Gift Annuities FAQ
HOW DOES A CHARITABLE GIFT ANNUITY WORK?
In return for a gift of cash, property or real estate, a charitable organization, such as Hoag Hospital Foundation, will contractually guarantee to pay you a specified annuity for as long as you live.
CAN A CHARITABLE GIFT ANNUITY BE SET UP FOR MORE THAN ONE PERSON?
Yes. Gift annuities are frequently arranged to provide annuity payments for two persons. The most common type of two-life annuity is the joint-and-survivor annuity. Under such an arrangement, payments are made to both annuitants for their joint lifetime. Upon the death of the first annuitant, the payments are continued for the lifetime of the survivor. The payout rate for a two-life annuity may vary from the rate of a single annuitant.
HOW ARE THE RATES FOR CHARITABLE GIFT ANNUITIES DETERMINED?
All charitable organizations are free to set the rates they offer, as long as the rates comply with any applicable state regulations. Generally, charities choose to follow the schedule of recommended maximum rates published by the American Council on Gift Annuities. These recommended rates change from time to time, based on a variety of economic factors. (Any changes would affect only newly issued annuities.) The following chart shows the most recent rates recommended for annuitants of various epresentative ages.
SAMPLE BENEFITS FOR A $10,000 CASH GIFT ANNUITY
| AGE(S) | RATE | INCOME |
| One annuitant |
| 60 | 5.7% | $570 |
| 65 | 6.0% | $600 |
| 70 | 6.5% | $650 |
| 75 | 7.1% | $710 |
| 80 | 8.0% | $800 |
| 85 | 9.5% | $950 |
| Two annuitants |
| 60-60 | 5.4% | $540 |
| 65-65 | 5.6% | $560 |
| 70-70 | 5.9% | $590 |
| 75-75 | 6.3% | $630 |
| 80-80 | 6.9% | $690 |
| 85-85 | 7.9% | $790 |
Calculations are based on quarterly payments for a gift annuity funded in 2007. Click here to prepare your own personalized gift annuity illustration.
I KNOW I QUALIFY FOR A CHARITABLE INCOME TAX DEDUCTION WHEN I MAKE A CONTRIBUTION FOR A GIFT ANNUITY. HOW IS THE DEDUCTION DETERMINED?
The charitable deduction is equal to the difference between the amount of the contribution and the value of payments to the annuitant(s). Deductions are lower for younger people since they are likely to live longer. Similarly, deductions are lower when there are two annuitants rather than one.
HOW FREQUENTLY CAN I RECEIVE PAYMENTS?
Many gift annuity payments are scheduled quarterly. Payments can also be made monthly, semi-annually, or annually.
HOW ARE THE ANNUITY PAYMENTS TAXED WHEN RECEIVED BY THE ANNUITANT?
As with other types of annuities, a portion of each annuity payment is treated as a tax-free return of the original principal over the life expectancy of the donor. Note: When a donor lives beyond his or her actuarial life expectancy, the entire annuity payment will be taxed as ordinary income.
I LIKE THE IDEA OF MAKING A GIFT BY MEANS OF A CHARITABLE GIFT ANNUITY, BUT I REALLY DON'T WANT OR NEED ANY ADDITIONAL INCOME NOW. CAN I MAKE A CURRENT GIFT AND DELAY RECEIVING THE PAYMENTS? IF SO, ARE THERE ANY ADVANTAGES TO THIS?
The answer is "Yes!" on both counts. This is known as a "deferred" charitable gift annuity. You can make a gift now and designate the time in the future when payments are to begin.
ARE THE FUNDS I CONTRIBUTE FOR A GIFT ANNUITY SET ASIDE AND INVESTED TO SECURE MY ANNUAL PAYMENTS?
Actually, the annuitant's security goes far beyond the specific funds contributed for a gift annuity. Our obligation to make gift annuity payments is backed by all the assets of Hoag Hospital Foundation, not just the amount contributed for any individual gift annuity.
HOW DO RETURNS ON GIFT ANNUITIES COMPARE WITH RETURNS ON REGULAR INVESTMENTS?
It is important to remember that a charitable gift annuity is a charitable giving plan. It is not an investment.
However, if annual net spendable cash flow is a major objective for you, a charitable gift annuity compares quite favorably with regular investments.
MORE QUESTIONS? WE'RE HERE TO HELP.
Charitable gift annuities can offer you many benefits, as we have discussed. If you have additional questions or simply would like additional information, please contact our Gift Planning department at (949) 764-7206 or by email at sharon.thornton@HoagHospital.org.
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