvantages as well. For a list of disadvantages and related information, see charitable gift annuity.
The Guide to Charitable Giving by Michael B. Kennedy, allows you to explore all the possibilities in using your estate for charitable giving. Topics covered include charitable gift annuities, charitable remainder trusts, conservation easements, and charitable bequests. Questions on deductible versus non-deductible charitable contributions are also addressed.
Advantages of Charitable Gift Annuities
1. A charitable gift annuity pays a lifetime income stream to you or another annuitant on a gift you make to a charitable organization or non-profit.
2. Charitable gift annuities allow you to take an immediate deduction for assets transferred to charity.
3. If you are concerned about capital gains taxes, a charitable gift annuity can be a good way to deal with appreciated assets in your estate, such as stocks in which you have a low cost basis.
4. A charitable gift annuity is an estate planning method that does not require the costly legal fees associated with establishing a charitable remainder trust.
5. A gift annuity offers the satisfaction of knowing your last wishes regarding a gift to charity will be fulfilled while you are alive rather than relying on relatives you may not trust to carry out your wishes.
6. If you cannot get a desirable rate of return on investment from CD's, money market funds or bonds, the current rates on a charitable gift annuity may work better for your financial plan.
7. A charitable gift annuity offers diversification if you are concerned about keeping all your retirement funds in a particular account or investment.
8. If you are not ready to begin accepting annuity income, you can still receive the benefits of a charitable gift annuity and defer payments until a later date, provided you meet the age requirements.
9. A charitable gift annuity is available to individuals with modest estates. You can get a charitable gift annuity with as little as 5,000 or 10,000 dollars.
10. Part of the income paid to the annuitant is not taxable.
