What Is a Charitable Gift Annuity?

A Charitable Gift Annuity, commonly called a CGA, is an arrangement between you and a nonprofit organization.

You make a gift to the organization.

In return, the nonprofit agrees to provide a lifetime income stream according to the terms of the arrangement.

When the covered person or people die, the remaining funds stay with the charitable organization.

For someone who wants lifetime income while also supporting a cause they care about, a Charitable Gift Annuity can be worth exploring.

Key Takeaways

• A Charitable Gift Annuity is offered by a nonprofit organization rather than a traditional annuity agent.
• You make a charitable contribution and receive a lifetime income stream.
• The remaining money ultimately benefits the charity.
• CGAs may offer tax benefits, but tax questions should be reviewed with a qualified tax professional.
• Many universities, hospitals, charities, and nonprofit organizations offer CGAs.
• Compare the lifetime income from a CGA with other annuity income options before making a decision.

How Does a Charitable Gift Annuity Work?

The basic structure is straightforward.

You transfer money or other eligible assets to a nonprofit organization.

In return, the nonprofit agrees to provide a contractual income stream.

That income may continue for your lifetime and, depending on the arrangement, can sometimes cover another person as well.

When the income obligation ends, the remaining funds belong to the charity.

Who Offers Charitable Gift Annuities?

Many nonprofit organizations offer CGAs.

Examples can include:

• universities
• hospitals
• charitable foundations
• religious organizations
• cancer organizations
• humane societies
• public broadcasting organizations
• other qualifying nonprofits

If you have a charity that is important to you, ask whether it offers a Charitable Gift Annuity.

Why Would Someone Choose a CGA?

A Charitable Gift Annuity combines two objectives.

You receive lifetime income.

The nonprofit ultimately receives the remaining assets.

That can appeal to someone who wants to support an organization while also creating dependable retirement cash flow.

Charitable Gift Annuity vs. Immediate Annuity

A CGA can be compared with a Single Premium Immediate Annuity.

Both can provide lifetime income.

The difference is what happens to the remaining value.

With a Charitable Gift Annuity, the nonprofit ultimately keeps the remaining assets.

With an Immediate Annuity, the contract can be structured with beneficiary protections that direct remaining contractual value to family members or other beneficiaries.

The right choice depends on your goals.

Compare the Income

If you are considering a CGA, compare the lifetime income payment with an Immediate Annuity quote.

That gives you a clearer understanding of what you are receiving in exchange for the charitable gift.

The highest payment may not necessarily be your only priority if supporting the organization is important to you.

Charitable Gift Annuities and Taxes

CGAs can also provide tax benefits.

Depending on the arrangement, you may be eligible for a charitable deduction and may receive favorable tax treatment on portions of the income stream.

However, tax rules can be complicated.

Work with a CPA, tax attorney, or other qualified tax professional before making a decision based on tax benefits.

Evaluate the Nonprofit's Financial Strength

The lifetime income obligation is backed by the nonprofit offering the CGA.

That means you should understand the organization's financial position.

Ask for financial information.

Review the organization's history and ability to support its payment obligations.

You want to be comfortable that the organization can continue making the promised income payments.

CGAs Can Be Structured for Couples

Some Charitable Gift Annuities can be structured to provide income for two people.

For example, a married couple may be able to establish a joint lifetime payment.

The exact options depend on the nonprofit and the structure it offers.

Why You May Not Hear Much About CGAs

Charitable Gift Annuities are typically handled directly through the charitable organization.

Traditional annuity agents generally are not involved and do not earn commissions from the arrangement.

That is one reason many consumers may hear less about CGAs than commercial annuity products.

CGAs Can Be Part of an Income Floor

A Charitable Gift Annuity can potentially become one part of your retirement income floor.

That floor might include:

• Social Security
• pension income
• Immediate Annuities
• Deferred Income Annuities
• QLACs
• Income Riders
• a Charitable Gift Annuity

The goal is to create enough dependable income to support your retirement lifestyle.

You Can Combine Strategies

You do not necessarily have to choose between a commercial annuity and a CGA.

Some people may use both.

Part of the money may create lifetime income through a traditional annuity.

Another portion may be gifted through a Charitable Gift Annuity.

The appropriate combination depends on your income needs and charitable goals.

Start With the Charity

If there is an organization you strongly support, contact it directly.

Ask:

Do you offer a Charitable Gift Annuity?

What payout options are available?

Can the income cover two lives?

What happens when the income period ends?

What financial information can you provide?

Those answers will help you understand whether the arrangement fits your plan.

Compare the Alternative

Before making the gift, compare the CGA with other lifetime income options.

Use our annuity calculators to run an Immediate Annuity quote and compare the contractual income.

That gives you another reference point when deciding whether the charitable component makes the CGA worthwhile for you.

The Bottom Line

A Charitable Gift Annuity allows you to support a nonprofit while receiving a lifetime income stream.

You make a charitable contribution, the organization provides income, and the remaining value ultimately stays with the charity.

For someone who wants to combine retirement income with charitable giving, it can be a useful strategy.

Just make sure you understand the income guarantee, the nonprofit's financial strength, and the tax implications before moving forward.

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