Charitable Gift Annuities

Transcription

1 Charitable Gift Annuities A Gift that Gives Back Would you like to support The College of Wooster but are hesitant to do so because of the current market uncertainties? Perhaps you are concerned about being able to meet your future needs. Others donors who feel the same way have discovered the joy of supporting Wooster through a charitable gift annuity. A charitable gift annuity is a contract between you and Wooster that provides advantages for both. You can make a gift and receive immediate financial benefits. By funding a charitable gift annuity you will provide valuable support to The College of Wooster and receive a charitable income tax deduction and fixed payments for your lifetime or the lifetime of a loved one. Charitable gift annuities may be funded with cash, securities or property. The payout rate on a charitable gift annuity is a fixed rate based on the age of the donor at the time the gift is made. Payments may be made to one or two income beneficiaries. Summary of financial benefits: Guaranteed fixed payments for life A portion of your payments may be nontaxable Charitable income tax deduction for a portion of the gift Reduced capital gains taxes

2 EXAMPLE: Beth J., age 76, contributes $10,000 cash and receives a lifetime annuity of $600, of which $466 is tax-free for approximately the first twelve years. She receives an income tax deduction of $4,501 results in tax savings when she claims it. Donor(s) Give Assets Gift Annuity Remainder to The College of Wooster Income Tax Deduction Fixed Payments Benefits Include: Guaranteed fixed payments for life. The annuitants you name will receive fixed annual payments for life, backed by the general resources of The College of Wooster. With attractive annuity rates, your cash flow may increase from what you currently receive from your asset. Federal and state income tax deduction. You will receive an income tax deduction in the year of your gift to be used for immediate tax savings. This is usually 20%-40% of your gift amount. Favorable capital gains tax treatment. If you fund the annuity with a long term appreciated securities (ones you have held for more than one year), you will incur tax on only part of the gain. If you name yourself as an annuitant, this tax will be spread out over many years. In other words, some of the capital gain is forgiven completely and the other portion is spread out over your life expectancy. Reduced estate costs. Your estate may enjoy reduced probate costs and estate taxes. Support The College of Wooster. You will have the satisfaction of knowing you are providing generous support to Wooster s goal of preparing students to become leaders of character and influence in an interdependent global community. A simple contract A charitable gift annuity is a simple arrangement between you and The College of Wooster that requires a one or two page agreement. There are minimal or no costs to you to establish the arrangement and no costs at all to maintain it.

3 Fixed payments for life In exchange for your irrevocable gift of cash, securities, or other assets, Wooster will pay you a fixed amount each year for life. Payments last for your lifetime. You cannot outlive your payments. Payments are predictable. Your payments will not be affected by investment performance or market conditions. You will get the same amount each year. Payments are very secure. They are backed by the general resources of The College of Wooster, not just by the assets you donate. Tax-advantaged payments Part of each payment typically will be tax-free for many years. This tax-free portion makes the payments more valuable than an equal amount of fully taxable income. The amount of this tax-free portion will be greater if you give cash than if you give stock or other appreciated property. Who can receive payments? You decide who will get the payments from your gift annuity. Usually, this will be you, or you and your spouse. You can, however, select any one or two people to receive the payments from your gift annuity. For example, you may wish to provide income for parents, a sibling, or a faithful employee. Payout rate depends on age The older you are when you make your gift, the greater the payment rate you will receive. If you choose other people to receive the payments from your gift annuity, their ages at the time of your gift will determine their payment rate. Our minimum age is 65. Sample Annuity Rates Gift Amount Age Payment Rate Annuity Deduction $50, % $2,350 $17,449 $50, % $2,400 $17,850 $50, % $2,400 $ $50, % $2,450 $19.421

4 Tax benefits You will earn an income tax charitable deduction in the year of your gift. If you cannot use the entire deduction that year, you may carry forward all unused deduction for up to five additional years. If you give appreciated property such as stock to create a gift annuity, you will avoid tax on some of your capital gain in the property. Even better, if you are the payment recipient of your gift annuity, you will be able to pay the tax on the rest of your capital gain in installments over many years. By removing the gift assets from your estate, you may also reduce future estate taxes and probate costs. Assets to consider Cash currently held in a savings account, bank CD, or money-market fund makes an excellent funding asset. Usually, a gift annuity will provide you with larger payments than any of these investments. Securities, especially highly-appreciated securities that you have owned for one year or more, are also an excellent funding asset. Giving them to us in exchange for a gift annuity will allow you to unlock their value to increase your cash flow and avoid substantial capital gains tax at the same time. Example Helen Thomas is a 71 year-old widow. She would like to make a significant gift to The College of Wooster, but she is dependent on the income produced by her investments. One of these investments is stock in XYZ Widget Corporation that she and her late husband purchased many years ago for $3,000. Her stock is now worth $10,000 but provides little income - about $121 after tax. Helen is reluctant to sell her XYZ Widget stock to reinvest in higher yielding assets because she will have to pay $1,400 in capital gains tax in the process. This will leave her with just $8,600 to reinvest. Helen is pleased to learn that she can make a significant gift to The College of Wooster and increase her cash flow by giving her XYZ Widget stock to Wooster in exchange for a gift annuity. She can also save substantial income and capital gains taxes at the same time.

5 Tax results Cash flow before tax Cash flow after tax (39.6% tax rate) Helen keeps her stock None $200 $121 Helen sells and reinvests for 4.0% yield Owes $1,400 capital gains tax $344 $208 Helen funds a 5.3% gift annuity $4,014* income tax deduction Avoid tax on $2,810* of capital gain $530 $421 *Deduction amount and capital gains tax avoided may vary depending on the timing of the gift. NEXT STEPS: To receive further information and assistance on charitable gift annuities, or to learn more about how your gift can help the The College of Wooster, please call Brian Nielson at (330) or bnielson@wooster.edu. * Because everyone s situation is different, we encourage you to seek professional legal, estate planning, and financial advice before deciding on a course of action. This information does not constitute legal or financial advice and should not be relied upon as a substitute for professional advice. By supporting The College of Wooster with your philanthropic donations, you are helping us continue to prepare students to become leaders of character and influence in an interdependent global community. Brian S. Nielson, JD Director of Planned Giving The College of Wooster Phone: (330) bnielson@wooster.edu