Examples of Charitable Gift Annuities

One-Life Annuity for Yourself Using Cash

Miriam, 70, would like to support Hadassah and generate a secure stream of payments for herself. She establishes a charitable gift annuity with a donation of $10,000 in cash to Hadassah. Based on her age, she receives an annuity payout rate of 5.6 percent. Hadassah will pay her $560 each year for the remainder of her life, of which $382 will be tax-free to her throughout her life expectancy. She may also receive a charitable income tax deduction of $3,923 in the year she makes the gift if she itemizes on her federal income tax return.

Miriam will continue to receive her annuity of $560 if she lives beyond her life expectancy, and the entire amount will then be treated as ordinary income. After Miriam's lifetime, the remaining amount will be used to support Hadassah.

Another Option Using Cash

Miriam, 70, currently owns $10,000 in stock that is producing low dividends. She purchased the stock several years ago for $6,000 and is looking for ways to increase her current income, minimize her capital gains tax and help Hadassah. She decides to establish a $10,000 charitable gift annuity by donating her appreciated stock to Hadassah.

Miriam will continue to receive her annuity of $560 if she lives beyond her life expectancy, and the entire amount will then be treated as ordinary income. A great advantage of funding a charitable gift annuity with a donation of long-term appreciated stock is that the capital gains tax is eliminated on a portion of the gift. If Miriam had sold the securities, she would have immediately realized $4,000 in reportable capital gains. By donating the securities to Hadassah to establish an annuity, she has a total capital gain of only $2,431, reportable over her life expectancy of 15.9 years.

One-Life Annuity for a Loved One

Susan would like to provide her mother, Esther, 80, with additional income, but knows that her mother does not wish to accept money from her. Instead, Susan gives $100,000 in cash to Hadassah to establish a gift annuity for her mother. Susan is eligible for an income tax charitable deduction of $48,823 if she itemizes. Her mother will receive annual payments of $7,300 for the rest of her life. Of that amount, $5,446 will be tax-free to her until she reaches her life expectancy (9.4 years). If Esther lives beyond her life expectancy, she will continue to receive her annuity of $7,300, and the entire amount will then be treated as ordinary income.

One-Life Deferred Annuity for a Loved One

Vivian would like to supplement her daughter Carol's retirement income. Carol is 60 years old and plans to retire in 2028. Vivian contributes $50,000 in cash to Hadassah to establish a deferred gift annuity for her daughter, with payments to start on June 30, 2028. Vivian is eligible for an income tax charitable deduction of $22,949 if she itemizes. On June 30, 2028, Carol will start receiving quarterly payments totaling $4,000 each year for the rest of her life. Of that amount, $1,700 is tax-free to her until she reaches her life expectancy (15.9 years). If Carol lives beyond her life expectancy, she will continue to receive her annuity of $4,000, and the entire amount will then be treated as ordinary income.

Two-Life Annuity for Spouses

Gloria, 77, and her husband, Melvin, 79, wish to establish an annuity that will continue at the same level for both of their lifetimes. They donate $50,000 in cash to Hadassah to establish a two-life charitable gift annuity. Based on their ages, they will receive a payout rate of 5.9 percent ($2,950 each year for life) and are also eligible for a charitable deduction of $19,864 if they itemize. Of the $2,950, $2,121 will be tax-free for their joint life expectancy of 14.2 years. The annuity will continue after the first spouse passes away. After the second spouse passes away, the remaining amount will be used to support Hadassah's mission.

Two-Life Deferred Annuity for Spouses

Herman, 70, and his wife, Barbara, 65, decide to contribute $250,000 in cash for a deferred gift annuity that will begin making payments when Barbara retires on June 30, 2023. Their gift generates a charitable deduction of $90,685 in the year they establish the annuity, and they will receive a payout rate of 6.2 percent ($15,500 each year in quarterly payments beginning June 30, 2023). Of the $15,500, $8,525 will be tax-free for their joint life expectancy of 18.7 years. The $15,500 annuity will continue after the first spouse passes away. After the second spouse passes away, the remaining amount will support Hadassah's mission.

All examples are for illustrative purposed only and are intended to represent only some examples of how your support can make a difference.

All examples are based on payout rates current as of September 2018. Examples assume a 3.2 percent charitable midterm federal rate and payment of the annuity in quarterly installments. Your actual tax benefits may vary depending on the timing of your gift and your specific financial circumstances. Federal income tax deductions for gifts of cash are limited to 60 percent of your adjusted gross income; for gifts of securities, the cap is 30 percent. You may, if necessary, take unused deductions of this kind over the next five years, subject to the same percentage limitations. For charitable gift annuities and deferred gift annuities established by the donor to benefit non-spouses (e.g. the donor's parent or child), the donor should confer with his or her financial advisor regarding potential gift tax issues. This information is provided for educational purposes only and we encourage you to consult with your own tax or financial advisor.