Are you thinking about your giving back strategy for 2023? You might want to consider a charitable gift annuity. Also known as a CGA, a charitable gift annuity is when a donor makes an irrevocable gift to a charity in exchange for a stream of income payments for the rest of the donor’s life, according to Mary Meadows Livingston, President of Abeona Wealth.
“Many larger 501c3 charities offer charitable gift annuities,” she explains. “If you’re donating cash, you as the donor can take a tax deduction for a portion of the gift, with the deduction calculated as the gift less the present value of the expected payments. A portion of the payments you receive will be taxable, but not the full value.”
Livingston goes on to explain that if a donor makes use of the new provision under the SECURE 2.0 legislation, they can make a one-time “split-interest election” and give up to $50,000 from a retirement account as a qualified charitable distribution.
“You don’t get a tax deduction, but the gift is excluded from income,” she says. “It would otherwise be taxable as a withdrawal, so it is a good deal.”
For example, a 75-year-old single donor could make a one-time, $50,000 gift from her IRA to Children’s of Alabama using their charitable gift annuity, which pays 6.6% for someone of that age. The donor would receive $3,300 a year for her life, a portion of which would be taxed as income.
Currently, Children’s offers donors an option for charitable gift annuity, and funds are used in a multitude of life-giving ways.
“The generosity of our community helps make a difference for the children in our care,” notes Chandler Bibb, chief development officer. “Donations also ensure Children’s of Alabama will be here for generations to come.”
Wondering if this strategy is right for you? According to Livingston, you might consider a CGA if the following sound familiar:
- You are someone with charitable intent.
- You are retired and don't need any or all of the funds in your pre-tax retirement account to support your lifestyle.
- You are someone who has the majority of your assets in pre-tax retirement accounts.
To learn more and discuss your options, visit abeonawealth.com.
