Gift Annuities Can Enhance Financial Security

The charitable gift annuity stands out as an important way to continue your support while preserving financial security. Donors who are looking for antidotes to stock market volatility or low CD rates may find gift annuities ideal for their retirement needs – and peace of mind. Retirees often are interested in having an “income they cannot outlive,” which is just what a charitable gift annuity offers. More than half of those payments would be tax free during the recipient’s life expectancy. Gift annuities thus offer a safe way to “dip into principal” and improve one’s living standards.

One hidden source of additional income may be U.S. savings bonds that lie forgotten in a desk drawer or safe deposit box. Cashing these bonds generally results in taxation on the buildup of interest, but gift annuities offer a way to convert savings bonds to a stream of income with little or no tax. Charitable gift annuity deductions can reduce or eliminate taxes from redeeming savings bonds, and the cash proceeds can fund an annuity whose payments are largely tax free during your life expectancy.

Investors with large capital gains can use gift annuities to “lock in” investment profits now, in case their stock drops in value, and start receiving fixed annual lifetime payments. In general, 30% to 50% of a donor’s capital gain escapes capital gains tax completely. The remaining gain can be reported in small annual installments as part of the donor’s annuity payments – and taxed at only 15%, or even less. Donors will also receive a substantial charitable deduction – and the personal satisfaction of making an important gift. Note: The capital gains tax rate has dropped to zero percent for 2008, 2009 and 2010 for taxpayers in the 15% tax brackets, which could make funding charitable gift annuities with appreciated securities even more appealing. For 2008, single taxpayers remain in the 15% bracket until taxable income exceeds $32,550. Married couples filing jointly will pay at a 15% rate on 2008 taxable income up to $65,100. In the right circumstances, these donors could escape all capital gains taxes on future annuity payments.

Remember that gift annuities also provide tax deductions of as much as 50% of the amount you transfer, and that part of your payments will be tax free or taxed at low capital gains rates. Contact us for details.

<Back

Copyright © 2008 by R&R Newkirk. All rights reserved.