CHARITABLE GIFT ANNUITY INFORMATION

What is a Charitable Gift Annuity?

A charitable gift annuity is a way to make a gift to The Wistar Institute, and still receive an income for yourself or others. It is a contract under which Wistar agrees to pay a fixed sum of money for a period measured by one or two lives in exchange for cash or other property. The person who contributes an asset for the annuity is called the "donor", and the person who receives payments is called the "annuitant" or "beneficiary." Usually, the annuitant is also the donor, but this is not always the case. The maximum number of annuitants is two, and payments can be made to them jointly or successively.

Charitable Gift Annuity Payments

Payments from a charitable gift annuity are established at the time of the gift and do not change regardless of changes in interest rates or the stock market. A charity is contractually obligated to make the payments, even if it has to dip into its general funds to do so.  Wistar annuitants will receive their payments no more frequently than four times a year.

Factors Affecting the Amount of Payments

The amount of the payments from a charitable gift annuity depends on the following factors:

• The gift annuity rate offered by the charity.
• The value of the contribution.
• The number of annuitants.
• The age(s) of the annuitant(s).

Requirements

• Due to differences in state laws The Wistar Institute is only establishing annuities with residents of Pennsylvania and Delaware.  There is some availability for New Jersey residents.
• The minimum age required for Wistar to create an annuity is 60 years of age.  The exception is an annuity by someone younger with payment deferred until after 60.
• The minimum amount required for an annuity is $10,000.  

Gift Annuity Rates

The Wistar Institute uses rates that are published by the American Council on Gift Annuities (ACGA).  The ACGA, established in 1927, periodically publishes a schedule of suggested charitable gift annuity rates. Although a charity is free to offer any schedule of rates it wishes – so long as its rates don't exceed the limits imposed by federal and state laws – most charities, including Wistar, follow the rates suggested by the ACGA.  Having rates that are similar among charities encourages donors to make a philanthropic decision based on supporting the work of certain charities, rather than a financial decision based on the rates offered.

Charitable gift annuity rates are lower than those offered by insurance companies to purchasers of commercial annuities so that a significant portion of a contribution will be available for charitable purposes. Though lower than commercial rates, gift annuities are still very attractive to individuals who want simultaneously to support Wistar and provide payments to themselves or others.

Taxation of Gift Annuity Payments

If the gift annuity is funded with cash, part of the payments will be taxed as ordinary income and part will be tax-free. If funded with appreciated securities owned for more than one year, and the donor is receiving the annuity payments, part of the payments will be taxed as ordinary income, part as capital gain, and part may be tax-free. The donor will receive a Form 1099-R which will specify how the payments should be reported for income tax purposes.

Income Tax Charitable Deduction

Taxpayers who itemize deductions may claim a charitable deduction for a portion of the original gift, resulting in income tax savings. The deduction is equal to the amount of the contribution less the present value of the payments that will be made to the donor and/or other beneficiary during life. The present value of those payments is determined using IRS tables regarding life expectancy and assumed earnings, factoring in the gift annuity amount and rate.

To learn more about starting a charitable gift annuity with The Wistar Institute please call Peter Corrado at 215 898-3930.