Refresher Course: Charitable Gift Annuities

Did you know that the Chautauqua Region Community Foundation has administered a Charitable Gift Annuity program since 2006? With advisors fielding more questions about charitable gift annuities (CGAs), we thought this was an opportunity to share some updates: 

A $54,000 opportunity

Word is finally getting out about the availability of a one-time Qualified Charitable Distribution transfer via a “split-interest gift” such as a CGA or a charitable remainder trust (CRT) under the “Legacy IRA” provisions enacted a couple of years ago. Adjusted for inflation, the ceiling for 2025 is $54,000. Because the law effectively mandates that the CGA or CRT be created solely for the purpose of receiving a QCD, your clients may gravitate toward the CGA, which is less complicated than going through the process of creating a relatively small CRT.

Payout rates are still high

Current charitable gift annuity payout rates, as suggested by the American Council on Gift Annuities (ACGA), are generally higher than in previous years. Rates were increased in January 2024 and remain in effect for 2025. With the status of interest rates unpredictable as 2026 approaches, some clients may want to take advantage of a CGA this year.

So what do you need to know about how and why a charitable gift annuity can be an effective planning tool for some clients? 

Here are the basics:

• Through a charitable gift annuity, your client makes a transfer of assets to the Chautauqua Region Community Foundation and in return receives a lifetime income stream and a partial tax deduction.
   

• When the client passes away, the remaining assets are retained by the Foundation.
   

• As part of the illustration provided to the prospective annuitant, the Foundation calculates the charitable donation portion of the transaction.
   

• Your client can fund a charitable gift annuity with a variety of assets, including marketable securities and cash. 
   

• Actuarial calculations are used to establish the payout amounts, which are paid quarterly and in equal installment payments that are considered a partial tax-free return of the client’s original gift.
   

• The assets are managed to maximize the residual that flows into a named Fund after the client's death.  
   

• The Foundation's own assets, not just the donated assets themselves, back the annuity payouts. Because of this dynamic, charitable gift annuities are regulated by NY state to ensure that the charity has enough reserves to meet obligations.

Please reach out to our team when a client asks about charitable gift annuities or any other type of charitable gift. Keeping up with the rules and regulations for charitable gifts of all kinds is one of the many ways our team is here to help you serve your charitable clients. We’re honored to be your first call on all things philanthropy!