Tax & Estate Planning

Charitable Gift Annuities

Giving through a Charitable Gift Annuity allows you to arrange a generous gift to your community, while providing yourself a new income source you can count on for the rest of your life.

How it Works

  • You make a gift to the Community Foundation of North Central Wisconsin–you can give cash, appreciated stocks, real estate, or other assets.
  • We set up a contract with you that combines immediate annuity payments with a deferred charitable gift.
  • You receive a stream of income that is fixed, regardless of market conditions.
  • You also receive an immediate tax deduction for the charitable portion of your gift.
  • We handle all the administrative details–issuing annuity payments to you during your lifetime and, afterward, issuing annual grant awards to charities in the community.
  • Your gift can be placed into an endowment that is invested over time. Earnings from your fund are used to make grants addressing community needs. Your gift–and all future earnings from your gift–is a permanent source of community capital, helping to do good work forever.

More Benefits

Income from your Charitable Gift Annuity may add up to more than the interest and dividends you earned from holding the assets. You can use this income to supplement your own lifestyle, or that of someone else: a sibling, a dependent parent, a friend, or a former employee. You or a loved one can start receiving annuity payments immediately, or defer them to increase your charitable income tax deduction. A portion of the income may be a tax-free return of principal, while some is taxed as ordinary income or capital gains. The amount of annuity paid and the tax deduction received depends on the age of the recipient and the current annuity rate (as established by the American Council of Gift Annuities).

A Charitable Gift Annuity reduces estate assets and may reduce estate taxes. Plus, it's easier to set up than a charitable trust and is backed by the general assets of the Community Foundation of North Central Wisconsin.

Understanding Annuity Rates

Annuity rates are higher for older annuitants and lower for younger annuitants, based on life expectancy. As a result, gift annuity contracts are generally more appealing to older donors because the purchasing power of a fixed dollar return can shrink over any long period, even with modest inflation.

Rates are also adjusted according to the number of annuitants, with rates for two-life contracts often lower due to the extended life expectancy. The age of an annuitant is the age reached at the nearest birthday when the contract is made.

A specific annuity rate is a matter of agreement between the donor and the issuing charitable organization. Below you'll see how one-life annuity rates increase with age. These rates are recommended by the American Council on Gift Annuities and are redetermined periodically. Check with the Community Foundation of North Central Wisconsin for current rates*.

One Life Two Lives
Your Age Rate of Return Ages Rate of Return
50 3.7% 65/65 4.2%
55 4% 65/70 4.4%
60 4.4% 70/70 4.6%
65 4.7% 70/75 4.8%
70 5.1% 75/75 5.0%
75 5.8% 75/80 5.3%
80 6.8% 80/80 5.7%
85 7.8% 85/85 6.7%
90 9.0% 90/90 8.2%

*Please be advised that not all organizations offer CGAs at the above ages and rates and that CGAs are not available in all states. Contact the Community Foundation of North Central Wisconsin for specific information.

A Case Study of Benefits

Linda, age 75, plans to donate a maturing $25,000 certificate of deposit. Since she needs continuing income, Linda decides to use the cash for a one-life charitable gift annuity that we will issue at the suggested rate of 7.1 percent. Payments will be made quarterly. At the time of purchase, the charitable midterm federal rate (a figure used in calculating the charitable deduction) is 5.8 percent.

Although Linda's annuity rate is 7.1 percent, her actual earnings will be higher. Because Linda itemizes income tax deductions, she earns a federal income tax charitable deduction of $11,721. With a marginal income tax rate of 28 percent, the tax savings of $3,282 will reduce the net cost of the gift to $21,718. Her annual payments of $1,775 will mean an effective rate of total return of 8.2 percent, which is Linda's annual payment expressed as a percentage of the net cost. Secondly, for the next 12.4 years, more than half of every dollar Linda receives will be considered a return of her investment in the contract and will not be subject to tax.