The Gift Annuity

Lifetime Income for You, Beneficial Gift to Lakeview

A charitable gift annuity is an extraordinary way to make a gift, increase your income, and slice your tax bill – all in one transaction! Our charitable gift annuity program was created as a service to our many friends who have expressed a desire to make a gift of significance, while still retaining income from the gift property during their lives.

A charitable gift annuity is a contract in which you exchange a gift of cash or securities for a fixed income each year for the rest of your life (or the lives of two people). Your gift annuity offers five distinct advantages:

  1. Income for Life – at attractive payout rates for one or two lives;
  2. Tax Deduction Savings – a large part of what you transfer is a deductible charitable gift;
  3. Tax-Free Payout – a large part of your annual payment is tax-free return of principal;
  4. Capital Gains Tax Savings – when you contribute securities for a gift annuity, you minimize any taxes on your “paper profit;”
  5. Personal Satisfaction – from making a gift to Lakeview Ministries of lasting significance.

How Much Income Will I Receive?

Gift annuities are special vehicles for giving that are regulated through state and federal laws. The exact payout will vary depending on your age when the gift was made. The rate of return is higher for older donors. Generally, those under the age of 60 should not consider giving through a gift annuity. For these people, a trust may be better.

To give an example of the rate of return you might expect, the following table shows the gift annuity rates for a single life. We can provide you with payout rates for two-life arrangements if you are interested, but the single-life rates are enough to show how large of a factor age is.

Age 60 5.7% rate of return

Age 65 6.0% rate of return

Age 70 6.5% rate of return

Age 75 7.1% rate of return

Age 80 8.0% rate of return

Age 85 9.5% rate of return

Age 90 11.3% rate of return

But that is just the beginning of the benefits. Let’s take the example of a 70-year-old contributor in the 28% tax bracket who establishes a single-life gift annuity of $100,000. He would receive a charitable tax deduction of $34,980 for the initial gift, generating a savings of almost $10,000. Then he would receive $6,500 for the rest of his life. Of this, annual payout, $4,090 would be tax free. Although the payout rate is 6.5% the effective payout rate, taking into account the tax savings and tax-free income, comes to 9.0%. As you can see, both you and the charity benefit.

Transform CDs into Gift Annuities

Do you have certificates of deposit that are nearing maturity? Consider converting CD funds to a gift annuity. Take the fictional case of Mrs. King, age 75, who has $10,000 in a CD that will mature next month. She thinks she can get 2% interest on a new CD. But Mrs. King had been thinking about leaving Lakeview Ministries $10,000 in her will and that leads her to a better plan – a charitable gift annuity. For a $10,000 gift, Mrs. King will receive a charitable tax deduction of $4,081, an annual income of $710 (7.1% instead of 2.0%), and the satisfaction of making a truly significant gift.

Remember that the charitable gift annuity is an irrevocable gift, but one with excellent tax and financial benefits.

Gifts of Securities Save Twice

A gift annuity funded with appreciated securities may hold special advantages. If you gave $50,000 worth of stock in which you have a $15,000 long-term capital gain, you can avoid some tax that you would owe were you to sell your stock. Suppose your charitable deduction was 40% of the $50,000 you gave. You would escape tax on 40% of your $15,000 gain. The remaining capital gain could be reported in prorated amounts over your life expectancy.