Which is Right for You?
Creating a Charitable Gift Annuity (CGA) is a wonderful way to support Benedictine Foundation while securing fixed payments for your life. Two excellent options for funding your CGA are cash and appreciated securities, such as stocks, bonds, or mutual funds that you have held for more than one year. Each option offers unique benefits, so it’s worth exploring which funding source aligns best with your financial and philanthropic goals.
Why Choose a Charitable Gift Annuity?
A Charitable Gift Annuity is a simple contract between you and Benedictine Foundation. In exchange for your charitable gift, Benedictine Foundation agrees to make fixed payments to you every year for life. The payment amount depends on your age at the time of the gift, and it remains constant, providing reliable payments that won’t fluctuate with the market. This stable income can be particularly appealing if you are looking to supplement retirement income. Once the annuity ends, the remaining balance supports Benedictine Foundation’s mission, creating a lasting legacy.
Funding a CGA with Cash:
- Straightforward Setup: Funding a CGA with cash is simple and quick. There’s no need to account for market value fluctuations or calculate capital gains, making cash funding ideal if you want an easy, straightforward gift.
- Tax-Free Payments: You receive fixed payments each year for life. A portion of these payments will be tax-free for many years. This tax advantage can make cash a cost-effective option for funding your CGA.
- Charitable Deduction: You are eligible for an immediate income tax charitable deduction based on the value of your gift and the annuity payout, subject to IRS limitations. This deduction can reduce your taxable income in the year of your gift. You may carry forward any unused deduction for up to five additional years.
- Ideal for Those with Ample Cash Reserves: If you have liquid assets that you don’t need for other expenses, using cash to fund a CGA can help convert cash into a steady stream of payments while supporting a cause you care about.
Funding a CGA with Appreciated Securities
- Reduced Capital Gains Taxes: You recognize only a portion of your capital gain in the appreciated securities. What’s more, in most cases you can spread payment of the capital gains tax you do owe over many years. If you sell the appreciated securities yourself, you will owe capital gains taxes on all the appreciation in the year of sale.
- Income Tax Deduction: You are eligible for an income tax charitable deduction based on the fair market value of the property you give, subject to IRS limitations. This deduction can reduce your taxable income in the year of your gift. You may carry forward any unused deduction for up to five additional years.
- Lifetime Payments: You receive fixed payments for life. A smaller portion of the payments will be tax-free for many years than if you fund the CGA with cash. The difference will be capital gain income instead.
- Diversification: Donating appreciated securities to fund a CGA can serve as a diversification strategy, allowing you to reduce concentrated holdings in your investment portfolio without incurring immediate capital gains taxes.
- Charitable Impact: After the annuity payments conclude, the remaining funds support Benedictine Foundation’s mission, making a lasting impact.
Which Option is Right for You?
Consider your personal financial situation and goals:
- Choose Cash if you prefer a simpler process, have ample cash reserves, or want to maximize the tax-free portion of your annuity.
- Choose Appreciated Securities if you wish to avoid capital gains taxes in addition to receiving a substantial income tax deduction, or to diversify your investment portfolio.
Consult with Your Advisors
Before you fund a Charitable Gift Annuity, we encourage you to speak with your financial and tax advisors to evaluate how a CGA fits within your overall financial plan.
If you would like to explore establishing a CGA with cash, appreciated property, or other assets, please contact us. We can provide you with information tailored to your needs, including the current annuity rates, potential tax benefits, and the long-term impact of your gift.
Thank you for considering a generous gift to help sustain Benedictine Foundation.