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You may have a charity, non-profit organization or university that has a special place in your heart, and you’d like to show your support with a significant donation. At the same time, you’re working hard to make sure you’ll have enough income to support the retirement you’ve always imagined.

A charitable gift annuity, or CGA, is a way to accomplish both of these important goals in one shot, offering a potentially valuable tool for both charitable giving and retirement planning. We’ll take a closer look at how a charitable gift annuity works and the benefits it can provide to you, both immediately and in the future.

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What is a Charitable Gift Annuity?

In simple terms, a charitable gift annuity is a contract between a donor and a charity. You agree to make a gift to a qualified charity, and they, in return, agree to pay you (and someone else if you choose) a fixed stream of income for the rest of your life. You may also qualify for a federal income tax deduction for your donation and other tax benefits.

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How Does a Charitable Gift Annuity Work?

There are a few key steps to take in setting up a charitable gift annuity, including deciding where to make your donation, agreeing on terms, determining how your payments will be structured and figuring out what tax benefits you may be able to enjoy. Let’s walk through each one.

Establishing a Charitable Gift Annuity

First, you’ll need to select a qualified 501(c)(3) charity, and make sure that it’s eligible to issue charitable gift annuities. The American Council on Gift Annuities currently lists more than 400 organizations issuing CGAs. These organizations span hospitals, religious institutions, foundations and many colleges and universities.

Once you’ve decided on a charity, determine how much you want to contribute and what assets you want to use to make your gift. Gifts could be as low as $5,000, depending on the charity. Charities may impose their own maximum for financial management reasons. A charitable gift annuity can be funded with assets such as cash, securities like stocks or bonds, real estate or other appreciated property.�� If you are 70½ or older, you can make a one-time transfer from a traditional IRA to one or more CGAs. The maximum amount of funding this way is $54,000 in 2025, which is now adjusted each year for inflation.

You’ll work with the charity to agree on specific terms, including the income payment frequency and annuity rate. Once terms are set, the charity will provide an agreement that outlines details of the gift and the annuity payment. Before you sign an agreement it’s wise to consult with tax and financial advisors to review it and make sure the CGA aligns with your retirement goals. Our planners can help. ��

Receiving Lifetime Payments

The size of your gift, your age and the charity’s annuity rates all affect the amount of the annuity payment you’ll receive. The older you are, the higher your rate will be, because the charity expects it will be making fewer payments.

For example: if you make a $25,000 gift at the age of 65, using the American Council on Gift Annuities’ suggested maximum payment rate for that age of 5.7%, you would receive $1,425 every year for life.

But if you make the $25,000 gift at the age of 75, your rate would be 7%, and you’d receive payments of $1,750 annually.

Tax Benefits of a Charitable Gift Annuity

A charitable gift annuity can offer tax benefits right away and well into the future.

If you fund your gift annuity with cash or appreciated assets – such as stocks, real estate and other property – you may qualify for a federal income tax deduction if you itemize. You can also minimize capital gains taxes when you fund your gift with non-cash appreciated assets.

While a donation funded through your IRA does not qualify for an income tax deduction, it avoids income tax liability on the transfer of funds and counts toward all or part of your required minimum distributions, or RMDs.

The charitable portion of your gift – the amount that will eventually go to the charity – can also be deducted from your estate when you pass away, potentially reducing your estate tax liability.

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Benefits of a Charitable Gift Annuity

With wide-ranging benefits that are often quite flexible, charitable gift annuities are set up to be a win-win for the donor and the charity.

Guaranteed Lifetime Income

One of the biggest risks you face in planning for retirement – and one of the biggest retirement fears you may have – is outliving your assets. By providing stable, predictable payments for life, they can combine with other income sources – like your 401(k), IRA, other investments and Social Security – to help secure a longer retirement.

Supporting a Charitable Cause

With a CGA, you can seamlessly align your philanthropic goals with your financial objectives. You can make a real impact on causes you care about and give back to the community while helping shore up your own financial stability. ��

Tax Deductions and Savings

While the tax incentives can differ depending on how you fund your CGA, you may be able to take advantage of an immediate income tax deduction, capital gains tax savings and even estate tax savings. The tax benefits have the potential to be long lasting.

Flexibility in Payment Schedule

There’s often plenty of flexibility in structuring your CGA. You may be able to choose the frequency of your payments – such as annually, semi-annually or quarterly.

What’s more, you can opt for immediate or deferred annuity payments, depending on your needs. With an immediate annuity, payments begin right away. Deferring payments can be a good option if you want to support your selected charity and enjoy tax benefits now but want to earn a higher annuity rate later when you’re in or closer to retirement.

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Who Should Consider a Charitable Gift Annuity?

A CGA may be a smart option if you’re:

• Approaching retirement or already retired and seeking a steady, predictable stream of income.
• Looking for tax-efficient ways to donate, as it can offer an immediate charitable income tax deduction, capital gains tax avoidance, and potential estate tax benefits.
• Want to leave a legacy without compromising your own financial security.

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Charitable Gift Annuity vs. Other Charitable Giving Options

A CGA is one of several options that allow you to support charities while securing financial benefits for yourself. It differs from other common charitable giving methods, each of which comes with its own structure, benefits, and tax implications. Here's a comparison:

Charitable Remainder Trust (CRT)

A charitable remainder trust is another type of “split-interest” gift that provides donors with income while benefiting a charity. The income can be for life or for a specified period.�� Unlike a CGA, which offers fixed lifetime payments, a CRT provides income that can vary based on the value of the trust’s investments. However, CRTs generally involve higher administrative complexity and typically require more time and cost to set up compared to the simplicity of a CGA.

As far as tax benefits, both CGAs and CRTs allow for an immediate charitable income tax deduction and the avoidance of capital gains tax when you donate appreciated assets. However, CRTs offer greater flexibility in terms of asset management and the possibility of additional tax deductions in future years, depending on the trust’s structure.

Donor-Advised Fund (DAF)

A donor-advised fund allows donors to contribute assets to a fund, receive an immediate tax deduction, and then recommend grants to charities over time. DAFs offer much greater flexibility in terms of timing and distribution – donors can decide when and how much to donate to charities, making them ideal for those who want to give strategically over the long term. While a DAF allows for immediate charitable impact, it does not provide fixed lifetime income like a CGA.

Outright Charitable Gifts

An outright charitable gift involves donating assets directly to a charity without any strings attached, often resulting in an immediate impact for the organization. The donor can claim a charitable income tax deduction for the full amount of the donation. However, unlike a CGA, outright gifts do not provide any income for the donor.

Outright donations can be made in various forms, such as cash, securities, or property, and may be subject to capital gains tax if appreciated assets are donated without being part of a structured giving plan like a CGA.

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Consider a Charitable Gift Annuity Today

While there are several ways to give to charity and enjoy tax and other benefits, only CGAs offer a combination of giving with a guaranteed fixed stream of lifetime income.

Is a charitable gift annuity right for you and your retirement strategy? Let’s find out. Connect with a financial planner to schedule a meeting.��