Charitable Gift Annuities

Charitable Gift Annuities:

Save Tax, Increase Income, and Make a Gift

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In addition to cash, you may own any number of assets which have been very good investments, yet you wish they would provide you with more annual income. Consider the following.

Stocks and Bonds - Stocks, in particular, have in recent years increased greatly in value; yet are likely to be paying very low dividend rates.

Real Estate - Like stocks and bonds, real estate can be a strong growth asset, but depending upon the type of property, may not be providing you with adequate annual income

Certificates of Deposit (CD's) - A safe, predictable investment, yet current rates may not keep pace with inflation or meet your annual income needs.

If you want to increase your current income and accomplish charitable intentions at the same time, consider a charitable gift annuity. A charitable gift annuity is a simple agreement between you and a non-profit organization under which you transfer an asset to the organization in return for lifetime income for yourself and possibly one other individual. The annual annuity income you receive is a percentage of the value of the asset transferred, and is based on your age at the time you complete the agreement. The following are suggested rates

for single life agreements:

age/rate****60 - 6.9%****65 - 7.2%****70 - 7.7%****75 - 8.4%

and for two-life agreements:

ages/rate**60/60 - 6.6%**65/65 - 6.8%**70/70 - 7.1%**75/75 - 7.5%

Depending upon the type of asset you transfer in exchange for the gift annuity, some of the annuity income you receive may be tax-free. In addition to lifetime income, you are also entitled to a charitable income tax deduction for a large portion of the value of your gift. If your gift annuity is established with long-term capital gain property (usually stock or real estate), the capital gains tax is reduced and spread out over your lifetime.

Gift annuity payments can be deferred if you want the benefit of an immediate income tax deduction but wish to provide income for later years.

Many non-profits and charities are small, so a large foundation is sometimes used as an intermediary to guaranty the income stream. Mid-America Financial Services will provide you with any number of gift annuity illustrations at no cost or obligation.

METHODS OF GIVING

1. OUTRIGHT GIFTS

A. Cash

B. Stocks

C. Securities

D. Property

2. GIFTS THROUGH WILLS

A. Outright gifts

B. Gift to establish a Charitable Remainder Trust

C. Gift to establish a Gift Annuity

Advantages- Estate and inheritance tax savings

Provides financial security for loved ones

Provides financial management of assets for loved ones

Provides increased inheritance to heirs

Long range contribution to a charitable institution

3. GIFTS PROVIDING A LIFE INCOME

A. Gift Annuities- assets of the trustee guarantee the contracted payment

B. Deferred Gift Annuities

C. Unitrust- a minimum trust should be $50,000

D. Annuity Trust

E. Lead Trust

Advantages- Annuity is a very simple agreement Lifetime income to donor or other beneficiary Income tax Savings Estate and inheritance tax savings Probate cost savings Long range contribution to a charitable institution

4. LIFE ESTATE CONTRACTS

Advantages- Donor retains use of home of farm

Immediate income tax savings

Possible capital gains tax savings

Eventual estate tax savings

5. GIFTS OF CLOSELY HELD STOCK

Advantages- The business owner is able to transfer control of the business and receive immediate income tax deductions and avoid other tax liabilities. This transaction allows the company to pay for the gift while the donor receives the tax advantage.

6. GIFTS OF LIFE INSURANCE

Gifts of life insurance may be made using one of three methods:

A. By making a gift of a paid up policy, the donor receives a charitable tax deduction for the cash value of the policy or the total policy, whichever is greater.

B. The donor may make the non-profit organization owner and beneficiary of an existing policy and receive a charitable deduction for all previous and current premium payments.

C. The donor may purchase a new policy and make the non-profit organization the owner and beneficiary. A charitable deduction is allowed for all premium payments.