CGA gifts from anonymous donors created an endowment for the Sequoya Branch Library.

Higher CGA rates provide new opportunities for donors

Effective July 1, the rate of income paid to donors for new charitable gift annuities will increase.

A few examples show increases of .3% to .7%, depending on the donor’s age:

Madison Community Foundation, like most nonprofits that accept CGAs, follows the gift annuity rates recommended by the American Council on Gift Annuities. Earlier this spring, the ACGA released new rate tables, the first change since January 1, 2012, when rates were decreased dramatically due to the low interest rate environment at the time.

When a donor creates a CGA, he or she makes a gift to a nonprofit organization like MCF. The nonprofit then agrees to pay a stream of income back to the donor (and, in the case of a two life “joint” CGA, a second person) for their lifetime. The donor may claim an income tax deduction for a portion of the gift.

The annual annuity amount is determined by the ACGA rate tables. A portion of the payment is a tax-free return of principal. When the annuitant(s) passes away, the annuity payments cease and the remainder of the CGA gift is retained by the nonprofit. In the case of MCF, the remainder is used to create a new endowment or is added to an existing endowment fund, as designated by the donor.

The management of a CGA program can be complex, and many nonprofits prefer to focus on their service mission and are not set up to accept CGAs. MCF can accept CGA gifts to benefit other nonprofit organizations and help them establish or build their endowment funds at MCF.

If you think a CGA may be an attractive charitable giving tool for you—or if you have created a CGA in the past and think the new rates are attractive—contact me for more information. I can create a custom calculation of annuity payments, possible tax deductions and estimated remainder amount for the gift you are considering.

Ann Casey, (608) 232-1763, acasey@madisongives.org