Planned Giving Insights and Information

Gift Annuity Contracts Filed with State Regulators and the Legacy IRA Act

As we’ve discussed in other blog posts, it is now possible to use a qualified charitable distribution (QCD) from an IRA to fund a charitable gift annuity (CGA). Among the specific requirements set forth in Section 307 of the Consolidated Appropriations Act, 2023 (“the Act”) is that the “income interest” of such an annuity be non-assignable. Our interpretation of the Act is that the income interest in a CGA may not be assigned to anyone, including the issuing charity. Many gift annuity agreements, including those included in PG Calc’s PGM Anywhere and Planned Giving Manager (desktop) software, provide that the annuity is non-assignable “except that it may be assigned to the charity.” That exception is specifically provided for in Reg. Sec. 1.1011-2(a)(4)(ii), which allows for ratable reporting of capital gain when a long-term capital gain asset is used to fund a CGA if the annuity is non-assignable or only assignable to the charity issuing the CGA.

Beware CGA Rate Shoppers

The rate to be offered to your interested donor, per your organization’s policies, is 6.5%. So what do you do if your donor asks if you can go a little higher, maybe a rate of 6.8%? And then lets you know that another charity is willing to offer that? How do you suppress the urge to waive your policy in order to not “lose” the gift, particularly since these situations often arise in the context of an exceptionally large contribution amount – which is precisely when you don’t want to increase the risk to your organization? To help stamp out the urge to participate in rate shopping, it helps to understand how policy decisions affect your program, and the impact bumping up your rates can have on its success.

Year-End Reminder - What a Difference a Day Makes

What prompts the flurry of calendar year-end gifts?  That all important – to many of your donors – current year charitable deduction.  A day late, a gift made on January 1st rather than December 31st, and the deduction is “lost” for a year.  Of course, a day can make a difference throughout the year, by changing what discount rate is used for calculating the deduction or in determining the amount of a first gift annuity payment. But it is of particular significance at year-end.

Hidden CGAs: A Cautionary Tale

There are two scenarios for how the funds from a gift annuity issued by one organization might ultimately be directed to another organization. In one situation, Charity A either doesn’t issue gift annuities at all or doesn’t issue them in a particular state, but knowingly directs a donor interested in a gift annuity to another charitable organization (Charity B) that will issue a gift annuity to the donor. In this situation, Charity A has the opportunity to proactively look into Charity B, the issuing organization, and to understand how the gift will be managed and distributed.