Deferred-Payment Gift Annuity
This type of gift might appeal to a donor if the donor wants to support UJA-Federation, is 40 to 60 years old, has a high income, needs to benefit now from a current tax deduction, and is interested in augmenting potential retirement income.
The deferred-payment gift annuity involves the current transfer of cash or marketable securities in exchange for which UJA-Federation pays the donor an annuity starting at a future date—usually at the donor's retirement. The gift can consist of a single transfer, a series of transfers, or periodic transfers to the plan in high-income years.
The donor realizes an immediate charitable deduction for the gift portion of each transfer to the deferred gift-annuity plan. A portion of each annuity payment, when the payments begin, will be a tax-free return of principal over the life expectancy of the annuitant. When appreciated long-term capital-gain securities are transferred, any reportable capital gain is spread out over the donor-annuitant's life expectancy.
Gift Range: $10,000 or more
Example: A married couple, Michael and Lisa, both 57, wish to supplement their retirement income with deferred-payment gift annuities. After consulting with their own financial advisors and a member of our staff, they decide to contribute $25,000 each year for the next ten years to our gift annuity program.
The tax and financial benefits of this arrangement to Michael and Lisa are as follows:
- Under the deferred-gift arrangement, Michael and Lisa are entitled to a charitable deduction for each annual contribution. While the deductions vary from year to year, the total charitable deduction over the ten-year period—based on current IRS mortality and interest assumptions—will be approximately $94,900 (about 37.9% of the amount they contribute over the ten-year period).
- Beginning in the year they both attain the age of 67, when retirement income becomes important, Michael and Lisa will receive $13,575 each year from their well-planned annuities. In addition, a portion of those payments will be excludable from their taxable income for their life expectancy.
- Unlike a qualified retirement plan, there are no upper limits to their contributions or other restrictive requirements on the design of the plan.
|Want to see a diagram about how a deferred-payment gift annuity works? View the diagram of this gift|
William Samers, Vice President
Stanley Baumblatt, Director
Shira Hudson, Associate Director
UJA-Federation of New York
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