I found a recipe for Cherry Surprise Cookies. The surprise is a nugget of chocolate inside the cookies. Like these delicious-sounding cookies, deferred gift annuities can come with a surprise. The surprise can be pleasant like chocolate or dreadful, as in losing lots of money.
I learned recently of a donor who left money to charity in a manner that made it seem like she wanted to establish a so-called “college annuity” for her seven-year-old granddaughter. The applicable bequest language indicated that the annuity would begin “on or about July 30 of the year the beneficiary attains the age 19 years, and the payment shall continue for a term of 5 years.” If perhaps you’re not familiar with the college annuity, it’s a deferred charitable gift annuity established for the life of a young child, with the deferral period ending – and payments beginning – when the child is age 18 or 19. Shortly after the annuity is established, the child’s guardian (usually a parent) exercises a right explicitly reserved in the gift annuity agreement to commute the lifetime payments into a stream of payments made over the course of only four or five years. Because the present value of the lifetime payments must equal the present value of the commuted payments at the time the commutation provision is exercised, each commuted payment is quite a bit larger than each lifetime payment would have been.
A gift annuity funded by a married couple with their separate property can create unexpected tax issues. This article examines the tax consequences of such a gift, how to properly plan such a gift, and how to avert problems with this common gift structure.
If your organization uses the annuity agreements contained within Planned Giving Manager (PGM) and has two representatives of your organization sign each completed agreement, a recent change by New York may affect you.