Charitable Gift Annuity
Maximize your income and your impact with a Charitable Gift Annuity with Babson.
Creating a charitable gift annuity is a wonderful way to support Babson in the future while supporting yourself today. In today’s weak interest rate environment, a Charitable Gift Annuity with Babson can increase your income and reduce capital gains liability. Your gift of cash or securities will generate a fixed and guaranteed income stream in an amount determined by your age at the time of the gift.
Here are answers to some common questions:
What is a charitable gift annuity?
A charitable gift annuity is a contract with the College specifying that, in return for your irrevocable gift, Babson will pay a fixed income to you and/or another beneficiary for life. After the death of all income beneficiaries, Babson will use the remainder of your gift for the purpose you request. In addition to favorable rates of return, charitable gift annuities also afford donors many tax benefits.
How much income will I receive?
Like most charitable organizations, Babson uses rates set by the American Council on Gift Annuities. These rates are based solely on the age of the income beneficiary or beneficiaries at the time of the gift:
For example, in return for a transfer of $50,000, a 65-year-old will receive an annuity of $2,350 each year for life ($50,000 x 4.7% percent). This amount will never change.
Is this income guaranteed?
Yes. Payments to you are a general obligation of Babson and backed by the College’s general resources.
Is there a minimum gift amount?
The minimum contribution to establish a gift annuity at Babson is $25,000.
What assets can I use to fund a charitable gift annuity?
Most people fund a gift annuity with cash or appreciated securities.
How will I receive my income?
Babson typically pays its beneficiaries quarterly, depositing income directly into your specified bank account.
How will my income be taxed?
Annuity payments are treated as a combination of ordinary, capital gains, and tax-free income. The details depend upon your age and what you use to fund the charitable gift annuity. A Babson gift officer will be happy to discuss specific examples with you.
If you use cash, a large portion of your income will be subject to no income tax at all for a fixed number of years, depending upon your age. The balance will be taxed at ordinary income rates. If you use appreciated securities, a part of the tax-free portion of the payment is replaced by income taxed at capital gains rates. Each year, you will receive a Form 1099 that indicates how to report the income on your tax return.
Will I receive a current income tax deduction when I create a charitable gift annuity?
Yes. The exact amount depends upon a number of factors, including your age, the annuity rate, and the applicable monthly IRS discount rate.
Will I have to pay capital gains taxes if I use appreciated securities to fund an annuity?
No. You will not have to pay tax on capital gains, but some of the annuity payment will be taxed at capital gains tax rates. Choosing appreciated securities as your funding assets allows you to spread out your capital gains tax liability over your life expectancy while converting a highly appreciated, low-yielding asset into an attractive fixed-income stream. (The rules are slightly different if you create a gift annuity for another person.)
Are gift annuities good for everybody?
Not necessarily. If you are younger than 65, inflation may erode the value of fixed income payments over time. While fixed income is guaranteed to the beneficiary or beneficiaries for life, younger donors should balance fixed income with investments that can grow.
I am under 65. Are there charitable gift annuities that are right for me?
Yes. A deferred gift annuity might be particularly beneficial to you. If you agree to postpone receipt of your income, you will receive an even higher rate of income. The deferral of the annuity payment also increases the income tax deduction you can take in the year that the annuity is established.
*Annuity rate reduced in order to meet the IRS requirement that the charitable deduction is at least 10% of the original gift amount.
Can a deferred gift annuity supplement my retirement income?
Yes. Many working people find themselves wanting to set aside more than they are allowed to contribute tax-free to retirement plans such as IRAs and 401(k) plans. When you establish a deferred gift annuity, you create an additional source of guaranteed retirement income.
How will Babson use my gift?
While the income beneficiaries are alive, Babson will invest the gift assets in a pool of investments, with the interest funding the annual payments to beneficiaries. After the beneficiaries die, the remaining assets from the original gift will be withdrawn from the pool and used by the College for the purpose you designate.
Charitable gift annuities have been used by donors to support student financial aid, faculty research or library acquisitions. The Babson Advancement Office will help you to direct your gift to support a program at Babson that is particularly meaningful to you.
How do I get started?
To establish a charitable gift annuity with Babson, please contact Julie G. Snow, Director, Leadership Giving & Planning, at 781-239-4271 or email@example.com
Please note: Gifts of appreciated securities and other property must have been held by the donor for one year in order to receive a full fair market value tax deduction.
The information on this site is not intended as legal, tax or investment advice. For such advice, please consult an attorney, tax professional, or investment professional.