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Planned Giving for Financial Advisors

Charitable Gift Annuity — Flexible — Frequently Asked Questions

  • How long can my client's deferral "window" be?

    With the flexible start date option, your client can set any number of years as a window to begin receiving payments. Then she can wait to choose her payment start date until she's ready. The longer she defers payments, the higher the payments will be.

  • How will my client's annuity rate be determined?

    Like most charities, Harper College Educational Foundation offers the maximum charitable gift annuity rates recommended by the American Council on Gift Annuities (ACGA).

    We will be happy to provide information and calculations for your client based on various "window" start dates for her Flexible Gift Annuity. You can also perform calculations for yourself on our Flexible Gift Annuity Calculator.

  • How is my client's income tax charitable deduction calculated and when does she claim it?

    Your client's income tax charitable deduction will be based upon the first year in the window she can start to receive payments.

    For example, if her deferral window is anywhere from 5 to 15 years from now, her income tax deduction will be calculated based on the assumption that she starts taking payments in year 5, even if she actually waits until year 15 to do so.

    Your client will claim her income tax charitable deduction in the year she creates the gift annuity.

  • How will my client's payments be taxed?

    Just as with Immediate and Deferred Gift Annuities, payments from Flexible Gift Annuities are taxed based upon the assets used to fund the gift annuity. If your client funds her gift with cash, a portion of each payment will be taxed at ordinary income tax rates and a portion is tax-free return of principal. However, if she funds her gift annuity with appreciated stock, a portion of each payment is taxed as ordinary income, a portion is taxed as capital gain, and a portion is tax-free return of principal.

    We can assist in determining the taxation for any particular gift.

  • Can my client include her children as income beneficiaries of her Flexible Gift Annuity?

    A Flexible Gift Annuity can benefit a maximum of two beneficiaries. Often, the donor and her spouse are the beneficiaries, but your client could also name children, parents, or friends as annuitants.

    Note that naming beneficiaries other than a spouse will raise gift tax considerations and cause immediate recognition of capital gain on appreciated property.

    For more flexible beneficiary options, your client can explore Charitable Remainder Trust options.

  • Can my client choose the start date for her annuity payments?

    Yes, she may. In fact, she must elect a specific start date in the defined window if she wishes to begin receiving payments before the end of the window. She can choose whatever date makes sense to her, as long as it is at least one year from the date the Flexible Gift Annuity is created. And remember: the longer she defers payments, the larger her payments will be.

  • Is it better to use gifts of cash or stock for a Flexible Gift Annuity?

    One is not necessarily better than the other. Both have distinct advantages.

    A gift of cash will produce a larger tax-free portion of the annuity and be deductible against a larger percentage of your client's adjusted gross income, but she will avoid a portion of capital gain on appreciated stock used to fund the annuity (and defer the rest).

    Your client's charitable deduction and annuity rate are not affected by the type of asset used to fund the gift.

  • When will my client typically want to use a Flexible Gift Annuity?

    A Flexible Gift Annuity provides lifetime annuity payments commencing at a future date your client elects, for example when she retires. A Flexible Gift Annuity adds the advantage of giving your client the ability to wait until she knows her exact retirement date before receiving payments so that she can calibrate her future income to her needs.

    Sometimes a charitably-minded client is unsure if she will need additional income in retirement. In such cases, a Flexible Gift Annuity can be the perfect tool. Your client sets the range of dates to start when she might need the income and has it extend well beyond likely life expectancy. Your client can then elect never to start payments, or to simply relinquish the right to payments at a future date, when she is certain she will not need the income. She will benefit from an additional income tax charitable deduction when she gives up the right to payments. Best of all, she has the security of knowing she can turn on the payments until such a date when she decides that she does or does not want them.

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