In exchange for a gift of money or property to the Foundation, the REF promises to pay a fixed amount each year to you or your designated beneficiary for life.
Gift annuity contracts essentially consist of two parts:
- A current tax-deductible gift to the ACR Research and Education Foundation.
- The right to receive a fixed-dollar amount of income each year for the life of one or two beneficiaries.
The annuity payment amount will depend upon the beneficiary's age at the time of the gift and the value of the property donated. If the gift is funded with cash, a substantial part of the annual annuity payments may be entirely tax free. In some states, regulations may prevent the REF from offering gift annuities to residents of those states.
Benefits of a Charitable Gift Annuity
- It pays you, your beneficiary, or both an income for life or for a specific period of years—in many cases providing a larger income than the gift property is currently earning for you.
- It can offer significant tax advantages in the form of an immediate charitable deduction, avoidance of capital gains tax upon sale of any appreciated assets, and an eventual estate tax savings.
- It relieves you of the burdens of asset management and enables you to support, in a significant way, a program of the REF in which you are especially interested.
- You ensure the future of the rheumatology profession.
Example of a Charitable Gift Annuity
Dr. Smith, age 75, makes a cash gift of $100,000 to the REF this year in exchange for a gift annuity. She will receive annual payments of $7,100 from the REF for the rest of her life. She is entitled to a charitable income tax deduction for current income tax purposes of about $43,000 (based on an IRS discount rate of 4.6 percent).
Assuming Dr. Smith is in the 35 percent federal income tax bracket for ordinary income and can use up the entire deduction, she will save about $15,038 in income taxes, making the net cost of her gift approximately $84,962. Of the $7,100 she receives each year, only $2,499 will be taxed at ordinary income rates, and $4,601 will be received tax-free each year over her life expectancy, after which time the full annuity amount will be taxed as ordinary income.
For a donor like Dr. Smith, the $7,100 gift annuity payments are equivalent to a taxable return of 8.7 percent for the first twelve years of the gift annuity.
This one-life charitable gift annuity is not subject to federal estate taxes on Dr. Smith’s death and is not subject to probate or estate administration. Dr. Smith will receive her lifetime payments without the worry and bother of investment or management issues.
