Charitable Gift Annuity Examples

Example: Mrs. Wintergreen, age 73, transfers $10,000 cash to the SDSM&T Foundation for a charitable gift annuity.

  • She receives a guaranteed annual income rate of 6.1% or $610 of which $421 is tax-free
  • She receives a charitable deduction of $4,195
  • The SDSM&T Foundation receives a wonderful gift (usually 50-80% of the original gift value)

Example: Mr. Springfield is 80 and Mrs. Springfield is 78. They transfer $50,000 cash to the SDSM&T Foundation for a charitable gift annuity.

  • They receive a guaranteed annual income rate of 6.1% or $3,050 of which $2,200 is tax-free
  • The survivor is guaranteed full payments will continue for his or her lifetime
  • They receive a charitable deduction of $20,520.
  • The SDSM&T Foundation receives a wonderful gift (usually 50-80% of the original gift value)

Example: Mark Harlow wants to provide income to his older sister, Georgia, who is widowed. Mark contributes $100,000 stock (that has a cost basis of $50,000) for a charitable gift annuity and names Georgia, who is 70 years old, as the annuitant.

  • Mark receives a charitable deduction of $38,020
  • Georgia receives an annual income rate of 5.8% or $5,800 per year of which $1.950 is tax-free
  • Since the annual payments are under $13,000, they will be covered by the annual gift tax exclusion, which can be used year after year
  • Mark escapes capital gain tax on $20,402
  • The SDSM&T Foundation receives a wonderful gift (usually 50-80% of the original gift value)

College Annuity Example

Example: A grandfather contributes stock having a fair market value of $50,000 and a cost basis of $30,000 for a “college annuity” for his granddaughter, who is 2 years old. The agreement provides for the granddaughter to start receiving quarterly payments for life beginning September 1, 2025. It also contains a provision allowing a commutation of life payments. Two years before the lifetime payments are to begin, the granddaughter’s father, as her guardian, assigns her annuity interest to the charity in exchange for eight semi-annual installments.

  • The grandfather receives charitable deduction of $9,327
  • There is tax-free growth within the annuity
  • The payments are taxed at the student’s low tax rate
  • The total amount paid to granddaughter during each college year is $21,916 of which $10,168 is tax-free
  • The grandfather can postpone any taxable gift by retaining the right to revoke the granddaughter’s payments during the grandfather’s life
  • The grandfather escapes capital gain tax on $3,731
  • The SDSM&T Foundation receives the balance of the annuity at the end of the annuity agreement.