.	You’re considering a lifetime gift in partnership with your favorite charity > Your planning objective is increased income > Your investment preference is the stability of fixed income payments

Of all the gifts that pay you back, the gift annuity may be the simplest and most affordable. Here are some of the features that make the gift annuity the most popular life-income gift:

• You make your contribution directly to your favorite charity – not to a trust – and they agree to pay you a fixed amount for life. You know up front how much you will receive in return for your gift. For example, if your payment is to be 6 percent of a $20,000 gift, you will receive $1,200 every year for the rest of your life.
• A charitable gift annuity is easy to create. The gift agreement is a simple contract between you and your favorite charity. Your payments become one of their general obligations, backed by their corporate assets, not just the principal of your gift. The charity commits itself to making your payments.
• Gift annuities generally pay a slightly higher income rate than other life-income gifts.
• Most charities ask a minimum gift of only $5,000 to $10,000 to create a gift annuity, bringing the benefits of a life-income gift into reach for many donors.
• You will receive a charitable income tax deduction when you create a gift annuity, based on the fair market value of the assets you contributed minus the present value of the life-income interest you retained. (The present value of the life-income interest you retained is a formulated calculation. Continue reading for a sample scenario and to use PG Calc, a software calculator.)
• If you fund your charitable gift annuity with appreciated securities, no upfront capital gains tax is payable. You can contribute appreciated but low-yielding assets and put the entire amount of your gift to work earning income for you. Only a portion of your capital gain will be reportable, and the tax will be spread out over your annuity payments.
• A third tax benefit of a gift annuity is the treatment of your income payments: part of each payment will be treated as the tax-free return of principal. This increases the effective yield of a gift annuity, and is not available on other types of life-income gifts.
  (The IRS provides that the capital gain and tax-free income benefits are in effect during your life expectancy – if you live longer, the entire annuity payment will be taxed to you as ordinary income.)
• Your gift annuity can make payments to a maximum of 2 people.
• After the death of the last annuitant, the balance remaining in your gift annuity will be applied by your charity to the project that you selected or established with your charity when you created your annuity.
• Your charity will give you gift credit for the remainder value of your gift annuity – the same amount as your charitable deduction, explained above.

.	Example You hold a portfolio that has appreciated well but only pays you and your wife 2 to 3 percent income per year. You’re now 70, your wife is 68, and you're concerned that if you sell some of the stock to reinvest in bonds, capital gains taxes will cut heavily into the proceeds. You want to make a gift of $50,000 to your favorite charity, but you and your wife need the income that your portfolio provides you. You are looking for a gift plan that will continue this income, and, if possible, increase it. You choose General Electric stock to make your gift because the shares have more than doubled in value since you and your wife bought them. You select a gift annuity, which will pay you and your wife a 6.5 percent income rate for an annual payment of $3,250, a significant improvement over the $1,250 the stock has been yielding. Here’s a summary of the income and tax benefits from your gift annuity:
.	Donors	Husband and wife, 70 and 68	Click here to calculate the benefits a gift annuity would give you.
.	Amount contributed	$50,000, stock
.	Cost basis	$20,000
.	Current dividend income	$1,250
.	Gift annuity rate	6.5%
.	Annual payment	$3,250 (fixed)
.	Charitable deduction	$14,212
.	Increased annual income	$2,000 ($3,250 annuity vs. $1,250 dividend)
Note: The Charitable Gift Annuity is not the only gift plan that pays you lifetime income. Compare its benefits with those of the annuity trust and the unitrust.

Tips on Creating a Gift Annuity:

First, read the gift annuity disclosure statement provided by your favorite charity. You should then consult with an attorney expert in the area of charitable gifts and estate planning. The charity may provide a draft of the gift annuity agreement for review by you and your attorney, and will help you transfer cash or securities when you make your gift.

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