A charitable gift annuity is a legal arrangement in which a donor transfers assets to a charitable organisation in exchange for a fixed income stream for a specified period of time. The donor receives a tax deduction for the charitable contribution portion of the gift, and the charitable organisation uses the donated assets to fund its charitable activities. The annuity payments are typically based on the donor’s age and the value of the donated assets. This arrangement allows individuals to support charitable causes while also receiving a financial benefit.
A CGA is a contract between a donor and a charity in which the donor makes a gift to the charity and, in return, the charity agrees to pay the donor a fixed income for life.
The donor makes a gift of cash or property to the charity, and the charity agrees to pay the donor a fixed income for life. The amount of the income is based on the donor’s age and the amount of the gift.
The donor may be eligible for an income tax deduction for the charitable gift portion of the annuity, and a portion of the income received may be tax-free.
Anyone can establish a CGA, but it is most commonly used by individuals who are retired or nearing retirement age.
Cash, securities, and real estate are the most common assets used to fund a CGA.
The remaining funds in a CGA are typically used by the charity for its charitable purposes.
The donor’s annuity payments are backed by the assets of the charity, so if the charity is unable to make the payments, the donor may lose some or all of their income.
Yes, a donor can establish a CGA with multiple charities.
A donor can establish a CGA by contacting the charity they wish to support and working with them to set up the annuity.
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This glossary post was last updated: 4th April 2024.
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