It’s Nice to Have Safe Reliable Income.
It is even nicer to increase your income and support your favorite charity at the same time.
This column is the first in eight weeks that is not about the coronavirus. Lean times and a recent mailing by the American Council on Charitable Gift Annuities reminded me that during the inevitable ups and downs in our economy, a steady income is much appreciated.
Charitable gift annuities (CGAs) are not the only way to receive a steady income, a pension, bonds, social security, commercial annuities, treasury notes, and other fixed-income instruments also fill that role. Charitable gift annuity income is not anywhere near the size of most of those other income sources, but for the right person, they are a wise investment.
One example where a CGA worked well is a client who set up a charitable gift annuity with the Community Foundation some years ago. The gentleman was in his mid-70’s, and for his annuity of $100,000, he received a charitable gift deduction of about $50,000, resulting in a tax refund of about $15,000—cash in his pocket.
But the tax refund did not come from the annuity, that was intact. His charitable gift of $100,000 was invested. Based on his age and the gift annuity tables, he received a fixed return of 6.5% on his gift. Every year he has received $6,500, and he is now in his mid-80’s. He will receive that income through the remainder of his life. Before making this charitable gift, he had invested the $100,000 in bond, paying 3% and was earning $3,000 per year income. He invested in bonds because he was wary of stock market volatility, so his options were limited to fixed return investments.
The charitable gift annuity was attractive to this donor for a reason close to his heart.
He loves a local charity that cares for animals, and he wants to leave them a generous gift. His charitable gift annuity will fulfill that purpose because when he passes, the remainder of his $100,000 gift, carefully invested over the years, will become an endowment to support his favorite charity forever.
The rates of return are based on the long-term returns of a fund invested in the market. Over time the rates change, and during recent years they have decreased. The rates are about to change again, on July 1, 2020, and will drop an average of 0.3% to 0.5%.
I suggest that for people who already plan to leave a gift to their favorite charity, who like a predictable return, who appreciate a tax deduction, and who would like to increase their income, to consider establishing a charitable gift annuity before June 30.
The Community Foundation of Western Nevada has experience administering many annuities. It can help you give a gift that will benefit virtually any charity you choose while it earns and sends you a steady income for life.
Giving and supporting our community in a smart, taxwise manner is one reason people work through and give to the Community Foundation. The Community Foundation exists to connect people who care with causes that matter. We support all charitable nonprofit and educational organizations and work with donors from all walks of life and income brackets. Everybody can be a philanthropist! Call me to discuss your charitable and income goals. A charitable gift annuity may be the right investment for you.
Chris Askin, President, and CEO
P.S.The Community Foundation asks nonprofit executives to complete the brief COVID-19 needs survey by May 21. How is the COVID-19 pandemic affecting your mission, your services, and your needs? Your response will be shared with our fundholders and the community in the Community Foundation e-newsletter.