Planned Giving Alert
Gift Annuity Rates Increased, New Funding Opportunity
Have you been thinking about a charitable gift annuity? Now is the time to take another look because payout rates for new gift annuities increased on January 1, 2023, and the omnibus spending bill, recently signed into law by the President, created a new funding opportunity for charitable gift annuities with IRA assets.
What do the new charitable gift annuity rates mean?
Rates increased for all age levels for both one-life and two-life charitable gift annuities.
|One Life||Two Lives|
The benefits of a charitable gift annuity completed after January 1, 2023, include:
- Locking in the new, higher rates.
- Achieving the satisfaction of making a meaningful difference with your gift.
- Enjoying the security of guaranteed income payments for life.
- Obtaining relief from taxes. You may be able to claim an income-tax charitable deduction, and each payment may be partly tax-free for your life expectancy.
New Funding Opportunity! You Can Now Receive Life Income by Making an IRA Charitable Gift
The Consolidated Appropriations Act of 2023, also known as the omnibus bill, includes a provision that will allow individuals to transfer from an IRA up to $50,000 (also adjusted for inflation beginning in 2024) to fund a gift annuity, a charitable remainder annuity trust, or a charitable remainder unitrust—all of which can be designed to pay income to the IRA owner, the spouse of the owner, or the owner and spouse jointly.
Unlike direct transfers to charities for current purposes, which can be made year after year, the transfer for a life-income plan can only be made in one tax year. During that year, transfers for both direct gifts and for life-income plans can be made. For example, a donor might transfer to a charity $50,000 as a direct (outright) gift and $50,000 for a gift annuity. That would be the end of the life-income gift transfers, but outright-gift transfers could continue year after year, subject to the $100,000 cap, adjusted for inflation.
Example of new provision: Rachel, aged 75, has $800,000 in her IRA, and she has been considering a gift of $50,000 made with IRA funds. If she transfers $50,000 as an outright gift, the charity will have $50,000 to use now—but afterwards she will have only $750,000 to earn income and be distributed. If she transfers the $50,000 for a gift annuity, she will receive for life $3,300 per year and $750,000 will remain in her IRA to earn income and be available for distributions. The combination of IRA distributions and annuity payments enables her to sustain her income while making a gift.
The Type of IRA Gift Depends on Your Situation
If your IRA balance plus other assets are more than enough for a secure retirement, consider an outright transfer of IRA funds—as you may have been doing. Your gift will go to work right now for the cause you want to support.
If you want to make a gift that satisfies all or part of your distribution requirement but also pays life income, transfer some of your IRA funds for a gift annuity or a charitable remainder annuity trust or remainder trust. Because of the low minimum size, a gift annuity will be more common.
Consult Us for Information
Contact our office for an illustration showing what you would receive if you fund a life-income plan with your IRA and for an explanation of the procedure for making such a gift.
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