Charitable Gift Annuity

Income for Today, a Gift for Tomorrow

The Charitable Gift Annuity is a perfect example of how our tax laws provide special ways for you to accomplish two objectives with one asset. The Gift Annuity makes it possible for you to receive high returns on an asset for the rest of your life, and make a lasting charitable contribution!

A charitable gift annuity is a contract between the donor and the Mt. Pleasant Area Community Foundation. It gives the donor the opportunity to make a charitable gift and secure a stream of income for life. Under this contract arrangement a donor transfers assets, cash or securities, to the Foundation in exchange for a commitment by the Foundation to pay the donor (and a second annuitant, if the donor chooses) a fixed and guaranteed payment for the remainder of his or her lifetime. The total annual payment does not change once established. Upon the death of the donor (and the second annuitant if one were designated), the remaining principal is retained by the Foundation to carry out the donor’s charitable intentions.  An annuity requires a gift of $10,000 or more. Annuitant must be at least 60 years of age to receive annuity payments.

Sample of single-life annuity payments based on a $10,000 gift, calculated using the following ages:

Age

Gift Annuity Rate

Gift Annuity Payment

Tax Free Portion

Taxable Portion

65

6.0

600

352

247

75

7.1

710

477

232

85

9.5

950

726

223

Rates are based on recommendations by the American Council on Gift Annuities. Tax-free portions relate to normal life expectancy, becoming ordinary income thereafter.

For example: Ruth, age 78, gives $10,000 in cash to Mt. Pleasant Area Community Foundation in exchange for a gift annuity. She receives an income-tax deduction of $4,478, based on her age. She will begin receiving income checks of approximately $190 each calendar quarter for the rest of her life. When Ruth passes away, the remaining principal will go to support the charitable organization or cause she has selected.

Deferred Gift Annuity

This version of the charitable gift annuity is especially designed for younger donors. Called the deferred gift annuity, it makes fixed annual payments to the donor and/or another beneficiary for life, with payments commencing at a future date. Because of the deferral of income:

  • The Mt. Pleasant Area Community Foundation can offer a higher income rate for these annuities than for annuities whose income starts immediately, and
  • You may receive a larger charitable income tax deduction than you could get from any other life-income gift plan.

These two features make the deferred gift annuity quite attractive to donors in high-earnings years who are concerned about securing both current tax deductions and additional sources of retirement income.

Sample comparison of a Gift Annuity deferred and not deferred.

Gift Annuity  

Deferred

Not Deferred

Age when annuity is established

50

62

Value of gift

$10,000

$10,000

Age when payments begin

Deferred to age 63

One year from gift at age 63

Payment rate

11.40%

6.10%

Initial income tax deduction

$5,032

$3,966

Annuity payout

$1,140

$610

Tax-free amount of annual payout

$230.28

$269.62