Gift annuities can be used many different ways and meet a variety of purposes. Stan Haithcock wrote a piece for Marketwatch about gift annuities titled “How annuities can benefit your charity.” People leave gift annuities to colleges and universities as well as traditional charities like the Red Cross or Susan G. Komen for the Cure. When the author was brainstorming ideas for a college to raise money, he realized the mostly untapped potential of using gift annuities. There is around $3 trillion of annuities out there, along with an additional $200 billion sold each year, so there is quite a lot of potential.
The first way to use an annuity as a gift annuity is simply to add your charity as the beneficiary to your annuity. You can either add your charity as the sole beneficiary or as a partial beneficiary along with an heir. Call the insurance company or owner of your annuity and they can get you the correct form to add or change your beneficiary. This is a great way to be certain that the money you want to go to charity actually gets there after your passing.
Some organizations actually offer their own charitable gift annuities to provide lifetime income streams to donors. Charitable gift annuities are similar to single premium immediate annuities because they offer you a lifetime stream of guaranteed income payments. Really the main difference is that any money leftover in your account at death will immediately go to your charity or organization. Another benefit of this type of annuity is the tax benefits that you receive up front.
There is a new way to charitably use your annuity with the Charitable Endowment Deferred Annuity. With this product, you keep control of the money in your annuity, but the up front bonus you receive goes directly and immediately to your charity. That gift is a tax write-off for you and a great bonus for your charity. This fixed annuity also has a contractual guaranteed death benefit of 4% compounded. You can name your charity as either the main or a partial beneficiary of those death benefits. Using a 1035 exchange, you can transfer an old annuity to this new type of charitable annuity without any tax implications if you’d like. If you have been looking for a better way to leave money to your charity, these products and choices might be worth a look.
Written by Rachel Summit
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