What is a Charitable Gift Annuity?

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  • Written By: Diane Goettel
  • Edited By: W. Everett
  • Last Modified Date: 22 January 2020
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A charitable gift annuity is a tool that allows a donor to give property or money to a charity with an agreement that the charity will provide the donor with income on an annual basis. The income received by the donor is secured by the assets of the charity, assets that are boosted by these kinds of donations. One of the key factors in a charitable gift annuity is the tax deduction that can be taken by the donor. This tax deduction is based on the fact that the donation is less than the total amount of funds that will be paid out by the charity.

There are a number of factors to consider when setting up a charitable gift annuity. One of the most important things to consider is the annual income that the donor will receive from the charity, which is determined by the age of the donor when he sets up the charitable gift annuity as well as the value of the donation and policies of the charity. It is common for charitable organizations in the United States to base their annual payments to such donors on the payout rates that are set forth by the American Council on Gift Annuities.


In many cases, when the donor passes away, the remainder of the charitable gift is kept by the charity. There are other cases in which the annual income from a charitable gift annuity will continue for multiple lifetimes. If, for example, a man sets up a very sizable charitable gift annuity, he might be able to make stipulations for the annual income for that annuity to cover his lifespan as well as the lifespan of one of his children to whom the income will be passed on.

These decisions are to be made prior to the establishment of a charitable gift annuity and are to be set forth in the contract that outlines the annuity. Some alterations can be made later in the process of estate planning as long as those alterations are allowable by the original contact. The income that a donor receives from a charitable gift annuity may begin right after the donation has been made or may begin at a certain point in the future. For example, a person may decide not to begin taking an annual income from his charitable gift annuity until he reaches a certain age, such as retirement age.



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