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The Art of Giving
| Giving Options
| Charitable Gift Annuities
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| Charitable Gift Annuities |
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Income for Life...Guaranteed
Charitable Gift Annuities are among the simplest, oldest, and most popular ways of making a gift and obtaining an income for life. They allow you to make a substantial gift, many times larger than you may have thought possible. In return for your gift of $10,000 or more, CMA guarantees to pay you and/or another beneficiary, a fixed amount quarterly for the rest of your life. You receive a current charitable deduction for the portion that represents the charitable gift (the amount of the gift which exceeds the value of the annuity received). Capital gains tax is spread over a lifetime reducing taxes paid from the income stream. Additionally, a portion of the payments you receive may be tax free.
The effective rate of return for charitable gift annuities, including taxes saved, is often higher than market rates.
Why should I create a gift annuity?
" Quick & easy to establish
" Income tax deduction for charitable gift
" Fixed income payments for life
" Guaranteed by the substantial assets of the museum
" Option of who is to receive payments
" Reduced taxable estate
" Reduced capital gains tax for appreciated stock
" Membership in the Legacy Society
How is a gift annuity created?
First, contact CMA's Office of Gift & Estate Planning to
request a personalized proposal including detailed tax information.
Next, review our proposal with your financial and legal advisors.
We will assist you in transferring funds and will
execute an annuity agreement promising to pay a fixed annuity for life.
This agreement is a general obligation of the Museum and is backed by all of our assets.
Who may I choose as annuitants and how many persons?
You may select anyone you wish, up to 2 persons and they can be anyone you wish. If the annuitant is someone other than the donor there may be gift tax implications, but you are still entitled to a charitable income tax deduction. The annuitant can be any age, but payments will not begin until a specified date in the future which must be when the person is at least 60 years of age.
Is there a minimum contribution to fund an annuity?
Yes, the minimum amount to purchase an annuity is $10,000, but there is no maximum.
What assets may I use to purchase the annuity?
Cash, stock, real estate or some other type of appreciated assets. Older donors in their 70's & 80's may even wish to use the value of their home and have the added benefit of being able to live there for the rest of their lives. Using appreciated assets to create a gift annuity may help you avoid part of the capital gains tax
.
May I increase the size of the gift annuity after establishing it?
No. Although you cannot add to an existing annuity, you may create as many separate annuities as often as you wish. May people purchase them yearly as rates increase & life expectancies change.
Charitable Gift Annuity Agreement
This Charitable Annuity Agreement ("Agreement") is entered into as of the date first written below between The Cleveland Museum of Art, an Ohio non-profit corporation, located in Cleveland, Ohio ("Museum") and NAME________________ of ADDRESS________________ , Social Security Number________________, birthday________________ ("Donor").
The Donor, upon the signing hereof, shall transfer and convey to the Museum the sum of SUM SPELLED OUT________________ ($________________). The transfer will be accomplished on or before DATE________________.
The Museum, in consideration of the transfer of such funds, agrees to pay an annuity of AMOUNT________________ annually, for the rest of the Donor's life in equal quarterly installments of AMOUNT________________. The first annuity payment shall be paid on DATE________________ in the prorated amount of AMOUNT________________ and all future quarterly payments will be made on or before January 1 (October-December), April 1 (January-March) July 1 (April-June), and October 1 (July-September), and will be made within the first five days subsequent to the end of the preceding quarter. If Donor does not survive to the date of the first payment, the Museum shall have no obligation under this Agreement to make payments.
The obligation of the Museum to make said annuity payments, if any, shall terminate either without payment if the Donor dies before the first payment, or with the payment made by the Museum immediately preceding the death of Donor. This Agreement is irrevocable and cannot be assigned except by the Museum. Donor may irrevocably renounce all future payments, thus making a charitable gift of Donor's interest in the annuity.
The Museum certifies that Donor, as evidence of Donor's desire to support the work of the Museum and to make a charitable gift, has on the aforementioned date contributed to the Museum said property, receipt of which is acknowledged. When the Museum's obligation to make payments hereunder ceases, said remaining property shall be used by the Museum for its general purposes.
If any birth date or age shall be at any time found incorrect, then any underpayment or overpayment due to misstatement or other error, with interest as may be specified in Treasury Regulations, shall be corrected by prompt distribution to the Donor or by charge against current or future payments, as may be applicable.
The annuity payments to be made under this Agreement are backed solely by the full faith and credit of the Museum and are not insured or otherwise guaranteed by any government entity. This Agreement is not a security and is not regulated by the Federal Securities and Exchange Commission or by the State of Ohio.
This Agreement and annuity shall be governed by the laws of the State of Ohio.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement this DATE________________ day of MONTH________________ , YEAR________________ .
Deferred Charitable Gift Annuities
These are also simple gifts to make that enable you
to make a substantial gift to the museum, while
providing income to you. In this case the income is
deferred until retirement. You may donate cash,
stock or other appreciated assets for either type of
annuity. The fixed income amount is based on the
age of the beneficiary at the time it is established.
Who should create a deferred gift annuity?
Younger persons, age 30 to 60 with sufficient income to benefit from a current tax deduction.
Older donors required to take distributions from IRA's, using the distribution to create a
charitable deferred annuity to offset the taxes.
What are the benefits of a Deferred Gift Annuity?
" Retirement income created on a tax-sheltered basis
" Quick & easy to establish
" Supplements pension plans
" Higher annual payments than a regular charitable gift annuity.
" Significantly larger charitable tax deduction to use now when you need it
" Longer deferred payments result in higher payout rate
" Permanent fixed income payments for life
" Guaranteed by the substantial assets of the museum
" Amount remaining after paying you is your legacy to the museum
" Membership in CMA's Legacy Society
How is a Deferred Charitable Gift Annuity created?
In the same basic manner as a regular charitable gift annuity. See above.
What determine rates of Deferred Annuities?
" Age of the beneficiaries at the time of the gift.
" Age of the beneficiaries at the time payments are to begin.
" Number of years payments are deferred
" Longer delay before payments begin results in a higher rate
" Rates will never change once your annuity has been established.
Donor Portrait
Jack & Barbara
Jack and Barbara, both 60, are investigating creating a charitable gift annuity with The Cleveland Museum of Art. They are in a position to fund the annuity with a cash gift of $40,000. Jack and Barbara particularly like the idea of providing a gift that they know CMA will use right now, during their lifetimes.
Jack and Barbara, at age 60, are eligible for an immediate annuity. While they would love to have a charitable income tax deduction this year, they do not need more income right now. They prefer to receive the income in later years, when they may possibly be in a lower tax bracket.
After meeting with CMA's Office of Gift & Estate Planning, Jack and Barbara discover that they can receive a charitable income tax deduction this year & defer the payments until they may be in a lower tax bracket. Additionally, they will receive a higher income payment when they do begin receiving income because their cash gift of $40,000 will be growing in a tax free environment for 10 years.
Jack and Barbara ask the Office of Gift & Estate Planning to prepare a customized proposal comparing an immediate annuity and a deferred annuity:
|
Immediate Annuity |
Deferred Annuity |
| Gift Amount |
$40,000 |
$40,000 |
| Payments Begin |
Immediately |
Deferred 10 years |
| Charitable Income Tax Deduction |
$8300 |
$16,381 |
| Rate of Return |
6.1% |
10.7% |
| Annual Income |
$2,440 |
$4,280 |
By choosing to defer their annuity payments 10 years, Jack and Barbara will accomplish their goals by:
- Receiving a charitable income tax deduction for the current year.
- Receiving income payments at a time when they will need income.
- Deferring income until they may be in a lower income tax bracket.
Will deferring my annuity instead of creating an immediate annuity result in any tax advantages?
Yes, charitable income tax deductions are greater with a deferred annuity because your payments are postponed.
The information provided here is not intended as legal advice and is for educational purposes only. You should speak with your legal and financial advisors regarding how these techniques apply to your individual situation.
You may reach us to ask further questions or to request a personal proposal or by mail or phone at the following:
Bishoy M. Mikhail, Esq.
Associate Director, Planned Giving
bmikhail@clevelandart.org
216-707-2585
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