Is this? Or is there a catch? The answer to these two questions is not. But the issues are simplistic.
Better ask yourself the question: "I want to support charity?" and "is a gift annuity choice for me." If you answer with a Yes, then you need to assess your finances and understand what are the charitable gift annuities, and how they work.
"Some people assume it is as a bank account," said Avery e. Neumark, a retirement expert and a partner in the accounting firm Rosen Seymour Shapss Martin & Company New York. "But it is not." It's just what the name — a gift. You give is the main, and you get a guaranteed lifetime income. You cannot compare with the rate of monetary market of today. The disadvantage is that you are locked in. »
Rates, which further annual inflation rates now exceed 1.1 per cent, may seem low years now if inflation heats up.
To be a wise choice, said Mr. Neumark, persons must generally approaching retirement and charitably inclined, have liquid assets, and other income and other needs is supported. "I had a client who did very well," he said. "He was 90 years, the rate was very high, and he has lived up to what he was 103".
The American Council on gift annuities defines the product as a contract under which a charitable organization, in exchange for a donation of money or property, undertakes to pay a fixed term one or two lives, usually donors '. Most reputable charitable organizations use the rates recommended by the Council, that vary according to the age of the annuitants and if there is one or two. Because of the charity, there are tax benefits.
For a simple life, the last rate table called for a 55 years old receive 5% a year, a 60 years 5.2 percent, a 5.5% 65, 70 years 5.8 per cent, an 80-year-old 7.2% and someone 90 or more 9.5 per cent.
Potential donors can calculate their own rates and tax benefits on the Web site: pcalc.ptec.com/hosts/989357365/CGA. For a donation of $100 000 covering a person 65 years and another aged 62 annuity calculator site showed an immediate tax deduction of $12,179.50 and an annual annuity of $5,000. Of the latter, $3,326.53 would be non-taxable because it represented a return of principal and $ 1,673.47 would be taxed as ordinary income.
After 26.4 years, common life expectancy, all payments would be taxed as ordinary income.
Conrad Teitell, a lawyer in Stamford, Connecticut, who represents the Council and a number of leading charities, said donors could donate appreciated assets and avoid the immediate payment of capital gains tax. The gain is calculated pro rata per year in the life expectancy of the donor, and the taxable portion of the pension payment is divided into ordinary income and capital gains.
Donors do not have to begin to take immediate, annuity payments he said; they can defer payments for a year or more. Which can be a good option for people who work and in a high tax bracket, but planning to retire in a year or so.
Some States require charities to meet the criteria, including the initial registration, notification and annual filing, sponsor of charitable gift annuities. Others are silent. Many are somewhere between the two. Mr. Teitell advises potential donors to check their own States to the American Council on the pension gift (www.acga-web.org/regs/regsoverview.html) Web site.
If the State of origin does not charities require to meet all the criteria, see if a charitable organization is authorized to offer annuities in a stricter State and ensure its financial soundness of the Better Business Bureau (www.bbb.org/us/charity) and Charity Navigator (www.)(CharityNavigator.org).
A healthy approach is not to engage with a charity that does not meet the standards of a more severe State, because pensions are a general obligation of the charity. Although the failure to meet the obligation is rare, some charitable organizations accept reinsurance, a useful to discuss with a potential beneficiary question.
Paul Horrocks, Vice President of the New York Life Insurance Company, which sells individual annuity policies and works also with organizations of charity on gift annuities, said donors could "accomplish the same thing in two ways," a charitable gift annuity that could pay 5% or by dividing the amount in a pure and simple gift of charity and a commercial annuity that would pay about 7%.
Don Greene, Executive national Bank of America Merrill Lynch philanthropic products, promotes charitable gift annuities. They are a means for "donors of bottom-end" to enter the world of "structured philanthropy", said, and "they offer tax benefits and a consistent level of support to a spouse."
The gift is irrevocable, he added, but a person who is committed to charity, by including a bequest in it, for example, might will want to examine a gift rather annuity and enjoy gift in life.
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