Gift of the Month: Charitable Gift Annuities
Saturday, March 8, 2008
In this period of economic uncertainty, our Charitable Gift Annuity (CGA) program is quite popular with ATS supporters. The CGA program permits you to make a gift to ATS and earn a high guaranteed income at the same time. For example, if you're 75 and you have a $100,000 CD, you're probably earning $2000/year in interest, after taxes.
If you give the ATS that CD and establish a CGA, your gross interest will increase to $7100 per year, and your after-tax income will be about $6100 per year. This income is payable for your life, and cannot go down, regardless of changes in the financial markets.
You also earn a substantial income tax deduction for your gift, and you remove the amount of your gift from your taxable estate at a savings of up to 45% of the gift amount.
What better way to support the Technion and triple your income, while saving on taxes at the same time?
If you'd like more information on our CGA program for yourself or for a client, please contact me at firstname.lastname@example.org or at (212) 407-6313. I'd be happy to take the necessary information in confidence and prepare a personalized proposal for you.
Focus on Interest Rates
The IRS recently announced its March discount rate for determining the tax benefits of charitable gifts will be 3.6%. Since 1989, when the IRS began computing discount rates under Internal Revenue Code Section 7520, the rate has been this low only once, in 2003-04. March's rate is more than 2.5 percentage points below what it was in August 2007. This trend is reflective of a general decline in market interest rates since the middle of last year.
When the discount rate is this low:
- Individuals age 70 and under may find it difficult or impossible to structure a CGA or Charitable Remainder Trust (CRT) that meets the requirements of federal tax law. (CGAs and CRTs still may remain attractive to those over 70).
- Any CGA or CRT proposal that has been sent out to a donor or prospect more than two months ago needs to be recalculated.
- Charitable lead trusts become more attractive to donors who want to make a gift and pass assets to heirs at lower estate and gift tax cost.
It is uncertain whether the downward trend in discount rates and interest rates will continue. The American Council on Gift Annuities (ACGA) meets in early April to fix recommended CGA rates for 2008-2009. After decreasing the recommended rates by an average of almost 200 basis points in 2004 and 2005, the ACGA has left CGA rates alone. The recent drop in rates to near historic lows would suggest a further reduction is in the cards. However, problems in the credit markets and a possible resurgence of inflation lead some economists to think that interest rates will rise dramatically by the end of this year, and ACGA may follow suit. We are watching these developments closely. Again, stay tuned.
It has been a very quiet month in Washington. There has been no action at all on the legislation of interest to the charity community, notably the reinstatement of the IRA rollover under the Pension Protection Act of 2006. Will we have any major tax legislation this year? If it passes, we plan to report it as soon as it happens. Check our website often for the latest news.
I'd love to hear from you. Please feel free to contact me at email@example.com or at (212) 407-6313.