CGAs: When old is new again

November 7, 2015       The NonProfit Times      

Many people think that charitable gift annuities (CGAs) are a recent phenomenon, but historical records indicate that some institutions were marketing CGAs during the late 19th and early 20th centuries.

If that’s not enough, ponder this: According to the American Council on Gift Annuities, more than 4,000 organizations and institutions now issue CGAs.

Speaking during the 2015 National Catholic Development Conference (NCDC) Conference and Exposition, Cathy Sheffield of All Saints Health Foundation said the CGAs have the following characteristics and advantages:

They are inexpensive to establish and not complicated.

They provide an income stream for the life/lives of the annuitants.

The immediate income tax charitable deduction is based on age, payout rate, earnings assumptions and the Internal Revenue Service (IRS) discount rate.

Prospects are generally older and might have less wealth.

Lower interest rates and lower inflation increase the attractiveness of this arrangement.

A gift annuity is a contract (not a trust) under which a charity, in return for a transfer of cash, marketable securities or another asset, agrees to pay a fixed amount of money to one or more individuals, for their lifetimes. In that sense, then, it is a hybrid, part charitable gift and part annuity, or a “split interest gift.”

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