Life Income Agreement

These plans are available to donors who desire to make an irrevocable gift during their lifetime. Such an agreement will benefit one or more charities at their death (or at a specified future date), while the donor (and/or other beneficiary(s)) usually retains the right to an income stream during one or more lifetimes. Life-income agreements are often funded with highly appreciated assets (worth more than their cost) such as real estate or stock. Potential benefits to donors include increased income, income tax deductions, avoidance and/or deferral of capital gains tax, and estate tax relief.

  • Charitable Gift Annuity
    The donor transfers an asset to a charity and in return receives fixed annuity payments for one or two lifetimes. The income beneficiary(s) is selected by the donor. Most charities use a percentage rate for payouts (based on age) suggested by the American Council on Gift Annuities. These rates are more favorable to elderly individuals, yet protect the interest of charities. Donors receive an income tax deduction for a portion of the value of the gifted asset. In addition, the income beneficiary(s) receives partially tax-free income for a period of years and the donor receives capital gain benefits if the gift is funded with appreciated property.

    A variation of this gifting method is the deferred gift annuity. Here, the income payments begin in a later year, typically with a higher return rate. Often, donors choose to defer their income until retirement age.
  • Charitable Remainder Trust
    Donors make a substantial irrevocable gift to a trust that they have established and the selected beneficiary(s) receives annual payouts in either a fixed amount or an amount based on a fixed percentage of the year-end value of the trust assets. Selected charities typically receive the trust assets either upon the death(s) of the income beneficiary(s) or after a selected term of years. Some donors utilize part of the additional income they receive from the trust (as well as tax savings) to purchase life insurance to benefit family members, thereby replacing the gifted asset.