This week I want to start a short series of posts on some of the ways you can make a gift to ACU or most other non-profits without tapping your bank account. We call these types of gifts “planned gifts” because they take more planning and thought than just reaching for your checkbook or pulling the credit card out of your wallet.
The planned giving work we do with each of our donor families attempts to accomplish at least one of the three things we have written on the sidebar of this blog under the heading “Who We Are”. Planned gifts can be a part of your estate plan. They can be vehicles for making gifts that are transformative to you as well as to the University. They can be a great way to pass on your legacy to future generations.
And all of these things can happen without, generally speaking, taking cash out of your pocket. In many cases, planned charitable gifts are not just one-way gifts to your favorite non-profit. They can actually give back something tangible to you and your family. The first post in this series on the elements of charitable planned gifts talks about just such an instrument.
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Most of us need no reminder that few things in life are ever guaranteed. Despite the liberal use of the word “guaranteed” in modern marketing, most of us are skeptical of this concept. Yet the Abilene Christian University Charitable Gift Annuity does provide two guarantees.
Firstly, you (or a designated annuitant) will receive a set, guaranteed annuity payment for life. Secondly, you and ACU can immediately begin reaping the rewards of your desire to support the university’s mission to educate students for Christian service and leadership throughout the world.
Anyone can enjoy the benefits of an Charitable Gift Annuity. In exchange for your gift, the university will issue you a simple, two-page legal annuity contract, guaranteed by ACU and backed by the university’s assets.
How does a Charitable Gift Annuity Work?
The idea of an annuity contract in exchange for a gift to charity has been around for centuries – securing philanthropic support even in ancient times. However, it has been improved by current tax law, which encourage the support of qualified charities such as ACU. Today, a Charitable Gift Annuity may be designed to provide permanent future support for organizations such as ACU and a lifetime income for donors.
A Charitable Gift Annuity is a legal, contractual agreement between a donor and a qualified charity. The donor makes a gift to the charity and in return, the charity agrees to make annuity payments to the donor as long as he or she lives. Hence the term Gift Annuity – it’s part gift, part annuity.
In many cases, we find that donors will create a Gift Annuity with a matured bank Certificate of Deposit that is paying very little in interest. Others have used under-performing stocks or bonds from their investment portfolio. Other assets may be used to create a Gift Annuity also, such as houses or commercial property. Gift Annuities with non-liquid assets like these will require significantly more time and planning to affect and they are fairly uncommon in comparison.
The contract mentioned above is a simple two-page document signed by the donor and the President of the University. It spells out the asset (or funds) used to create the Gift Annuity, the annuity rate, the annuitants, and the ultimate destination for the remainder of the annuity fund.
What are the benefits of a Charitable Gift Annuity?
When you establish a Charitable Gift Annuity, a number of attractive tax benefits arise. These include a current charitable income tax deduction; partial bypass of capital gains tax when funded with an appreciated asset; and a possible reduction in estate tax liability.
In addition, the Charitable Gift Annuity offers attractive income-related benefits. Annuity payments often represent an increase in income to the donor, and a portion of the annuity payment may be treated as tax-free income – which adds to the effective rate of return.
How are Charitable Gift Annuity payments determined?
The ACU Charitable Gift Annuity is even more attractive because the annuity rate – the percentage used to determine the annual income payment to the donor – is based on the donor’s age. Older donors receive a higher annual return.
Current annuity rates are as high as 9.0 percent. Annuity contracts for two lives pay a lower annuity rate than those that guarantee payments for only one life. The following is a sampling of one- and two-life Gift Annuity rates for selected ages:
ACU Charitable Gift Annuity single-life rate*
| Age | Rate |
| 60 | 4.4% |
| 65 | 4.7% |
| 70 | 5.1% |
| 75 | 5.8% |
| 80 | 6.8% |
| 85 | 7.8% |
| 90+ | 9.0% |
ACU Charitable Gift Annuity two-life rate*
| Age | Rate |
| 60/63 | 4.0% |
| 68/70 | 4.5% |
| 73/75 | 4.9% |
| 75/77 | 5.1% |
| 78/80 | 5.6% |
| 80/85 | 6.1% |
| 88/90+ | 7.9% |
*Approved by the American Council on Gift Annuities, effective January 1, 2012.
So let’s summarize.
A donor gifts to ACU an asset that isn’t currently producing much in the way of income. ACU takes that asset, re-invests it, and pays the donor (or donors) a fixed annuity for the rest of their life (or lives). At the end of the annuity term, the remainder of the annuity fund goes towards helping future generations of students receive a world-class Christian education.
If this sounds like something you would be interested in, please give us a call at 800-979-1906 and we will be happy to create an illustration of a Charitable Gift Annuity that is specific to your situation. If you would prefer to do a little more research on your own and come up with your own illustration before speaking with us, our website (theacufoundation.org) has a Gift Annuity calculator.