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A Charitable Gift Annuity (CGA) is a financial agreement between a donor and a nonprofit organization, where the donor makes a significant contribution to the charity in exchange for a promise to receive a fixed annual income for the remainder of their life. The amount of income is determined based on the donor's age and the size of the gift. Upon the donor's passing, the remaining funds from the annuity are used to support the charitable organization's mission. This arrangement not only provides the donor with a reliable income stream but can also offer tax benefits, as part of the original donation may be tax-deductible. Charitable Gift Annuities are a popular option for individuals looking to support a cause they care about while securing financial support for themselves during their lifetime.
In reality, a CGA is not insurance but rather a contractual agreement between a donor and a charity that provides fixed income for the donor's lifetime in exchange for a charitable contribution. While they both involve financial planning, their purposes and structures are different.
Donors may receive an immediate charitable deduction for a portion of the gift, and a portion of the income received can be tax-free, depending on the nature of the funding asset. It's advisable to consult a tax professional for specific guidance.
Yes, generally, anyone can establish a CGA with a qualified nonprofit organization, though they are typically attractive to older adults who seek income during retirement.
Payout rates for CGAs are typically based on the age of the donor at the time of the gift and are regulated by state laws. Organizations often follow guidelines established by the American Council on Gift Annuities to determine the rates.