Deferred Charitable Gift Annuity

Don’t Need It Now? No Problem.
Photo by Brian DiMento '10The deferred-payment charitable gift annuity is a simple mechanism that can increase your income at some future date, offer both current and future tax savings, and minimize your capital gains tax exposure.

The charitable gift annuity (CGA) is a contract between the donor and Colby. A simple one- or two-page document, the CGA guarantees that the College will pay a fixed annual amount, for life, to one or two beneficiaries named by the donor. Colby’s obligation to make these payments is backed by the full faith and assets of the institution and is not subject to investment performance.

The deferred-payment charitable gift annuity allows the donor to defer the receipt of payments for some period of time. The date that the first payment is to be made is specified at the time the contract is written. The amount of the annual payment (the annuity) is determined by the age(s) of the beneficiary(ies), whether one or two have been named, and the length of the deferral period. The older the beneficiary(ies) at the time of the gift, and/or the longer the deferral period, the higher the payout rate and the higher the charitable deduction. In addition, payments received by the beneficiaries will be partially tax exempt in most cases. 

The income tax charitable deduction generated by this gift may be taken in the year the gift is made, and the resulting tax savings have the effect of reducing the cost of the gift. The table below shows the income tax deduction and annual payout resulting from a $25,000 one-life CGA deferred to age 65.

Annuity Rate if Defer to Age 65
Annual Payment Tax-Free Portion Deduction Amount
40 10.4%* $2,600 $1,123 $2,653
45 8.9%* $2,225 $1,052 $4,047
50 7.6%* $1,900 $992 $5,282
55 6.4% $1,600 $926 $6,555
60 5.5% $1,375 $898 $7,131

At Colby you may establish a deferred-payment charitable gift annuity for a minimum gift of $5,000 in cash or marketable securities.

Calculations shown here are based on Colby annuity rates for sample ages as of Jan. 1, 2012, and the December 2011 IRS discount rate of 1.6 percent.