Charitable Gift Annuity (continued)
Of all the gifts that pay you back, the charitable gift annuity is the simplest, most affordable, and most popular. You make a gift to Franklin College and in return, we agree to make fixed payments to you for life. The gift agreement is a simple contract between you and Franklin College. The payments to you become one of our general obligations, fully backed by all of our assets. After your lifetime, we apply the balance of the gift annuity to our general endowment or the program you designated when you made your gift.
Gift Annuities Offer Attractive Tax Benefits
- First, you receive a charitable income tax deduction for creating a gift annuity, based on the fair market value of the assets you contributed minus the present value of the life-income interest you retained.
- Second, if you fund your gift annuity with appreciated securities, no upfront capital gains tax is payable. Only a portion of your capital gain will be recognized, and the tax will be spread out over your annuity payments. The result? You can contribute appreciated but low-yielding assets and put the entire amount of your gift to work earning lifetime payments for you.
- Third, a portion of your annuity payments will be taxed at a low 15% capital gains rate if you created your gift with appreciated securities. Another portion will be treated as the tax-free return of principal. Only the balance of your payment is taxed as ordinary income to you. This tax treatment, not available on other types of life-income gifts, increasing the effective yield of your gift annuity.
NOTE: The IRS provides that the capital gain and tax-free income benefits are in effect during your life expectancy if you live longer, the entire annuity payment will be taxed to you as ordinary income.)
Planning Points
- A charitable gift annuity at Franklin College can be created with a gift of $5,000 or more.
- Your gift annuity can make payments to a maximum of two people.
- Gift annuity rates are partly determined by the age of the beneficiary (minimum age of 50). Younger donors may find planning benefits in a Deferred Gift Annuity.
