Charitable annuity: A two-way benefit

A charitable annuity is a contract that you as a donor make with a foundation and it is where the foundation guarantees paying you an annuity. This is what makes it different from a trust, which sources its payments solely from its assets. A charitable annuity is very appealing to the donors because you as a donor have the option to make an immediate gift annuity or a deferred gift annuity.

If you choose the immediate gift annuity under the charitable annuity plan, you will begin to receive payment immediately, or less than a year from the time you made the gift. If you choose the deferred gift annuity, your payments will not start until a specified date in the future. Of course the rate of return you get is much higher than the rate of return you will get on a passbook savings account or money market.

In other words, a charitable annuity is an extra-ordinary way of giving a gift where, as governed by a contract, you give a gift to a trust and receive a fixed income for life in exchange. Actually, a charitable annuity is more like a commercial annuity except that it is being issued by a charitable institution. It is a good way of giving a gift as you get something in return. It increases your income and at the same time slices your taxes. All over the United States, the charitable annuity is a very popular way of income instrument among countless donors.

An investor can get lots of benefits by using charitable annuities. This is a two-way service where both the investor and the recipient can both benefit, and this strategy creates a unique lure for many to use charitable annuity. Some of the benefits include allowing you to donate assets to a charity but at the same time provide you with income for a lifetime. This means that you or your partner will receive payments throughout the duration of your lives and you have the option of choosing the frequency of the payments, whether you want to receive it on a monthly, quarterly, semi-annual or annual basis.

Going for charitable annuities also gives your money a chance to generate more income for life because you receive a charitable tax deduction. This is usually based on your age and interest rates which means that if you have higher interest rate, you will have higher deductions.

Choosing charitable annuity is very simple. There are no legal or transaction fees and no paper works are required. Instead, as a donor you get an immediate deduction in taxes which is usually determined by analyzing several variables like the size of your donation, the number and the ages of the income beneficiaries and other considerations. Since the amount of your donation will be deducted from the value of your estate, this means charitable annuities help you avoid paying estate taxes.