As rate charts reveal, gift annuity rates are higher for older individuals. As a result, gift annuities are generally most attractive to persons in their retirement years.
If you are still planning for your retirement or in your early retirement years and you would like to receive higher payments at a future time, you might want to consider an option known as a deferred gift annuity. Under the terms of a deferred gift annuity, you transfer funds to (your organization's name) today and enjoy an immediate income tax savings, while higher payments to you are delayed until a future date you determine.
- Jane, age 74, will transfer assets valued at $50,000.00 on February 4, 2023 to (your organization's name) in exchange for a deferred gift annuity, which will provide income for life starting on 5/1/2027.
- The annuity will make payments of 7.5% of the gift amount annually, which is $3,750 per year.
- The gift will result in an immediate charitable income tax deduction of $32,041.62. Additionally, the $50,000 given in exchange for the annuity will not be subject to estate taxes.
- At the end of the annuity period the amount of the gift, less the value of the life payments, will be used by (your organization's name) to further its mission.
This example has used the December 2022 IRC Section 7520 discount rate of 5.2% to optimize the charitable deduction.