Planning for favorite charitable organizations through a charitable gift annuity is a way to make a gift and to receive fixed income back.

What is a charitable gift annuity?

A charitable gift annuity is a simple agreement in which the charity, like Kenyon College, agrees to pay one or two annuitants chosen by the donor a fixed sum each year for life, in exchange for the donor's gift of cash or marketable securities with a value of at least $10,000.

Technically speaking, a gift annuity is a "bargain sale" transaction in which the property donated exceeds the value of the investment in the gift annuity contract given in exchange for the property. The difference between the value of the property donated and the value of the gift annuity contract is the gift portion of the transaction.

When do payments begin?

Quarterly payments may commence immediately or start at a predetermined date at least one year into the future. The latter case is called a deferred payment charitable gift annuity.

How is the amount of the gift annuity payment determined?

At Kenyon College the payout rate is based upon the annuitant's actuarial age; an assumed investment return; and a residuum for the charity of 50% of the original gift. The older the annuitant is at the time of the gift, the greater the fixed income the organization agrees to pay.

Because two annuitants have a longer life expectancy than a single annuitant, the rate is lower for two-life gift annuities.

Will my gift qualify for an income tax deduction?

Donors to a charitable gift annuity qualify for an income tax charitable deduction equal to the amount of the gift less the investment in the contract. To put it another way, the amount the donor is able to deduct is the amount by which the gift exceeds the fair market value of the annuity, subject to IRS rules.

What type of funding assets can I use to establish a gift annuity?

Cash and long-term appreciated marketable securities are the most common funding assets.

How are gift annuity payments taxed?

Taxation of gift annuity payments depends upon the assets used to fund the gift annuity.

When cash is used to fund the gift annuity, a portion of each payment is classified as tax-free return of principal for the life expectancy of the annuitants. The balance of each payment is taxed as ordinary income.

When long-term appreciated securities are the funding assets, the donor permanently avoids tax on the long-term gain attributable to the gift portion of the annuity. If the donor is named as one of the annuitants, the remaining long-term gain, which is attributable to the investment portion of the gift annuity, is distributed ratably over the life expectancy of the annuitants. Typically this results in a portion of each annuity payment being treated as tax-free return of principal, another portion being treated as long-term capital gain, and a final portion being treated as ordinary income.

In all cases, if annuitant outlives his or her life expectancy, the entirety of each payment is then taxable as ordinary income, with no tax-free amount.

Are the annuity payments guaranteed for life? How?

Payments are fixed and guaranteed for life when the property is irrevocably transferred to the charity and gift annuity contract is established. The gift annuity payment obligations are guaranteed by the general resources of the issuing charity.

I'm under 50 and don't need the gift annuity payments now. What are the advantages of establishing a gift annuity today?

Establishing a gift annuity now will add to the fixed income portion of your retirement portfolio, provide an income tax deduction now while you are (most likely) within a higher tax bracket and provide a higher payout rate to you because payments are deferred.

Establishing a charitable gift annuity is really appealing to me. What are the current gift annuity payment rates?

Kenyon College Gift Annuity Payment Rates Available through June 30, 2007*

Your Age	65	70	75	80	85	90 +
Single Rates	6.0%	6.5%	7.1%	8.0%	9.5%	11.3%
Joint Rates	5.6%	5.9%	6.3%	6.9%	7.9%	9.3%

*$10,000 minimum gift of cash/stock. Personalized illustrations available. CGA availability varies by state

For illustrative purposes only