New Charitable Gift Annuity Rates Announced

The American Council on Gift Annuities has announced an increase of its suggested maximum payout rates for Charitable Gift Annuities for the first time since 2012. The rates will be rising by 0.30 to 0.50 percentage points for those ages where most annuity contracts are done. The new rates become effective on July 1, 2018.

For some sample ages, the following table compares the current single-life payout rates to the new rates:

 

Current Rate through 6/30/18 New Rate, effective 7/1/18
Age 60 4.4% 4.7%
Age 70 5.1% 5.6%
Age 80 6.8% 7.3%
Age 90 9.0% 9.5%

As the above table illustrates, a 70 year-old donor who creates a Charitable Gift Annuity in July will receive a payout rate that is 9.8 percent greater than the rate currently available. Nonprofit organizations may find that the new, higher payout rates will generate greater interest in CGAs.

You can find the complete new rate schedule by clicking here.

When marketing your CGA program, there are a few tips that philanthropy researcher Prof. Russell James, III, JD, PhD, CFP® has found that can help you achieve greater success:

1. Tax Avoidance. Because the new tax code means that most donors will not itemize when filing their taxes, you might think you shouldn’t bother discussing tax avoidance when speaking with donors. However, that’s not necessarily the case. First, many of those who can afford to make a CGA donation will be tax itemizers who will be able to take advantage of the charitable gift deduction. Second, anyone with appreciated securities can avoid capital gains tax by establishing a CGA with a gift of stock rather than cash.

2. Ask in the Correct Way. When asking for a gift of stock, don’t simply suggest to a donor that he make a donation of appreciated stock to fund a CGA. Instead, let the donor know that she can avoid capital gains tax by making a donation of appreciated stock to fund a CGA. That simple change of language can significantly increase your success rate.

3. Tell Meaningful Stories. Do not just suggest that someone “make a gift and receive a tax deduction and yearly income for life. Any unused gift amount will go to the charity at the end of your life.” Instead, for better fundraising results, tell a story of a real donor that prospects will be able to relate to. For example, an advertisement might say, “Sara made a gift and received a tax deduction and yearly income for life. Any unused gift amount will go to the charity at the end of her life.”

For additional tips involving CGAs, be sure to read my previous post about the CGA rate increase by clicking here.

How do you plan to market CGAs once the new rates go into effect? Do you think the payout-rate increase will be sufficient to boost donor interest in CGAs?

That’s what Michael Rosen says… What do you say?

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4 Comments to “New Charitable Gift Annuity Rates Announced”

  1. Great read as always!! Thank you!!

  2. Good article, Michael. Some individuals may be able to exceed the new standard deduction and benefit from a charitable deduction by doing a CGA and itemizing.

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