A charitable gift annuity provides fixed payments for life in exchange for a gift of cash or securities to WI. Gift annuities are easy to set up, and the resources of WI back the payments you receive.
A simple contract
A charitable gift annuity is a simple arrangement between you and WI that requires a one or two page agreement. You will incur minimal or no costs to establish the arrangement and no costs at all to maintain it.
Irrevocable gift
A charitable gift annuity is an irrevocable arrangement. Once you transfer assets in exchange for the gift annuity, you cannot change your mind and get the assets back. This requirement assures that whatever is left of your gift when the gift annuity ends will go to support WI.
Fixed payments for life
In exchange for your irrevocable gift of cash, securities, or other assets, WI will pay you a fixed amount each year for life. The amount of the payment depends on the amount donated and the age of the payment recipient.
Tax-advantaged payments
Part of each payment typically will be tax-free for many years. This tax-free portion makes the payments more valuable than an equal amount of fully taxable income. The amount of this tax-free portion will be greater if you give cash than if you give stock or other appreciated property.
Who can receive payments?
You decide who will get the payments from your gift annuity. Usually, this will be you, or you and your spouse. Alternatively, you can select one or two other people to receive the payments from your gift annuity. For example, you may wish to provide income for parents, a sibling, or a faithful employee.
Payout rate depends on age
The older you are when you make your gift, the greater the payment rate you will receive. If you choose other people to receive the payments from your gift annuity, their ages at the time of your gift will determine their payment rate. Our minimum age for a payment recipient is 65.
Sample Annuity Rates for Gift Amount of $10,000
| Age | Payment Rate | Annuity | Deduction |
|---|---|---|---|
| 65 | 5.7% | $285 | $1,648 |
| 66 | 5.8% | $290 | $1,676 |
| 67 | 5.9% | $295 | $1,708 |
| 68 | 6.1% | $305 | $1,691 |
Tax benefits
You will earn an immediate income tax charitable deduction in the year of your gift, providing tax savings if you itemize. The amount of this deduction will depend on several factors. If you cannot use the entire deduction that year, you may carry forward your unused deduction for up to five additional years.
If you give stock or other appreciated property to create a gift annuity, you will pay tax on only a portion of your capital gain in the property. Even better, if you are the payment recipient of your gift annuity, you will be able to report this capital gain in installments over many years. In this case, your capital gain income will replace some of the tax-free portion you would receive if you were to give cash.
By removing the gift assets from your estate, you may also reduce future estate taxes and probate costs. The amount of these savings will depend on the size of your estate and on estate tax law in force at the time your estate is settled.
Assets to consider
Cash currently held in a savings account, bank CD, or money-market fund makes an excellent funding asset. Usually, a gift annuity will provide you with larger payments than any of these investments.
Securities, especially highly-appreciated securities that you have owned for one year or more, are also an excellent funding asset. Giving them to us in exchange for a gift annuity will allow you to unlock their value to increase your cash flow and avoid substantial capital gains tax at the same time.
Donors over 70½ can receive lifetime payments in return for a contribution to WI from their IRA account. This gift plan combines a charitable gift annuity and a Qualified Charitable Distribution (QCD) from an IRA.
Charitable Gift Annuity — A charitable gift annuity is a simple contract between you and WI promising to pay you a fixed amount each year for life. The gift annuity contract is issued to you in exchange for your charitable contribution. The annual amount to be paid depends on your age at the time of the gift and does not change for the rest of your life. WI invests and manages your contribution, and the financial resources of WI back your payments. Payments you receive each year may be taxed as ordinary income.
Qualified Charitable Distribution — A QCD — sometimes called a "charitable rollover" — is a contribution from your IRA directly to WI. You can make a QCD if you are at least 70½ at the time of your gift. Unlike other distributions from your retirement accounts, you pay no income tax on a Qualified Charitable Distribution, although there is no charitable deduction for your contribution. However, your QCD contribution counts toward your Required Minimum Distributions (RMD) from your IRA without creating taxable income.
Charitable Rollover Gift Annuity — Under a new law effective in 2023, some donors can make a QCD in exchange for a charitable gift annuity. There are some rules and limitations:
April Miller is a 71 year-old widow. She would like to make a significant gift to WI, but she is dependent on the income produced by her investments. One of these investments is stock in XYZ Widget Corporation that she and her late husband purchased many years ago for $3,000.
Her stock is now worth $10,000 but provides little income - about $126 after tax. April is reluctant to sell her XYZ Widget stock to reinvest in higher yielding assets because she will have to pay $1,400 in capital gains tax. This would leave her with just $8,600 to reinvest.
April is pleased to learn that she can make a significant gift to WI and increase her cash flow by giving her XYZ Widget stock to WI in exchange for a gift annuity. She can also save substantial income taxes plus avoid and defer capital gains taxes, and will receive an income tax deduction that may provide additional tax savings at the same time.
| Tax result | Cash flow before tax | Cash flow after tax (37% tax rate) | |
|---|---|---|---|
| April keeps her stock | None | $200 | $126 |
| April sells and reinvests for 4.0% yield | Owes $1,400 capital gains tax | $344 | $217 |
| April funds a 6.4% gift annuity | $3,668* income tax deduction Avoid tax on $2,568* of capital gain | $640 | $499 |
*Deduction amount and capital gains tax avoided may vary depending on the timing of the gift.
