A simple contract
A charitable gift annuity is a simple arrangement between you and Saint Elizabeth University that requires a one or two page agreement. There are minimal or no costs to you to establish the arrangement and no costs at all to maintain it.
Fixed payments for life
In exchange for your irrevocable gift of cash, securities, or other assets, SEU will pay you a fixed amount each year for life.
- Payments last for your lifetime. You cannot outlive your payments.
- Payments are predictable. Your payments will not be affected by investment performance or market conditions. You will get the same amount each year.
- Payments are very secure. They are backed by the general resources of Saint Elizabeth University, not just by the assets you donate.
Tax-advantaged payments
Part of each payment typically will be tax free for many years. This tax-free portion makes the payments more valuable than an equal amount of fully taxable income. The amount of this tax-free portion will be greater if you give cash than if you give stock or other appreciated property.
Who can receive payments?
You decide who will get the payments from your gift annuity. Usually, this will be you, or you and your spouse. You can, however, select any one or two people to receive the payments from your gift annuity. For example, you may wish to provide income for parents, a sibling, or a faithful employee. When you elect for two individuals to receive payments, a gift annuity is often referred to as a "two-life annuity."
Payout rate depends on age
The older you are when you make your gift, the greater the payment rate you will receive. If you choose other people to receive the payments from your gift annuity, their ages at the time of your gift will determine their payment rate. Our minimum age is 65.
Sample Annuity Rates
| Gift Amount |
Age |
Payment Rate |
Annuity |
Deduction |
|
$25,000
|
65
|
5.7%
|
$1,425
|
$8,803
|
|
$25,000
|
70
|
6.3%
|
$1,575
|
$9,378
|
|
$25,000
|
75
|
7%
|
$1,750
|
$10,379
|
|
$25,000
|
80
|
8.1%
|
$2,025
|
$11,354
|
Tax benefits
Income tax savings
You will earn an immediate income tax charitable deduction in the year of your gift, providing tax savings if you itemize. The amount of this deduction will depend on several factors. If you cannot use the entire deduction that year, you may carry forward your unused deduction for up to five additional years.
Capital gains tax savings
If you give appreciated property such as stock to create a gift annuity, you will avoid tax on some of your capital gain in the property. Even better, if you are the payment recipient of your gift annuity, you will be able to pay the tax on the rest of your capital gain in installments over many years, rather than all at once in the year of your gift. In this case, your capital gain income will replace some of the tax-free portion you would receive if you were to give cash.
Establish tax savings
By removing the gift assets from your estate, you may also reduce future estate taxes and probate costs. The amount of these savings will depend on the size of your estate and on estate tax law in force at the time your estate is settled.
Assets to consider
Cash currently held in a savings account, bank CD, or money-market fund makes an excellent funding asset. Usually, the payments from a gift annuity will be greater than the interest earned by any of these investments.
Securities, especially highly-appreciated securities that you have owned for one year or more, are also an excellent funding asset. Giving them to SEU in exchange for a gift annuity will allow you to unlock their value to increase your cash flow and avoid substantial capital gains tax at the same time.
Aisha Petty is a 71-year-old widow. She would like to make a significant gift to the Saint Elizabeth University, but she is dependent on the income produced by her investments. One of these investments is stock in XYZ Widget Corporation that she and her late husband purchased many years ago for $3,000.
Her stock is now worth $10,000 but provides little income - about $126 after tax. Aisha is reluctant to sell her XYZ Widget stock to reinvest in higher yielding assets because she will have to pay $1,400 in capital gains tax in the process. This will leave her with just $8,600 to reinvest.
Aisha is pleased to learn that she can make a significant gift to Saint Elizabeth University and increase her cash flow by giving her XYZ Widget stock to SEU in exchange for a gift annuity. She can also avoid and defer capital gains taxes, and will receive an income tax deduction that may provide additional tax savings.
| |
Tax result |
Cash flow before tax |
Cash flow
after tax
(37% tax rate) |
|
Helen keeps her stock
|
None
|
$200
|
$126
|
|
Helen sells and reinvests for 4.0% yield
|
Owes $1,400 capital gains tax
|
$344
|
$217
|
|
Helen funds a 6.4% gift annuity
|
$3,847* income tax deduction
Avoid tax on $2,693* of capital gain
|
$640
|
$496
|
*Deduction amount and capital gains tax avoided may vary depending on the timing of the gift.
