Charitable gift annuities (CGAs) are becoming more attractive to philanthropists, making this planned giving vehicle a good fit for individuals who like the idea of an upfront tax deduction, a steady lifetime income stream that includes a portion that is non-taxable, and gift to support community causes that matter to them.
How it works:
In exchange for an irrevocable gift to The Community Foundation of Frederick County, the Community Foundation pays a fixed dollar amount to the donor and/or a designated family member or friend, for life. The amount of the payment to the donor or designee is determined by the size of the gift and the age(s) of the person(s) receiving the payments. The income is guaranteed, regardless of market fluctuations. In addition to receiving a charitable deduction for a portion of the gift at the time it is established, a portion of the gift annuity income may also be income-tax-free.
Why CGAs are growing in popularity:
- Effective on Jan. 1, 2023, the rate of return assumption moved from 4.50% to 5.25%. This increase translates to a significant boost in payout rates for annuity contracts and is therefore good news for a donor’s income stream. Current rates can be found on the ACGA’s website.
- Payments are fixed and not affected by market turbulence
- Payments are secure, backed by all of The Community Foundation of Frederick County’s unencumbered assets
- A portion of the initial gift may be tax-deductible
- A portion of the payments may be tax-free
- The donor may be able to increase his or her cash flow, especially if the CGA is funded with low-yielding assets
- The donor might receive a capital gains tax advantage if the CGA is funded with long-term appreciated assets
- The security of fixed payments can be directed to the donor or to a loved one, such as a parent, sibling or child
- The residuum will be used for the long-term benefit of the Frederick County community
For more information about establishing a charitable gift annuity through The Community Foundation of Frederick County, contact Laura McCullough, Director of Philanthropic Services, at 301.695.7660 or email l.mccullough@FrederickCountyGives.org. We’re always available to answer your questions about philanthropy or to schedule a personal consultation with both advisors and individuals – all at no cost.
The team at The Community Foundation of Frederick County is honored to serve as a resource and sounding board as you build your charitable plans and pursue your philanthropic objectives for making a difference in the community. This article is provided for informational purposes only, it is not intended as legal, accounting, or financial planning advice.