William Penn Life, 2002 (37. évfolyam, 1-11. szám)
2002-11-01 / 10. szám
____________________j MoneywiSe _____________ Charitable gift annuities Part Two: Different versions and types suit needs of donors and beneficiaries IN PART ONE OF THIS SERIES, WE discussed the basics of Charitable Gift Annuities (CGA's) and the tax advantages they offer both the donor and the receiving charity. In this month's final installment, we'll discuss the various "versions" and "types" of CGA's. Note that not all states permit the use of each type. Within the regulating states, the charity usually must submit a sample of each different version of each type of agreement it wishes to offer to the residents of that state before it issues that agreement. Versions of Agreements Generally, there are three "versions" of each "type" of agreement. The "versions" are: 1) A "single life" agreement (pay only one person for their lifetime) 2) A "two lives in succession" agreement (pay person "A" and then if person "B" survives person "A", pay person "B"), and 3) A "joint and survivor" agreement (pay two persons simultaneously with both names on the annuity payment check, each getting half of the payment, and at the demise of the first to die, pay the survivor the full annuity amount) This is used for married couples who file joint tax returns and/or who live in community property states. Type of Agreements Immediate Gift Annuity With an Immediate Gift Annuity, the annuitants starts receiving payments at the end (or the beginning) of the payment period immediately following the contribution. Payments can be made monthly, quarterly, semi-annually or annually. The most common arrangement is quarterly payments at the end of the quarter. The first payment is customarily pro-rated from the date of the contribution to the end of the first period, and thus is smaller than the subsequent payments, but it is possible to stipulate that the first payment be for the full amount. All of these factors have some effect on the amount of the charitable deduction. The annual annuity is determined by multiplying the amount contributed (measured as the fair market value on the gift date, NOT the net proceeds of sale if CGA is funded with securities) by the annuity rate. Deferred Gift Annuity With a Deferred Payment Gift Annuity (DPGA), the annuitant starts receiving payments at a future time, the date chosen by the donor, which must be more than one year after the date of the contribution. As with Immediate Gift Annuities, payments can be made monthly, quarterly, semiannually or annually. Tuition (College) Annuity A Tuition Annuity (aka "College Annuity") is a single-life deferred payment gift annuity created usually by a parent or grandparent for a young child, with the donor deferring the payments until age 18, or when the child is expected to enter college. The child (annuitant) then has the option of accepting the annuity payments for his/her lifetime, or, if elected before the payments start, the child can elect to receive much larger payments (known as the "commuted value" for a term of four or five years) as spelled out in the annuity agreement, at which time the payments end. Generally the option is for four or five annual payments. Flexible Annuity A Flexible (Deferred Payment) Gift Annuity means that the donor does not have to choose the payment starting date at the time of the contribution. The annuitant (who may or may not be the donor) may make that choice of the payment starting date based on his/her retirement date or other considerations. The older the annuitant(s) when the payments start, the larger the payments will be. This concept provides some of the flexibility offered by commercial annuities sold by commercial insurance companies. The donor would choose an initial "target date" for the payments to start. The charity would then offer a range of payouts with differing fixed payment amounts and differing starting dates based on earlier or later years. Since the charitable deduction remains fixed, the annuity rate for each starting date would have to change. The payments would be lower if the starting date was earlier and higher if the starting date was later. Each annuitant would have to determine on an annual basis whether or not they wish the annuity payments to start that year. Money Links For more information on charitable gift annuities, consult a certified financial planner. You can also learn more by logging onto the web site of the American Council on Gift Annuities at: 4 llilliaiii Penn Lile, November 2002
