This type of gift might appeal to you if you:
In exchange for a gift of cash or securities, Colgate would agree to pay you an annual annuity, the size of which depends on when you choose to begin payments. You could elect to start payments as early as the age of 65; or, if you decide to continue working, you could postpone receipt to a later year. The longer you wait, the larger your payments will be when they begin.
At the time you contribute assets for the annuity, you receive an income-tax charitable deduction that can reduce current income taxes. Another benefit is the favorable taxation of your payments. If you contribute cash, a portion of each payment will be tax-free for the duration of your life expectancy. If you contribute appreciated securities, a portion of each payment will be taxed at the lower rate applicable to capital gain, and a portion may also be tax-free, again for the duration of your life expectancy.
Gift Range: $10,000 and More.
Example of a Flexible Annuity
Dr. Gilbert, 55, received a $100,000 distribution from her mother’s estate and wanted to create a memorial fund in her mother’s name. She was also interested in supplementing her retirement income—but she wasn’t sure when she would be retiring. She decided to put her inheritance to work by giving the $100,000 to Colgate in exchange for a deferred-payment gift annuity that could begin making payments to her when she turns 65. Colgate also added a provision to the agreement that allows her to delay receipt of her payments up to the age of 75. This gives her the flexibility to choose when, between the ages of 65 and 75, she will begin to receive payments.
As a result of her gift, Dr. Gilbert received an immediate charitable deduction of $46,840 (based on earliest income dates allowable) that (in her 32% bracket) meant an actual tax savings of $14,989. If Dr. Gilbert elects to start payments when she is 65, she will receive $9,100 each year (9.1% x $100,000) for the rest of her life, and $2,675 of this amount will be free of federal income tax for the balance of her life expectancy.
If Dr. Gilbert postpones the beginning date of her payments, the amount of her payments will increase when she does begin to receive them. The portion that is tax-free will also depend on the starting age.
| Flexible Deferred-Payment Gift Annuity | ||
| Contribution Age | Income Begins At | Annuity Rate |
| 55 | 65 | 9.1% |
| 55 | 67 | 10.3% |
| 55 | 70 | 12.6% |
| 55 | 72 | 14.5% |
| 55 | 75 | 17.7% |
Achieving Still Greater Flexibility
If she thought she might not need all the income at one time, instead of contributing $100,000 for a single annuity, Dr. Gilbert might have contributed $25,000 to each of four identical flexible annuities. Then she could start payments from one of them at age 65, another at age 67, another at age 69, and another at age 70, depending on her cash flow needs.
She might also contribute $10,000 or more for a new flexible annuity each year she continues working. Then she could decide year by year, beginning at the age of 65, from which annuities to start receiving payments.
Next Steps
*The information contained herein is offered for general informational and educational purposes. The figures cited are accurate at the time of writing. State law may affect the results illustrated. This is not legal advice. Any prospective donor should seek the advice of a qualified estate and/or tax professional to determine the consequences of their gift. California residents: Annuities are subject to regulation by the State of California. Payments under such agreements, however, are not protected or otherwise guaranteed by any government agency or the California Life and Health Insurance Guarantee Association. Oklahoma residents: A charitable gift annuity is not regulated by the Oklahoma Insurance Department and is not protected by a guaranty association affiliated with the Oklahoma Insurance Department. South Dakota residents: Charitable gift annuities are not regulated by and are not under the jurisdiction of the South Dakota Division of Insurance.
The discussion herein is general in nature and may not apply to all individuals. Prospective donors are urged to consult their personal tax and financial advisors concerning the specific consequences of making gifts to Colgate. We would be pleased to discuss, in confidence, ways in which you may support Colgate. These measures may also have an impact on your estate planning.
© Pentera, Inc. Planned giving content. All rights reserved.
Disclaimer