Guaranteed Payments for Life

The gift annuity is an arrangement where you make a contribution to Cal Farley’s Boys Ranch and receive, in turn, guaranteed payments for life. It’s a way of giving that allows you to make a substantial gift even though you may need ongoing cash flow from your assets.

What are the Benefits?

In addition to guaranteed payments, a charitable gift annuity provides other benefits, including:

  • A portion of the payments is usually tax-free for a period of time
  • Charitable deduction in the year of the gift
  • An annuity rate often higher than the interest paid on current fixed investments
  • Reduced capital gains tax if the gift is of long-term appreciated assets
  • Satisfaction of assisting Boys Ranch in its mission

How Does It Work?

Most charitable gift annuities are funded with cash or long-term appreciated securities. When you contribute securities, the annuity payments will probably exceed the dividends you were receiving.

While donors usually name themselves as beneficiaries, a relative or friend could be named as well (perhaps to provide support to an aged parent or a sibling who needs financial assistance). Married couples typically provide for the full amount of the annuity payments to be made over both of their lives.

Boys Ranch invests and manages your contribution, and at termination the remainder is available to Boys Ranch for present or future work.

The amount of the annual payments will depend on the amount of the gift, the ages of the beneficiary(ies), and the annuity rate schedule in effect at the time of the gift. Once the annuity is established, the payments will remain fixed, regardless of changes in the economy. This makes the gift annuity especially attractive to donors in retirement who like the security of fixed, guaranteed payments.

What About Taxes?

The most notable tax benefit of a gift annuity is the charitable deduction in the year of the gift. The amount of the deduction depends on several variables, one of which is the age(s) of the annuitant(s) at the time the annuity is established. An additional benefit occurs when appreciated securities that have been owned for at least one year are contributed. Some of the capital gains tax will be partially forgiven, and the remaining capital gain (assuming the donor is one of the beneficiaries) will be taxed in the annuity payments over a period of years, spreading out payment of the capital gains tax. Gift annuities are a popular gift vehicle, allowing you the opportunity to support Cal Farley’s Boys Ranch and at the same time provide for your future financial security. We would be pleased to answer your questions, send you a personal financial illustration, or schedule a meeting with you. There is no charge and you are under no obligation. Let us hear from you if you want to take a closer look.

This article appeared in The Heritage, Vol. 22 Number 3, 2020.

Guaranteed Payments for Life

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