How to Calculate a Gift Annuity

Making a gift to a charitable organization can be philanthropically fulfilling. It can also provide a lifelong, steady stream of partially tax-free income to you, the donor, if made using a charitable gift annuity. A charitable gift annuity is a contract between a charity and a donor that stipulates fixed payments over the lifetime of the donor in exchange for an initial transfer of cash, marketable securities or other assets. A gift annuity can be a useful tool for ensuring financial stability while supporting a cause.

Instructions

1. Choose a charitable organization that you would like to support.

2. Determine the type of gift annuity contract you will enter. A donor and a charity can establish an immediate annuity, a deferred annuity or a flexible annuity contract. The contract will then be identified as a "single life," a "two lives in succession" or a "joint and survivor" agreement.

3. Calculate the value of the annuity payments using the rate tables published on the charity websites. The type of contract, age of the donor and size of the initial contribution all factor into the value of the payments. Many organizations use the rates published by the American Council on Gift Annuities.

4. Decide whether the value of the annuity payment, along with the benefit to the charity, warrant the initial contribution. Keep in mind that the charity retains this initial gift at the end of the charitable gift annuity contract. Repeat steps 1 through 3 if you feel that another organization or a different payout schedule would be more mutually beneficial.

Tips & Warnings

• Keep in mind the location of the charity when choosing an organization. Many states regulate the issuance of gift annuities, requiring registration of the annuity and, in some states, annual filing. Charities may also be required to comply with regulations in the state of residence of the donor.

References

• American Council on Gift Annuities