Creating Income From Charitable Gifts

 By: Ray Buckner
Do Well Doing Good

Many charities will give you annuity payments if you make a donation.

Your rewards from charitable giving need not be limited to a good feeling and a tax deduction.

You can get cash back, too.

Many charities offer charitable gift annuities. With a CGA, you give assets to a charity or nonprofit organization in return for a stream of cash flow.

Charities invest your assets and use the earnings to fund operations and pay your annuity.

Payments typically continue for the rest of your life. You can also arrange for the annuity to cover your spouse's life. If you name someone besides yourself or your spouse to receive the annuity payments, you may have to deal with the gift tax.

Payments from a CGA are fixed. In some states, regulations cap payouts.

The payments probably will be lower than you would get with an annuity from an insurance company. But you will get tax benefits, as explained below. And you can support a favorite cause or institution.

Each charity offering a CGA can set its own rate of payout as a percentage of assets. Many use a table from the American Council on Gift Annuities to set rates.

ACGA's current rate, posted at, are in effect through 2010. The older you are, the larger your payments will be as a percentage of your gift.

Say your nearest birthday is your 60th when you make a donation. You would get 5.0% on the ACGA table. On a $500,000 gift, you'd get $25,000 a year for life.

At age 70, a $500,000 gift would yield a 5.7% payout: $28,500 a year.

A joint annuity would get a lower payout than a single-donor annuity.

With some charities, you can arrange a smaller payout. Why? To boost the value of your donation, increasing your deduction.

Income you receive from a CGA is taxed like many other annuities. A portion is a tax-free return of your contribution. Another portion is taxable ordinary income.

Cutting Taxes

If you donate appreciated assets held longer than 12 months, part of the payout will be taxed at long-term capital gains rates.

That rate could be a lot lower than the ordinary income rate. So if you can afford to donate either, you might be better off gifting appreciatied assets vs. cash.

You'll also get an upfront income tax deduction for a charitable gift. But this deduction will not be for the full value of the donated assets.

Instead, a present value is put on the expected annuity payments. That value is based on life expectancy and current interest rates.

This present value of what you'll receive is subtracted fromt he value of the assets given away. If you donate appreciated assets held more than a year, their current value will be used. Otherwise, the amount you paid is the value.

The difference between the present value of what you'll get and the value of what you're giving is the amount you can deduct.

Say you and your spouse are each 75 years old. You offer a charity a $500,000 CGA. You'd receive $28,000 a year. Based on current interest rates and your joint life expectancy, the present value of that annuity is about $300,000. You donated assets worth $500,000, so your charitable tax deduction would be around $200,000.

Tax rules might bar you from deducting this all at once. For gifts of appreciated assets, charitable deductions are capped at 30% of adjusted gross income. That's in the year of donation.

Donations you can't deduct right away can be carried forward up to five years. Each year you could deduct up to 30% of joint AGI, until the deductible amount is used up.

What if your deduction would be so big that you couldn't use it up in six years? Stagger your donations. Arrange a smaller gift annuity now and get a deduction you'll be able to use up in six years.

After six years, fund another gift annuity for a new round of deductions. Repeat that as many times as needed.

Charities rarely issue immediate gift annuities for recipients under 60. Most are established by people over 70.

Charities want to limit the risk thta donors will live unusually long. Charities also want to cut the risk of investment underperformance,. Even if its payments top your gift, a charity must keep paying.

Delayed Gratification

If you're relatively young, you may be able to get a deferred gift annuity. You'd contribute now and get an annuity later, perhaps in retirement. You can lock in a payout that reflects the principal's investment growth in the years until you retire.

Say you're 50 years old and you agree to fund a gift annuity offered by a local museum that will start when you're 65. Waiting 15 years might double your payout.

A CGA is backed by assets of the sponsoring charity. Your future income stream is secure if your CGA is financially strong. You can check charities' finances at a site like

CGA's don't make sense for people who will need all of their money for retirement expenses. Also, anyone with a long remaining life expectancy chouldn't put too much into fixed-return annuities, because they provide no inflation protection.$
Artice Source:

Related Articles in Estate Planning

People interested in the above article are also interested in the related articles listed below:

Self directed IRA investment options go beyond the traditional stocks and bonds into real estate, limited liability companies and partnerships; tax liens, mortgage receivables, precious metals, notes and so on. To establish a real estate IRA investment account, the first step is to set up a self directed IRA. A self directed IRA account allows the account holder to control and make the final decisions in the type of IRA investments they consider to be the most profitable.
The real estate sector is a field that grown rapidly and also considers that it will be get mount in new future. If you are willing for properties in India, there are several real estate firm help you to finding best properties. Here you can get information about properties in India, home loans, home loans companies, etc.
Sickness and death are tragic realities that every family will need to deal with at some point. Too often, this planning goes neglected because the subject is difficult to deal with for many, or simply too confusing. Many consider "estate planning" to be only for the wealthy with sprawling country homes filled with valuable antiques and tapestries. However, this could not be farther from the truth. While most wealthy do have estate plans in place, they are also critical for those who are not wealthy, to ensure that their needs and desires are met in both sickness and health.

More in Estate Planning

Excellent, Larry. Thank you for taking the new article directory technology and making it work to the max. I encourage everyone to keep contributing and contributing regularly. I can attest to the fact that this site is already a strong directory in a field of many. Kudos to Larry!

Matthew C. Keegan
The Article Writer


I find it a delight to use both as an author and a publisher. It is full of nice little surprises that make the whole process of writing, reading and publishing articles a complete delight. This is one that comes out tops and beats the rest hands down.

Eric Garner
Managing Director


I did a Google search and came across your site. It was exactly what I was looking for and was elated to find such a broad range of articles. As I am launching a free magazine in a small town in Florida, I wanted to be as resourceful as possible while still being able to provide some content that is interesting and well written. Your site has all the variables in the mix. Excellent Site hitting all the notes in the scale sort of speak.

Mo Montana
Florida, USA

Article Topics

Copyright © 2005 - by Larry Lim, Singapore - Article Search Engine Directory at™
All Rights Reserved Worldwide. All Trademarks and Servicemarks are the property of the respective owners.
ArabicBulgarianCatalanChinese (Simplified)Chinese (Traditional)CzechDanishDutchEnglishEstonianFinnishFrenchGermanGreekHaitian CreoleHebrewHindiHungarianIndonesianItalianJapaneseKoreanLatvianLithuanianNorwegianPersianPolishPortugueseRomanianRussianSlovakSlovenianSpanishSwedishThaiTurkishUkranianVietnamese