The suggested maximum rates for gift annuities established after June 30 of this year will increase, the American Council on Gift Annuities has announced. The new rates were released by the ACGA on May 15. Below is a comparison of the old and new rates for selected ages.
For gift annuities that make payments for the lifetime of one individual
|Age||Old Rate||New Rate|
For gift annuities that make payments to two individuals jointly and then to the survivor for life
|Age||Old Rate||New Rate|
A person aged 75 who contributes $50,000 for a gift annuity with us before July 1 would receive $2,900 per year for life. But if the contribution is made after June 30, the payments will be $3,100 per year for life.
A couple, both 75, who contribute $50,000 for a gift annuity with us before July 1 with payments to them jointly and then to the survivor would receive $2,500 per year for life. But if the contribution is made after June 30, the payments will be $2,750 per year for life.
How Are Gift Annuity Rates Determined?
The American Council on Gift Annuities, a nonprofit organization, reviews and suggests gift annuity rates—and most charitable organizations, including ours, follow these rates. Thus in most instances charities pay the same gift annuity rates.
The rates are designed with two objectives: to provide attractive payments to individuals who want to make a gift but need to receive income from their contribution and to leave a significant amount of the contribution for charitable purposes after fulfilling the payment obligation.
Why Are Rates Increasing?
The existing gift annuity rates (those offered through June 30 of this year) have been in effect since 2012. They are increasing now largely in response to rising interest rates, though the gift annuity rates also take into consideration returns on other investments and on mortality data.
How Will the New Rates Affect Existing Annuities?
There is no effect on existing annuities. The gift annuity rate in effect when an annuity is established remains unchanged for the duration of the annuity. For example, if you have been receiving $2,000 per year from a gift annuity, that amount will not change. The new rates affect only annuities established after June 30.
Other Benefits of a Gift Annuity
Besides larger fixed payments for life, gift annuities will continue to provide tax benefits—an income-tax charitable deduction and payments that are favorably taxed. If you contribute cash, a significant portion of your payments will be tax-free for the duration of your life expectancy. If you contribute appreciated property, such as securities, a portion of the capital gain will not be taxed and the gain that is taxable can be reported ratably over your life expectancy.
As with other gifts to our organization, your gift annuity can be for our general support or it might be designated for a particular purpose in which you are interested.
Act Now by Requesting a Financial Illustration
If you think you could possibly be interested in a gift annuity once the higher rates become effective, contact us now. We will provide you with a financial illustration showing the payments you would receive beginning in July.
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