PG Calc Blog

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Jen Wickham
Author: Jen Wickham

Working with an Annuitant to Assign their Annuity Interest to Your Organization

An annuitant who concludes that he or she no longer needs the annuity payments – and won’t need them in the future either – could choose to assign to the charity the right to all future payments. If it is irrevocable, the assignment effectively terminates the annuity. When this happens, the annuitant may receive a charitable deduction for contributing her remaining interest in the annuity.

Supplementing Retirement Income with a Planned Gift

Many of your supporters will start planning for their retirement in earnest once they reach their late 40s or early 50s. In a classic scenario, their children may have moved out of the house, or will do so in the next few years. They are established in their careers and entering their peak earning - and saving - years. It's time to start planning for the next stage of life: retirement. An important aspect of planning for retirement is making sure there will be sufficient cash flow to meet living expenses. There are at least three gift plans that can provide a donor with additional cash flow to meet those expenses starting when a donor retires. Profile: Desires predictability and Guarantee The deferred gift annuity (DGA) has three characteristics that will appeal to many donors who are planning for retirement. 1. It offers the predictability of fixed payments. 2. It offers the security of being backed by your organization's general resources. 3. It allows the donor to set the date when payments will start. A promise of fixed and guaranteed payments is just what many in your target audience want to hear in a world of rock-bottom interest rates on CDs, money market funds, and other widely-used savings vehicles. Even under the lower annuity rates suggested by the American Council on Gift Annuities (ACGA) that went into effect on January 1, 2012, DGA payment amounts can look very favorable in comparison to common alternatives, as illustrated below. Deferred Gift Annuity Completed July 2013 (Model) Donor, Age 55 Payments Deferred to Age 65 ACGA Gift Annuity Rate is 6.4% The average CD rate is currently less than 1.0%. When you compare the ACGA rate, and the fact that the donor will receive a charitable deduction and that a portion of the DGA income will be tax-free, this vehicle will look attractive to your donors. Profile: Desires flexibility While many donors find the predictability of DGA payments reassuring, others want flexibility regarding when payments begin and the amount of those payments. For example, they may not know when they will retire and would prefer to decide on a payment start date when they are more certain of when they will stop working. The flexible gift annuity (FGA), a variation of a deferred gift annuity, may be just what these donors are looking for. The FGA works like a DGA, but does not lock in a payment start date and amount on the date of gift. Rather, it includes a schedule of possible payment start dates from which the annuitant can choose at any time before payments begin. The later the payment start date chosen, the greater the annuity amount your charity will pay. A typical FGA elective payment schedule for a 55 year-old contemplating a $50,000 gift on 6/24/2013 might look like this: Flexible Gift Annuity (Model)