How to make a charitable gift in 2018 and receive income

How to make a charitable gift in 2018 and receive income

December 31st is right around the corner, but there is still time to make a gift this year that will benefit your favorite charity in the future and provide you with a lifelong stream of income. This type of gift is known as a “charitable gift annuity” (CGA).

A charitable gift annuity is a contract between you and Silicon Valley Community Foundation in which you agree to donate cash or securities and, in exchange, SVCF agrees to pay you a fixed sum for the rest of your life. At the end of the term, SVCF distributes the balance of the assets to your favorite charity or charities.

“Charitable gift annuities are great gifts for people who would like to make a donation, yet may still need income. Donors get to make the gift today, earmark the remainder for a favorite charity, and know they’ll get a check for the rest of their lives in an amount that does not vary. It’s a winning solution for everyone,” says Don Gottesman, SVCF’s Director of Planned Giving.

Some benefits of creating an annuity are:

  • You can support your favorite charity or charities, including SVCF
  • You are eligible for an immediate income tax charitable deduction
  • You receive payments for the rest of your life that will not change, regardless of stock market fluctuations
  • The payments your receive are taxed at very favorable rates
  • For annuities funded with cash: the majority of the income is tax-free and a smaller percentage is taxed as ordinary income
  • For annuities funded with marketable securities: the majority of the income is taxed as capital gains and ordinary income and, in most cases, a small percentage is tax free

Interested? There are a few details to keep in mind:

  • The minimum amount needed to fund an annuity is $25,000
  • The annuitant – the person receiving the payments – must be:
  • 60 years of age or older; and
  • a California resident
  • The payment percentage is based upon the annuitant’s age.
    For example, for a 79 year old, the current rate is 7.1%
  • SVCF follows the rates suggested by the American Council on Gift Annuities https://www.acga-web.org/gift-annuity-rates
  • The Council increased the recommended rates in July for the first time in six years
  • The charity selected does not receive any money until after the annuitant has passed

If you would like more information about charitable gift annuities or you would like SVCF’s planned giving team to prepare an illustration showing your expected deduction and payments, please contact donate@siliconvalleycf.org.

To establish a CGA before the end of 2018, please contact us by Dec. 10. For year-end deadlines related to other gift types, please see the blog:  https://www.siliconvalleycf.org/blog/philanthropy/deadlines-year-end-charitable-giving