Charitable Gift Annuities
By Russell J. Speidel, Attorney

Charitable gifts to the Chelan-Douglas Land Trust can take many forms.  These include donation of assets for the future benefit of the Land Trust while assuring the donor continued income from those assets.

Description.  Charitable gift annuities are one such arrangement.  A charitable gift annuity is a contract.  The charity, in exchange for property, agrees to pay the annuitant a fixed sum of money for a period measured by one or two lives.

• The donor (the “annuitant”) receives a fixed annual income as well as an immediate income tax deduction. 
• The amount of the payments to the annuitant depends upon the amount of the contribution and the ages of the annuitants.

• Upon the death of the surviving annuitant the remaining assets benefit the Land Trust.  A minimum age of 60 and a minimum amount of $10,000 is required.

Financial Considerations.  Since 2000 the stock market has fallen dramatically, with the Dow Jones Industrials off almost 30% and the NASDAQ composite index off approximately 70%. 

• Current interest rates are at 45 year lows.  As of early June 2003 certificate of deposit interest rates were as follows: 

                                                12–month CD              1.21%

                                                3-year CD                    2.43%

                                                5-year CD                    3.0%

• A comparison of the payment rates available between certificates of deposit and charitable gift annuities illustrates the attraction of a charitable gift annuity, particularly to donors in their later years.  Here are the current charitable gift annuity rates:

Suggested Charitable Gift Annuity Rates
Approved by the American Council on Gift Annuities (“ACGA”)
Effective July 1, 2003

Income Tax Benefits to the Donor.  There are also significant income tax benefits from a charitable gift annuity.

• The donor receives an income tax deduction in the first year of up to 50% of adjusted gross income for cash gifts and up to 30% for the fair market value of gifts of appreciated property.  There is a five year carry forward of any unused income tax deduction.
• In addition, the annual payments receive favorable income tax treatment with a significant portion of the annuity payments being treated as tax free.

Example.  For example, if a donor at age 60 gifts $100,000 cash in exchange for a charitable gift annuity the donor will receive an income tax charitable deduction of $21,124.  In addition, the donor will receive $5,700 per year for life.  This is a result of application of the ACGA rate of 5.7% at age 60 times the $100,000 contribution.  In addition, the annual payments to the donor will be divided between a tax free portion of $3,272 and a taxable portion of $2,428 over the donor’s life expectancy of 24 years.  After 24 years, at age 84, the entire $5,700 per year is taxable as ordinary income.

Benefits to the Land Trust.  The portion of the contribution that remains at the death of the annuitant passes one-half outright to the Land Trust and one-half into the endowment fund of the Land Trust at a community foundation.

Conclusion.  Thus, a charitable gift annuity can be of great benefit to the donor and an effective way to make a significant contribution to the Chelan-Douglas Land Trust.

To make sure your goals are achieved, let us discuss your gift with you. Please contact Gordon Congdon at cdlt@cdlandtrust.org or (509) 667-9708. We also recommend that you discuss any planned gift with your attorney, accountant and/or other financial advisors.