BSA Gift Annuity Program/Deferred Gift Annuities
A gift annuity is a simple contract between a donor and Scouting. In exchange for a gift, Scouting agrees to pay income to the donor or others chosen by the donor. This income is paid for life, to one or two individuals, and guaranteed by the general assets of the Boy Scouts of America. The donor also receives an income tax charitable deduction.
The gift may be of cash, stocks, bonds or shares in a mutual fund. The minimum gift required to receive a gift annuity from the BSA is only $2,500. Though you cannot add to a gift annuity once it is made, you may enter into as many separate gift annuity contracts as you wish. The donor may choose anyone to receive lifetime annual income, and all income will be paid quarterly. However, a beneficiary must be at least 50 years of age at the time of the contract. Most donors select themselves and/or a spouse to receive the income. The amount of annual income depends on the age of the beneficiaries. The older the income beneficiary, the more income they receive. As of 2001, the annual returns for gift annuities range from 5.8% to 12%, for donors between age 50 and 90. Most of the income is taxable to the beneficiaries, but part of each payment is often considered tax free the IRS considers part of each payment a partial return of principal. This may increase the effective rate of return, depending on your tax bracket and the cost basis of the property you contribute. Example: A 70 year-old donor wants to set up a $10,000 gift annuity; it will pay 7.5%. She is considering either a gift of cash or stock (with a basis of $2,500). The comparison:
Tax Free Part of Payments
At the end of the gift annuity term the lifetime of the income recipient(s) the remaining value of the original gift is removed from the gift annuity fund and given to the council chosen by the donor. Gift annuities are handled through the BSA Gift Annuity Program at the National Council; this relieves our councils from administrative burdens and state filings and fees. Deferred Gift Annuities Some donors choose to set up a gift annuity now to get the income tax deduction now but defer the start of the payments until a later time. Payments may be deferred as long as the donor wants and the rates of return are often higher than for non-deferred annuity payments. This strategy may be useful for donors currently in a high income bracket and planning for retirement. Unlike IRAs and other retirement alternatives with maximum contribution limits, there is no limit as to how much you can place in a deferred gift annuity. Deferred Gift Annuity Example: A 60-year old donor sets up a $50,000 BSA gift annuity but defers the start of the income until he retires at age 65. He gets an immediate income tax deduction of $22,177 and will receive $4,400 a year when he retires. Pleased, he sets up another gift annuity every year for the next five years, receiving immediate income tax deductions for each and ending up with a significant source of extra retirement income.
Though donors may select anyone to receive gift annuity income, there may be gift tax implications for beneficiaries other than the donor and/or spouse.
For more information to make a gift annuity, contact Devon Dougherty at 714-546-8558 ext. 145 or firstname.lastname@example.org