A gift annuity is a financial arrangement between a donor and a nonprofit organization in which the donor makes a substantial charitable contribution in exchange for a series of guaranteed payments for the rest of their life. The payments are typically calculated based on the donor’s age and the amount gifted. This arrangement allows the donor to receive a secure income stream while also making a significant contribution to a cause they support. Upon the donor's passing, the remaining funds from the gift annuity are directed to the nonprofit to be used for its charitable purposes. Gift annuities can benefit both the donor, who may receive tax advantages, and the organization, which gains financial support and strengthens its relationship with the donor.
In reality, the organization will only receive the remaining funds after the death of the donor(s), as payments must first be honored for the donor's lifetime.
The minimum contribution varies by organization but generally starts around $10,000, although it can be higher depending on the nonprofit's policies.
Yes, a portion of the payments received by the donor is typically taxable, while some of it may be considered a tax-free return of principal. Donors should consult a tax advisor for specifics.
Yes, a gift annuity can be set up for multiple lives, usually for couples, allowing payments to continue as long as one of the annuitants is alive.