Planned Giving

Charitable Gift Annuity

How a charitable gift annuity works graphic with information about donor signs an annuity agreement with a charity, makes the lump-sum donation and takes a parital tax deduction, donation is invested by the charity, donor receives payments on a fixed schedule for life per the terms of the annuity agreement and the charity receives the balance of the invested funds upon the donor's death.

Gifts That Pay You Income

A charitable gift annuity is a contract between a donor and the University of Montevallo Foundation with the following terms: As a donor, you make a sizable gift using cash, securities or possibly other assets. In return, you become eligible to take a partial tax deduction for your donation, plus you receive a fixed stream of income from the University for the rest of your life.

How does it work?

First, you make a donation to the University of Montevallo Foundation via cash donations, securities and gifts of personal property. Then, the gift is set aside in a reserve account and invested. Based on your age(s) at the time of the gift, you receive a fixed monthly or quarterly payout (typically supported by the investment account) for the rest of your life. At the end of your life (as well as your spouse’s, if you’re giving as a couple), the University receives the remainder of the gift.

In addition to the income stream, annuitants may also be eligible to take a tax deduction at the time of the original gift, based on the estimated amount that will eventually go to the University after all the annuity payments have been made. A portion of the payments you receive may also be tax-free for a period of time based on your statistical life expectancy.

Benefits of a charitable gift annuity

  • Income stream for the rest of your life
  • Immediate (partial) tax deduction, based on your life expectancy and the anticipated income stream
  • Potential for a portion of the income stream to be tax-free
  • Possibility of donating many types of assets: cash, securities plus personal property
  • Reduced or eliminated capital gains tax liability for gifts of appreciated securities and personal property
  • Supporting an organization you care about

Potential drawbacks

  • Parting irrevocably with funds donated to create the annuity
  • Subject to income tax on the income stream (payments from the annuity)
  • Payments are fixed and won’t be adjusted for inflation
  • Payments may be lower than with a non-charitable annuity because the primary purpose is for nonprofit support

A wealth advisor or other advisors specializing in tax and estate planning will be able to provide advice specific to your priorities and can be a valuable source of information in making the right choice for your situation.