A charitable gift annuity is a contract between a charitable institution and a donor in which, in return for an initial payment, the issuer agrees to pay the donor and/or his or her designee, on a periodic basis, a fixed or minimum fixed sum certain for life, or for some fixed period of years, whether starting immediately or at some future date. As typically provided in such a contract, the residuum is conveyed to the charitable institution upon the death of the donor.
Collaboration with the Chicago Community Trust (Trust):
In order to offer to its patrons the opportunity to make charitable gifts in annuity form, the Society will partner with a well-established program at the Trust. In this program, an annuity contract is established between the Society’s donor and the Trust taking advantage of the Trust’s substantial assets, high credit, investment acumen, and administrative know-how, while providing a beneficial interest to the Society.
The program provides that, upon the death of the patron(s), the Trust will distribute 75% of any residuum outright to the Society and retain the balance (25%) as part the Trust’s unrestricted endowment.
How It Works:
The donor contacts the Society to advise of their interest in creating a Charitable Gift Annuity. Thereafter, the Society partners with the Trust to fashion an annuity contract that meets the donor’s needs. The Society, through the Trust, pays the donor (or one other beneficiary named by the donor) fixed income for life. When the contract ends upon the death of the last beneficiary, 75% of the residuum, or remaining balance, passes to the Society. The remaining 25% remains with the Trust as part of its unrestricted endowment for the benefit of metropolitan Chicago.
The terms of any annuity contract depend on a number of factors, including the age and gender of the benefactor and the basis and amount of the period of payout. Generally, the older the benefactor/purchaser, the larger the periodic payment.
As part of the above process the Trust will: provide an illustration of the structure of the annuity and how it works; draft the proposed annuity contract; receive the payment from the donor; provide a tax receipt; make distributions to the annuitant via check or direct deposit; prepare and mail to the annuitant the annual 1099; and distribute the residuum in accordance with the contract provisions.
A minimum contribution of $10,000 is needed to establish an annuity under the Trust program.
- There is a charitable income tax deduction in the year the contribution is made.
- The donor receives an assured, secure, fixed annual payment for life regardless of financial market fluctuations.
- A portion of the annual payment is tax-free.
- If the contribution is in appreciated securities, capital gains taxes are avoided.
- The rate of payment as a percentage of the contribution can be relatively high as compared with general market yields.
- The donor is able to make a legacy commitment to the Society.
Banner photo by Elliot Mandel