How does this kind of gift work?
A charitable gift annuity is a simple agreement in which you give cash or securities in exchange for lifetime fixed payments for one or two individuals (annuitants). These annuitants can be you and/or your spouse. You can even establish a gift annuity for or with another person(s), providing them with lifetime payments. You can start payments immediately or choose to defer payments until some date in the future, which provides for a higher payment amount. When the annuity payments end, the remaining amount supports your area of choice at SVMC.
Fixed Payments for Life
In exchange for your irrevocable gift of cash, securities, or other assets, SVMC will pay you a fixed amount each year for life. The amount of the payment depends on the amount donated and the age of the payment recipient.
- Payments last for your lifetime. You cannot outlive your payments.
- Payments are predictable. Your payments will not be affected by investment performance or market conditions. You will get the same amount each year.
- Payments are very secure. They are backed by the general resources of SVMC, not just by the assets you donate.
Who Can Receive Payments?
You decide who will get the payments from your gift annuity. Usually, this will be you, or you and your spouse. Alternatively, you can select one or two other people to receive the payments from your gift annuity. For example, you may wish to provide income for parents, a sibling, or a faithful employee.
Payout Rate Depends on Age
The older you are when you make your gift, the greater the payment rate you will receive. If you choose other people to receive the payments from your gift annuity, their ages at the time of your gift will determine their payment rate. Our minimum age for a payment recipient is 60.
Sample Annuity Rates for Gift Amount of $25,000
| Age | Payment Rate | Annuity | Deduction |
|---|
| 65 | 5.7% | $1,425 | $9,073 |
| 68 | 6.1% | $1,525 | $9,215 |
| 73 | 6.7% | $1,675 | $10,140 |
| 77 | 7.4% | $1,850 | $10,900 |
Tax-advantaged Payments
Part of each payment typically will be tax-free for many years. This tax-free portion makes the payments more valuable than an equal amount of fully taxable income. The amount of this tax-free portion will be greater if you give cash than if you give stock or other appreciated property.
Additional Tax Benefits
You will earn an immediate income tax charitable deduction in the year of your gift, providing tax savings if you itemize. The amount of this deduction will depend on several factors. If you cannot use the entire deduction that year, you may carry forward your unused deduction for up to five additional years.
If you give stock or other appreciated property to create a gift annuity, you will pay tax on only a portion of your capital gain in the property. Even better, if you are the payment recipient of your gift annuity, you will be able to report this capital gain in installments over many years. In this case, your capital gain income will replace some of the tax-free portion you would receive if you were to give cash.
By removing the gift assets from your estate, you may also reduce future estate taxes and probate costs. The amount of these savings will depend on the size of your estate and on estate tax law in force at the time your estate is settled.
