If you are charitably inclined, you may wish to consider contributing to a charitable gift annuity, which can combine the benefits of an immediate income tax deduction and a lifetime income stream. Furthermore, your future taxable estate will be reduced for the remainder value of the property transferred to the charity.
A charitable gift annuity is an arrangement in which you make a gift of cash or other property to a charity in exchange for a guaranteed income annuity for life. This is similar to buying an annuity in the commercial marketplace, except that you can claim an immediate charitable deduction (subject to a 50% adjusted gross income limitation) for the excess of the value of the property over the value of the annuity, based on IRS tables. The charity must receive at least 10% of the initial net value of the property transferred in order for you to claim a charitable deduction for a portion of the purchase price.
The annuity may be payable to you over your life, or over the joint lives of you and someone you have designated. The rate of return is typically set at the time of the gift based on your age at that time. A portion of each annuity payment is tax-free, because you’re entitled to recover your original investment over your life expectancy.
The amount of your charitable deduction depends on a combination of your age and an IRS-prescribed interest rate at the time of your purchase. Of course, your charitable deduction will be less than the total value of your annuity purchase price because your deduction can only be claimed for the present value of the property that the charity will keep after your death, based on your life expectancy at the time of purchasing the annuity.
Please contact Martini, Iosue & Akpovi by phone at (818) 789-1179 if you have any questions or would like more information.