Getting Started: The Deferred Charitable Gift Annuity
Gift Annuities Defined
A gift annuity is a simple, contractual agreement between you and KAOEF in which you transfer assets to us in exchange for our promise to pay you lifetime payments.
By donating through a gift annuity, you can accomplish two things: (1) contract for a fixed payment for yourself or yourself and another individual, if you choose, and (2) make a gift to KAOEF. If you itemize deductions on your federal income tax return, savings from the charitable deduction reduce the net cost of the gift.
A special type of annuity is the deferred payment gift annuity. With this type, the start of payments is delayed until a specific date, initially determined by the donor. In exchange for agreeing to defer your payments for a period of time, you will receive a higher interest rate, depending on your age and the length of the deferral period.
This option is appealing to younger donors who wish to improve future income, such as at retirement.
For a period of years a portion of each payment received is considered a nontaxable return of your investment in the gift. This means a portion of each payment is income tax free to you. This further increases your after-tax dollars available for spending or investing.
In addition to the annuity payment you receive, an annuity funded with appreciated property results in these 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 your life expectancy (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. 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 a recipient is the age reached at the nearest birthday, 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. These rates are recommended by the American Council on Gift Annuities. Check with your legal advisor or Erik Showalter at KAOEF for current rates.
One Life
Age
Deferred Until Age
Rate
50
70
12.6%
50
65
9.5%
55
70
10.2%
55
65
7.7%
60
70
8.3%
60
65
6.3%
65
70
6.7%
*Please be advised that not all organizations offer CGAs at the above ages and rates. Contact Kappa Alpha Order Educational Foundation for specific information.
For More Information
Charitable gift annuities are an excellent method of achieving your philanthropic goals and gaining substantial tax benefits. As with most contract agreements, however, before establishing a charitable gift annuity, it is best to consult your professional advisors.
At Kappa Alpha Order Educational Foundation, we are available to answer any questions and provide projected results for your specific situation, in confidence and with no obligation.
There may be minimums associated with this type of gift. Please contact Erik Showalter at 540-460-1401 or 540-463-1865, or via e-mail at eshowalter@ka-order.org, before making such an arrangement.
The information in this Web site is not intended as legal advice. For legal advice, please consult an attorney. Figures cited in examples are for hypothetical purposes only and are subject to change. References to estate and income tax include federal taxes only. Individual state taxes and/or state law may impact your results.
A gift annuity is a simple, contractual agreement between you and KAOEF in which you transfer assets to us in exchange for our promise to pay you lifetime payments. 
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