I’ve been at The Foundation for almost 14 years, and yet it feels like just yesterday that I left a position as partner of a large Los Angeles law firm to join The Foundation staff. It’s amazing really how fast the years go, and how varied and how surprising the moments and contacts have been. I guess that’s one of the wonderful things about life, and by example, about The Foundation. Every day there are new people to meet, new issues to consider, and new challenges to address. Helping people find solutions to their charitable giving is a rewarding experience, especially as these endeavors are so often about helping people to create a lasting legacy that holds meaning for them and their loved ones. The opportunity to be a part of that process is something special.
Two things I’m often asked about is when is the best time to open a Charitable Gift Annuity and how do I known if this is right for me? There is no simple answer, as there are numerous factors to consider. To learn more, please find the article below or contact me at developmentoffice@jewishfoundationla.org.
Getting Started: Charitable Gift Annuities
The concept of the charitable gift annuity in America dates back to 1843, when a merchant in Boston first donated a gift of money to the American Bible Society in exchange for a flow of income. Today, the concept includes valuable tax benefits for donors. But perhaps more valuable than the financial advantages is the satisfaction donors gain by helping to continue our mission and good works.
Gift Annuities Defined
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A gift annuity is a simple, contractual agreement between a donor and Jewish Community Foundation of Los Angeles in which you give assets to us in exchange for our promise to pay one or two annuitants payments for life.
By donating through a gift annuity, you: (1) contract for a fixed payment for yourself or yourself and another individual, if you choose, and (2) make a gift to The Foundation. If you itemize deductions on your tax return, savings from the charitable deduction reduce the net cost of the gift.
For a period of years, based on a government table of life expectancies, a portion of each payment received is considered a nontaxable return of a portion of your gift. This means portion of each payment you receive is income tax free. This further increases your after-tax dollars available for spending or investing.
An annuity funded with appreciated property results in these additional advantages: (1) the gain allocated to the gift portion completely avoids the capital gains tax, and (2) the portion of gain to be recognized can be spread over the expected term of the contract (provided that the donor is a primary annuitant and the annuity interest is assignable only to the charitable organization).
Understanding Annuity Rates
Annuity rates are higher for older annuitants and lower for younger annuitants, based on life expectancy. As a result, gift annuity contracts are generally more appealing to older donors because the purchasing power of a fixed dollar return can shrink over any long period, even with modest inflation.
Rates are also adjusted according to the number of annuitants, with rates for two-life contracts often lower due to the extended life expectancy. The age of an annuitant is the age reached at the nearest birthday when the contract is made, and rates are the same for men and women.
A specific annuity rate is a matter of agreement between the donor and the issuing charitable organization. Below you'll see how one-life annuity rates increase with age.
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The rate of return is slightly lower for two lives because the period of payment generally is longer. *Please be advised that not all organizations offer CGAs at the above ages and rates. Contact Jewish Community Foundation of Los Angeles for current rates. Learn More |
Weighing Year-End Tax and Gift Strategies
As the curtain comes down on 2012, the mad rush of the holiday season often is accompanied by year-end discussions with professional advisors on tax-, estate- and charitable-gift planning matters. With the ongoing political brinksmanship in Washington, D.C. over the impending “fiscal cliff,” uncertainty abounds like at no time in recent memory.
Year-end planning is perhaps a bigger challenge this year than in the past because, unless Congress acts, individuals will face higher tax rates next year on their income, including capital gains and dividends, and estate tax rates will be higher as well. In 2013, certain itemized deductions, including charitable deductions, may be limited or phased out for higher income taxpayers. Depending upon their tax brackets, certain individuals may benefit, therefore, from a larger charitable deduction in the current year (2012) versus deferring into 2013. Opportunities for income and estate tax planning are still varied and nuanced, and should be reviewed with professional
advisors for their potential and benefit in 2012 and 2013. Tax and interest rates are quite low currently and should prompt individuals to analyze their overall financial picture.
Elliot Kristal oversees development of the professional advisor community and brings more than 30 years of legal experience to the position.
