Gift planning late in life can be anxiety-inducing for many who worry about sustaining their current quality of life, preparing for the unexpected, and leaving a legacy that reflects their values and betters the world for future generations. Fortunately, as Bertha and Cooper Hoddinott’s story shows, there are ways to provide for the causes you care deeply about while still ensuring dependable income in your retirement years.
One of the most popular options is a charitable gift annuity, through which you agree to make a gift to BCF. In turn, BCF agrees to pay you and/or another beneficiary of your choosing a fixed amount each year for the rest of your life. Upon your death, any remaining balance can be used to support causes you care about in perpetuity. This type of donation offers the security of regular payments for life, as well as a variety of tax benefits, including a federal income tax charitable deduction if you itemize. The minimum charitable gift annuity at BCF is $10,000.
Annual payments depend on your age at the time of the donation.
The following are two examples of how a charitable gift annuity might affect different individuals:
Dennis, 72, and Mary, 70, want to make a contribution to BCF, but they also want to ensure that they have dependable income during their retirement years. They establish a $50,000 charitable gift annuity with cash. Based on their ages, they will receive a payment rate of 4.2%, which means that they will receive $2,100 ($1,698.90 tax-free income and $401.10 ordinary income) each year for the remainder of their lives. After 19.7 years, the entire payment will be ordinary income. They are also eligible for a federal income tax charitable deduction of $16,549 when they itemize. Finally, the couple knows that after their lifetimes, the remaining amount will be used to make grants to nonprofits doing vital work in local communities.
George, 74, has been a faithful donor to BCF. He has owned publicly traded stock for 30 years. He would like to sell some of it, but if he did, the capital gains taxes would lessen the amount he could put toward a higher income-producing investment. George reads about charitable gift annuities in one of BCF’s newsletters and calls to obtain a quote. His cost basis in his stock worth $100,000 is $10,000. George establishes a charitable gift annuity and will receive a payment rate of 5.2%, which means $5,200 annually (much more than his stock dividends). George’s payments will be tax-free income of $424.12, ordinary income of $962.00, and long-term capital gains income of $3,813.88. After 13.1 years, the entire payment will be ordinary income. George is also eligible for a federal income tax charitable deduction of $44,487 because he itemizes on his tax returns.
Deductions and calculations will vary, of course, depending on personal circumstances, so you should always seek the advice of your financial or legal advisor. BCF works with the region’s leading advisors every day, and our staff has more than 50 years of personal experience in estate, tax, and philanthropic planning. Whatever your circumstances, we are ready to help.
For more information on how to provide for your family and leave a legacy for the causes you care about, contact our director of gift planning, John A. Gilpin, J.D., CAP®, AEP®, at 410-332-4172, ext. 132, or email him using the button below.