REAL WORLD EXAMPLES

Example #1

John and Martha Smith have been members of their local church for nearly 35 years. They make weekly as well as annual contributions to support the efforts of their congregation.

After discovering the benefits of a Charitable Annuity they looked at their portfolio and decided to use $45,000 worth of stock that they had for 15 years with a cost basis of $18,000. The stock paid no dividends and if they sold it outright they would pay taxes on the $27,000 gain.

By donating the shares to their church they were able to gain many significant benefits. There were no taxes due on the transfer and sale of the shares, they now receive a monthly income check from for the rest of both their lives and gained a charitable tax deduction of $9,700.

They also received a framed certificate of recognition that the church put on display to recognize their planned gift.

Example #2

John Williams age 65 decides to establish a Charitable Annuity with the local Animal Shelter in the amount of $100,000. Based on his age he will receive a guaranteed annual income for the remainder of his life in the amount of $6,000.

In exchange for the gift the Animal Shelter purchases an annuity from an insurance company. The annuity will pay John his guaranteed income for the remainder of his life.

The Animal Shelter then retains the portion of the gift that was not required to purchase the annuity.

If John makes a gift with any cost basis or cash, a portion of his income will also be tax-free. In addition, John will receive a charitable tax deduction for his contribution.

If John gifts an appreciated asset such as Stock, Bonds, Mutual Funds or Real Estate he will also avoid any capital gains taxes.

In our example John made a gift of $100,000 in cash. His income of $6,000 will be taxed on just 38% of the $6,000. This will give him a taxable equivalent yield of 11.3% assuming john is in a 28% tax bracket. After paying taxes, John has $5,400 of net spend able income.

If John had been taking income from a CD paying 4%, he would have to pay taxes on the full $4,000. That would provide a net income of just $2, 875. With a Charitable Annuity John has an additional $2,525 of net after tax income.

Note:

Every situation is different, the examples above are shown as an illustration of how a Charitable Annuity can be used. If you would like a review of your specific situation, give one of our Planned Giving Advisors a call toll free at 800-535-4720. They can run the numbers based on your situation and the current IRS rate of the month that is used to determine charitable tax deductions for planned gifts.