Charitable Gift Annuities

Immediate Payment and Deferred Payment

A Charitable Gift Annuity is a simple contract providing for our payment to you (and an optional second beneficiary) of a fixed income for life in return for your contribution. The gift annuity offers you the assurance of an income that will not fluctuate, a modest minimum gift of $5,000, and payments that are secured by all the assets of Orange Coast College.

You will receive a charitable income tax deduction for your gift annuity, based on the full value of the assets you contributed minus the present value of the life-income interest you retained.

If you fund your charitable gift annuity with appreciated securities, no upfront capital gains tax is payable. Only a portion of your capital gain will be reportable, and the tax will be spread over your annuity payments.

A third tax benefit of a gift annuity is the treatment of your income payments: part of each payment will be treated as the tax-free return of principal. This increases the effective yield of a gift annuity, and is not available on other types of life-income gifts.

(The IRS provides that the capital gain and tax-free income benefits are in effect during your lifetime -- if you live longer, the entire annuity payment will be taxed as ordinary income.)

Your gift annuity can start paying you once you make your contribution (an immediate-payment gift annuity), or payments can commence at a later date selected by you (a deferred gift annuity). The deferral of income allows us to offer you a higher payment rate and gives you a larger charitable deduction.

Many younger donors create a series of deferred gift annuities over multiple years, jointly timed to begin income payments when they retire. To fund their gifts, they use assets they've already designated for retirement savings. Their deferred gift annuities give them an income tax deduction when they most need it and secure an additional source of retirement income for their later years.

Comparison: Gift Annuity and Deferred Gift Annuity

Assumptions: Donors aged 65 and 62 contribute securities worth $20,000

Option One: Gift Annuity paying income immediately
Option Two: Deferred Gift Annuity beginning income in 5 years;
Option Three: Deferred Gift Annuity beginning income in 10 years.

Options

Immediate
Payment Annuity

Income Deferred
5 years

Income Deferred
10 years

Contribution

$20,000

$20,000

$20,000

Income Rate

6.2%

8.6%

12%

Annual Income (fixed)

$1,240

$1,720

$2,400

Charitable Deduction

$3,888

$5,145

$7,143

To learn more about charitable gift annuities, email us, complete the personal illustration form, or call us at 714-432-5707 so that we can assist you.



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