Investing with Faith / James Maslar
Charitable gift annuities offer an added incentive to help God’s work
The Christmas holidays may be over, but the spirit of giving doesn’t have to end.
In fact, the beginning of 2024 might just be one of the best times to consider supporting the Church’s mission through a Charitable Gift Annuity (CGA) with the archdiocese’s Catholic Community Foundation (CCF).
Why? Because CGA rates, just updated on Jan. 1, are currently at their highest level in more than a decade. And higher rates mean that in giving through this unique way, there is more to receive.
What is a CGA?
A Charitable Gift Annuity is a contract made between a donor and a sponsoring charity, like the archdiocese’s CCF, in which the charity provides the donor or chosen loved one with fixed income payments for life in exchange for a sizable upfront donation of cash or appreciated assets.
Upon their death, the remaining value of the CGA is received by the donor’s chosen ministry (like a parish, school or agency) in a lump-sum legacy gift.
Unlike its more complex “cousin,” the charitable remainder trust, a CGA is easy and free to set up with a much lower minimum gift threshold. They are commonly referred to as “the gift that gives back.”
How do the payments work?
The payment amount is determined by applying an age-based rate (ranging from 5-10%) given by the American Council on Gift Annuities to the upfront gift. The older the annuitant, the higher the rate. For example, at
75 years old, Grace’s current CGA rate is 7%. This would mean an upfront gift of $25,000 to create a CGA will provide her annual payments of $1,750 for the rest of her life. The charity would make these fixed payments to Grace in monthly, quarterly or annual installments, per her preference, either by check or deposited directly into her bank account.
Deferral of payments is an option
It is also possible to defer annuity payments for a period of years. That means donors in their 50s may choose to defer payments until they retire at 65—or even later. Deferring offers an increased rate and thus payment amount—the longer the deferral, the higher the rate.
What are the tax benefits?
Continuing the example above, Grace’s $25,000 gift would receive a partial charitable tax deduction ($10,316) for the current tax year.
Additionally, a portion of each payment for the remainder of her life expectancy (Internal Revenue Service actuarial tables say 12.5 more years) will be considered tax-free. And since Grace used appreciated stock to fund her CGA, some of the capital gains tax due is avoided, too, and the rest will be spread out over that same life expectancy, diluting its impact in a given year.
Which charitable and financial goals can be met by CGAs?
Donors are unique and so are their goals and objectives. Some often-cited ones include:
• Offering a “middle ground” between not knowing how much you’ll need for the rest of your life with wanting to make a significant gift to your favorite parish, school or ministry.
• Providing a fixed, supplemental source of retirement income to yourself or a loved one not subject to market volatility.
• Allowing assets to “go to work” for you and the Church at the same time.
• Utilizing a windfall, bonus or low-returning asset to both make a tax-friendly legacy gift and provide additional income.
The joy of giving
Of course, the single biggest benefit of establishing a CGA is the joy of knowing that you are putting God’s blessings to work and making a difference for a beloved Church ministry.
At the Catholic Community Foundation, we offer donors CGAs that they can designate to benefit their favorite archdiocesan parish, school or agency, which will receive 100% of the eventual gift.
Wondering whether a CGA is right for you? The Catholic Community Foundation is here to help. Call 317-236-1482 or e-mail ccf@archindy.org.
(James Maslar is a Catholic philanthropic advisor for the archdiocese’s Catholic Community Foundation. Tax or legal information provided herein is not intended as tax or legal advice. Always consult with your legal, tax or financial advisors before implementing any gift plan.) †