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In return for an irrevocable gift of cash or other assets to a qualified charitable organization, a donor can receive a charitable tax deduction and a fixed amount of money to be paid for the remainder of their lifetime. This transaction is called a Charitable Gift Annuity. These lifetime payments are not considered to be "income" and are a partial tax-free return of the donor's gift. The donated property becomes part of the charity's assets and the payments are a general obligation of the charity. The annuity is backed by the entire asset base of the charity, not just by the value of the gift. In the case of a gift in the form of securities, the value is set by the fair-market value on the date of the contribution. Charitable gift annuities are regulated by most states. They require a published gift annuity rate chart of the maximum annuity rate the charity offers each annuitant which must show the age to the nearest birthday (actuarial age) on the date of the gift. Charities are allowed to spend a portion of the gift immediately, but they must maintain sufficient reserves, which are determined by state regulations, and satisfy all other state regulatory requirements. Charitable Gift Annuity Agreements Not all states permit the use of each type of the many agreements that are available. Usually the charity is required to submit each different type of agreement it would like to offer. Some of the types of gift annuities are: Immediate Gift Annuities Periodic annuity payments can be made monthly, quarterly, semi-annually or annually, as defined in the agreement. With the first payment to start at the end of the period (month, quarter, etc.), immediately following the contribution. Deferred Gift Annuities This type of annuity is where the annuity payments begin at a future date chosen by the donor. The payments must begin more than one year after the date of the contribution. Tuition Gift Annuities Usually these types of annuities are created by a parent or grandparent for a young child and the payments are deferred until the child is expected to enter college. The annuitant(s) then has the option of receiving annuity payments for his or her lifetime, or receive much larger payments for a term of four or five years, as defined in the agreement. Flexible Gift Annuities The starting date of this type of annuities is chosen by the annuitant(s). A "target date" for the payments to begin is chosen at the time of the gift. A range of payouts with a variety of fixed payment amounts and differing starting dates are offered by the charity. The charitable deduction remains fixed, therefore the annuity payment for each starting date would change. The payments would be higher if the starting date is later and lower if the starting date is earlier. Annuitants would need to decide on an annual basis whether or not to begin the annuity payments that year. Versions of Agreements Generally, there are three versions of each type of agreement, they are: "single life" agreement - annuity payments for the annuitant's lifetime, "two lives in succession" agreement - annuity payments for the annuitant's lifetime and then annuity payments of the same amount to a second person if he or she survives the annuitant, and "joint and survivor" agreement - annuity payments to both spouses simultaneously, each getting half of the payment, and upon the death of one of the annuitants, pay the survivor the full annuity.
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