Posts tagged ‘CGA’

May 24, 2018

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.

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May 3, 2018

Who Wins as a Result of New ACGA Decision?

For the first time since 2012, the American Council on Gift Annuities has approved an increase of its suggested maximum payout rates for Charitable Gift Annuities. The rates will be rising by 0.30 to 0.50 percent for those ages where most annuity contracts are done. The ACGA will publish the final rate schedules by May 15, with the new rates becoming effective on July 1, 2018.

The rate increase will make donors the winners of the ACGA decision. Beginning in the second half of the year, CGA donors will be able to receive more income than they previously could in recent years.

A CGA is a gift mechanism that allows donors to make a gift to charity, and then receive an income for life. A CGA contract sets the rate and terms with the donor. The rate is dependent on the age and gender of the annuitant(s), and the number of annuitants.

For charities, the higher CGA payout rates will make this planned-giving instrument more attractive to donors and, therefore, could generate more gifts. So, charities are another winner.

The ACGA summarizes what conditions its board considered when setting the new rates:

Generally speaking, the ACGA’s suggested maximum rates are designed to produce a target gift for charity at the conclusion of the contract equal to 50 percent of the funds contributed for the annuity. The rates are further predicated on the following:

An annuitant mortality assumption equal to a 50/50 blended of male and female mortality under the 2012 Individual Annuity Reserving Table (the 2012 IAR);

A gross investment return expectation of 4.75 percent (which is up from the previous return assumption of 4.25 percent) per year on the charity’s gift annuity funds;

An expense assumption of 1 percent per year.”

If your organization has a CGA program, you’ll want to reach-out to your prospects and donors to let them know about the CGA opportunity and higher rates. The new rate schedule provides a good reason to contact people about CGAs.

When communicating with people about CGAs, remember to encourage them to think about establishing a CGA with a gift of appreciated property (e.g., stocks, bonds, real estate). This will provide the donor with the added benefit of avoiding capital gains tax. Your organization will also benefit. Nonprofits that experienced greatest growth in their CGA programs, as well as average CGA gift size, emphasized gifts of appreciated property compared to cash, according to a recent ACGA report.

If your organization does not already have a CGA program, you might want to consider starting one. While managing an in-house CGA program can be administratively burdensome, there are third-party organizations (i.e., community foundations) that can administer your program for you.

Whether you manage the program in-house or out-source it, your organization will still be legally responsible for making payments to donors. While the CGA rates are designed to allow approximately 50 percent of a gift to ultimately go to the charity, there are many instances (particularly during the Great Recession) when that was not the case and charities received less than 50 percent, nothing, or were in a negative position. CGA programs are not without risk.

When marketing your CGA program, be careful to avoid a common mistake:

Do NOT sell CGAs as investments.

There are three reasons to avoid “selling” CGAs as an investment:

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October 28, 2016

Get a Free Halloween Treat for Fundraisers

If you’re like most fundraising professionals, you’re not optimally asking donors to include your nonprofit organization in their will.

You’re probably not driving as much traffic to your planned giving webpage as you could.

You’re also probably less successful at closing Charitable Gift Annuities than you could be.

lone-ranger-and-silver-via-melocuentas-flickr

The Lone Ranger and Silver.

I know. You decided to read this post to discover how you can get a free Halloween treat. Instead, you’re probably starting to feel tricked. But, fear not! Russell James, JD, PhD, CFP, the Texas Tech University professor and philanthropy researcher, along with the good folks at MarketSmart, are riding in to save the day.

Last summer, James conducted a webinar hosted by MarketSmart. During his presentation, James unveiled his latest, powerful research findings along with research insights from others. You can learn more about the webinar and get some great tips by clicking here.

Now, for your treat, MarketSmart has distilled James’ webinar into a free, 22-page e-book that will help you raise millions of dollars more. For example, here’s just one simple, yet valuable tip:

When you want to engage people in a conversation about Charitable Gift Annuities, what is the best way to describe this giving vehicle to make folks want to learn more?

James tested five phrases. Among the 2,550 respondents, he discovered the percentage interested in learning more:

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May 24, 2013

When is an Investment NOT an Investment?

If it looks like a duck, swims like a duck, and quacks like a duck, then it is probably a duck. But, not always.

If it looks like an investment, involves tax consequences like an investment, and produces a return like an investment, then it is probably an investment. But, not always.

So, when is an investment not an investment?

When it’s a Charitable Gift Annuity.

“A CGA is a contract (not a ‘trust’), under which a charity, in return for a transfer of cash, marketable securities or other assets, agrees to pay a fixed amount of money to one or two individuals, for their lifetime,” according to the American Council on Gift Annuities. 

Rubber Ducks by Felix63 via FlickrI’ll admit that CGAs do look a great deal like an investment vehicle. A CGA involves a proposal that contains an illustration of how the gift will work; it involves tax benefits; and, it involves a rate of return. It’s easy to see why donors and even many development professionals think of CGAs as an investment opportunity.

The ACGA Board of Directors voted recently to make no changes to the suggested maximum CGA return rates that originally became effective January 1, 2012. The current rate schedule will remain in effect until further notice. This news prompted a planned giving professional to post the following message on a listserv: 

We usually do a promotion to current annuitants and recent inquiries, when the new CGA rates get announced. Whether they go up or down, it’s a message I can easily work with (either promoting the new increased rates, or ‘act now before rates go down in July,’ etc.).

Not sure what to do since they are staying the same – they’re not so great that staying the same is anything to brag about. Just curious what others are doing, or if laying low on this and focusing promotions in other areas.”

That posting demonstrates that some development professionals tend to think of CGAs as investment vehicles rather than philanthropic instruments. There are a number of reasons why this is problematic:

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September 29, 2011

Special Report: Important Updates to Two Prior Posts

[Publisher’s Note: “Special Reports” are posted from time-to-time as a benefit for subscribers and frequent visitors to this blog. “Special Reports” are not widely promoted. To be notified of all new posts, including “Special Reports,” please take a moment to subscribe in the right-hand column.]

I recently did a blog post titled “Charitable Gift Annuities: How Much Are You Leaving on the Table?” In response, Stephen Kull of Eastern Illinois University raised some questions about risk management and the Insured Gift Annuity Program offered by Morgan Stanley. I, in turn, raised the issues on GIFT-PL, the listserve of the Partnership for Philanthropic Planning, and on the Yahoo Planned Giving Group listserve. You can find Kull’s comment and the responses we received in the comments section of the post.

This past Spring, I wrote a blog post titled “Should Your Legacy Society be Inclusive or Exclusive?” In that post, I criticized the Association of Fundraising Professionals Foundation for considering a measure that would increase the minimum threshold for recognition in the legacy society from $5,000 to $10,000. I argued that even the minimum requirement made the legacy society exclusive when it should really be inclusive. I am happy to report that the AFP Foundation decided not to increase the minimum threshold. Unfortunately, they also decided not to eliminate the $5,000 minimum requirement. I thank Robert N. Croft, CFRE, an AFP Foundation board member, who provided an update to my original post. You can find Croft’s detailed update in the comments section of the post.

I thank everyone who shares their comments and insights. I particularly appreciate the individuals who have made these two particular updates possible.

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

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