THE CHARITABLE GIFT ANNUITY
the gift that “pays you back”

If you were offered a financial opportunity that

• is safe
• offers a higher rate of return than you can obtain on a C.D.
• gives you an immediate income tax deduction
• produces partially tax-free annual income
• benefits the Jewish Home

would you be interested?

This unique opportunity is called a charitable gift annuity (CGA). It can be an excellent choice for individuals whose investments are vulnerable to changes in the economy.

What is a charitable gift annuity?

A CGA is a contract between an individual and a qualified charity that exchanges a gift to charity for secure, fixed payments for life.

How much will my annuity be?

Your annuity rate depends on your age. The older you are when you begin a gift annuity, the higher your return. For example, a person who is 70 years old receives a return rate of 5.1 percent. The return rate for an 80-year-old is 6.8 percent. This rate will continue for the rest of your life.

Once I have taken out the annuity will the rate of return ever change?

No. Once you take out a gift annuity, the amount you receive annually remains the same for life, regardless of what happens to the economy or stock market.

Do gift annuities provide any tax advantages?

Yes. There are number of advantages.

• You are entitled to an immediate income tax deduction at the time you create the gift annuity, typically between 35 percent and 50 percent of the value of the original contribution.
• A portion of the annual payment you receive is tax free, which results in a higher effective rate of return.
• Money placed in a gift annuity is not included in your estate for estate tax purposes.

What do you mean that part of the annual payment is tax FREE?

A little background may help. The reason why your immediate charitable deduction is 35 to 50 percent of the original contribution is because the IRS assumes that the rest of your contribution will be given back to you over time as part of your annuity payments. Since you are really getting your own money back, there is no tax.

As a practical matter, then, you will only pay income tax on a fraction of the annuity you receive.

Will a gift annuity work for a married couple or domestic partners as well?

Yes. Many gift annuities are “two-life” contracts, designed to make payments for the lives of both individuals. However, the annuity rate for two-life contracts is somewhat lower.

Can a gift annuity be funded with stock instead of cash?

Yes. In fact, it may be especially advantageous if the stock has appreciated in value, as some of the capital gains tax is eliminated immediately. The remainder is prorated over your entire life expectancy.

How does a gift annuity benefit the Jewish Home?

Your gift is held in a separate fund or funds during your lifetime. At termination, whatever remains is distributed to the Jewish Home. Secure gifts such as these enable the Jewish Home to operate with the assurance of a safe financial future.

Can I make a gift now and defer receiving my annuity benefits until later?

Yes. This may be an exceptionally valuable option. When you defer annuity benefits, your annual payments will be significantly higher because your gift has been invested until the date payments begin.

To illustrate, David is 65 and planning to retire in a few years. Although his income is comfortable, his tax bill is not. He could use a tax deduction now and another source of income when he retires.

David takes out a deferred payment gift annuity to benefit the Jewish Home,¹ delaying the annuity benefit to him until he reaches 70. His rate will be 7.2 percent for life beginning with the first payment.

David benefits in two ways from this arrangement. He receives a substantial charitable income tax deduction now to offset his income. Then, when he turns 70, the annuity payments to him will supplement his other retirement income.

How secure is a gift annuity?

Although it is not an insured security, it is very secure. Most of what you contribute is placed in a separate fund as mandated by California law. Additionally, all the assets of the charity stand behind the contract.

Who can answer my questions about gift annuities?

Please contact Daniel Hoebeke, the Jewish Home's senior development and gift planning officer, for a personalized illustration at no cost or obligation. The Jewish Home has the necessary software to provide technical information for your professional advisor as well.

¹ CGAs to benefit the Jewish Home are issued through a California-licensed third party.

The information in this publication is not legal or tax advice and is designed to be for general information only. Tax and estate planning should only be undertaken under the direction of a competent professional.

Lifestyle & Legacy Planning

Every generation produces visionaries. These are individuals who, as in the Talmudic story of the carob tree,* plant for the future with their legacy gifts. These gifts enable the Jewish Home to continue providing care for our elders – for generations to come.

The Carob Tree Circle is the Home's way of recognizing those whose vision includes legacy gifts by way of wills, trusts, and other estate planning gifts. Our appreciation goes to those of blessed memory whose work on this earth is completed, as well as to those who have told us that they have included the Jewish Home in their long-term legacy plans.