Charitable Gift Annuities (CGAs): Insights for Forward-Thinking Philanthropists

Charitable Gift Annuities

A Charitable Gift Annuity (CGA) is a financial tool combining philanthropy with financial planning. Essentially, it allows an individual to make a significant charitable donation while securing a guaranteed income stream for their lifetime. Here’s how it works: A donor gives a substantial gift to a charity 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 for the rest of your life. The amount of this annuity depends on several factors, including the donor’s age and the current market conditions.

The growing interest in charitable gift annuities can largely be traced back to recent legislative changes, particularly the introduction of the SECURE Act 2.0. A transfer to a charitable gift annuity will qualify as a Required Minimum Distribution (RMD) from an Individual Retirement Account (IRA). This development has effectively merged charitable giving with retirement planning, enhancing the appeal of CGAs among donors.

Delving deeper into the specifics of the SECURE Act 2.0, there is a lifetime transfer limit of $50,000 from an IRA to a CGA, a figure adjusted for inflation annually ($53,000 in 2024). Additionally, the act mandates that the payout rate for such annuities must be a minimum of 5%. This combination of philanthropy, financial security, and tax benefits under the new legislative framework is what’s driving the rising popularity of Charitable Gift Annuities.

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