Charitable Gift Annuity

Complying with New York Maximum Annuity Rates

Here’s the problem:
The ACGA, in an April 2021 communication, informed its members that the ACGA suggested maximum payout rates exceed the current maximum payout rates allowed by the State of New York at the typical ages of most gift annuitants. While there are a number of states that regulate gift annuities, New York is the only one that issues its own maximum allowable gift annuity payout rates for its residents. Until recently, the ACGA suggested maximum payout rates have been consistently lower than the New York maximum rates.

What we have determined:  
Our most recent analysis reveals that the ACGA rates exceed the maximum New York rates applicable to gift annuities funded in October – December 2021 for females at ages 45 through 88 and for males at ages 46 through 85. That’s pretty much the age group for new gift annuities! Please note, the NY maximum payout rates are published only for 1-life annuities, and they are gender-specific. The state does not currently publish maximum payout rates for 2-life gift annuities, or for any type of deferred gift annuities.

Recording Deaths in Prior Years in GiftWrap

The Record Death function in GiftWrap is designed to make adjustments to the payment and tax information for gift annuities. When an annuitant is deceased, the function can move future payment and tax information to a successor beneficiary, if any, or remove future payment and tax information for terminated gifts and change the gift status to Finished.

However, GiftWrap can make these adjustments automatically only for deaths in the current or immediately prior Organization Year. If the death occurs two or more years earlier than the current Organization Year, the Record Death function will mark the annuitant as deceased, but all adjustments to the payments and tax schedule must be done manually.

ACGA Announces Increase in Suggested Maximum Rates

On April 26, 2018, at the American Council on Gift Annuities’ biannual conference, David Ely, chairman of the ACGA’s Rates Committee, announced an increase in its suggested maximum gift annuity rates. David explained that after reviewing the model portfolio the ACGA uses for determining the interest rate assumption used in setting rates – 40% equities, 55% bonds, 5% cash – the committee determined that this interest rate assumption should increase from 4.25% to 4.75%.

Annuity Reserves

Annuity reserves are the assets a charity needs in order to finance its gift annuity payment obligations. The amount of reserves needed to finance each gift annuity depends on the size of the annuity payments, the ages of the annuitants, and the mortality table and interest rate used.

Many charities compute annuity reserves for their own internal purposes to make sure that they have ample funds on hand to make annuity payments now and in the future.

Tax Reform Provisions That Could Affect Charitable Giving

Under Republican leadership, Congress is working feverishly to complete the details of sprawling tax reform legislation, the Tax Cuts and Jobs Act, and have it on President Trump’s desk for his signature by the end of this year. The House bill was voted on and approved on November 16.  On the same day, the Senate Finance Committee approved their version of the package.

Revocation Language in CGA Agreements - To Include or Not To Include

Including revocation language serves two purposes. First, it may enable the donor to avoid making a taxable gift to the annuitant. Second, it preserves flexibility in the event of a change in circumstances, such as the dissolution of a marriage. The decision on whether to include the revocation language is ultimately the donor’s, but it is helpful if the charity understands the issues to help inform that decision. 

Funding CGAs with Mutual Funds (What Is the Problem?)

Mutual funds are easy to purchase, simple to understand, and they allow for continual reinvestment of income over the long run. As planned gift donors review their financial assets and determine which ones to use as the funding for charitable gift annuities, mutual funds present an obvious choice. But gift planners should be aware of some particular aspects of mutual funds that can cause significant complications in the process.  Read about the complexities in mutual funds transactions and tax accounting.

Taking the Temperature of Your Gift Annuity Program (And What To Do If It Is Unwell!)

Fundraisers consider a well-functioning gift annuity program the cornerstone of a robust planned gift fundraising effort.  Although bequests and beneficiary designations typically produce most of the realized planned gift revenue, offering gift annuities is usually the mark of a mature planned giving program.  Nonetheless, among those charities that have offered gift annuities, many frequently worry about the continued viability of offering them.

Are You Ready for the End?

The end we are talking about is the end of calendar year 2016.  Are you ready?  Most charities concentrate on year-end giving in the fourth quarter and for good reason.  A study conducted by the Center on Philanthropy at Indiana University focused on high-net worth donors found that 42.7 percent of those surveyed gave more during the holidays than the rest of the year. Nonetheless, in addition to soliciting and encouraging gifts at the end of the calendar year, it is also a time for planned giving departments to prepare and plan.