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The Flexible Deferred Gift Annuity
Posted February, 2007
The deferred gift is well suited to those individuals who are in their peak earnings years who wish to make a current gift to Union and, at the same time, supplement their retirement income. By transferring cash or marketable securities to us now we agree to provide you with a guaranteed income stream that will start at a time of your choosing sometime in the future, usually when you anticipate to retire.
Similar to a qualified retirement plan, you can, if you wish, "ladder" your charitable retirement plan by making annual contributions to us as you deem appropriate.
The tax benefits of the arrangement are, however, immediate. You will be entitled to a current income-tax charitable deduction for the present value of the gift portion of the transfer. Being in the top income-tax brackets, the deduction produces optimum tax savings.
The annuity payments you will receive in the future will receive favorable tax treatment. A portion of each payment will be a tax-free return of principal over the life expectancy of the annuitant. If appreciated, long-term securities are used to fund the gift, only a portion of the gain will be recognized, but it will be spread over the life expectancy of the donor-annuitant.
This arrangement works well if you are certain of the date you want to start to receive the annuity payments. But what if there is a possibility that when that date arrives you may decide to continue to work for a couple of more years and realize you do not currently need the annuity payments? There is a solution, and it's called the flexible deferred gift annuity.
We include a provision in the agreement that permits you, age 55, to postpone the date of annuity payments to begin no sooner than age 65, and not later than age 75.
At age 65, you elect to postpone the start date of your payments to age 68. At age 68, your annuity payments will be larger to reflect the postponement period. However, your charitable deduction does not change.
You have to give us notice of your election of at least 90 days prior to your first payment at age 65.
Example: Mr. Walton transfers $25,000 cash for a deferred gift-annuity agreement with Union on 1/1/2007, and elects to receive his payments no sooner than 3/31/2017, and no later than 3/31/2027. His gift produces an immediate income tax charitable deduction of $12,937 and tax savings of $4,269. The table below shows the range of his annuity payment over 10 years.
| Annual Payment and Taxation for Elective Start Dates | |||
| Elective Start Date | Age at Start Date | Annuity Rate | Total Annuity |
| 3/31/2017 | 65 | 10.1% | $ 2,525 |
| 3/31/2018 | 66 | 10.8% | $ 2,700 |
| 3/31/2019 | 67 | 11.5% | $ 2,875 |
| 3/31/2020 | 68 | 12.3% | $ 3,075 |
| 3/31/2021 | 69 | 13.2% | $ 3,300 |
| 3/31/2022 | 70 | 14.1% | $ 3,525 |
| 3/31/2023 | 71 | 15.1% | $ 3,775 |
| 3/31/2024 | 72 | 16.1% | $ 4,025 |
| 3/31/2025 | 73 | 17.2% | $ 4,300 |
| 3/31/2026 | 74 | 18.4% | $ 4,600 |
| 3/31/2027 | 75 | 19.9% | $ 4,975 |
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Please know that we are always available to help as you consider charitable strategies, either for this year or for the long-term. Simply click here for information on how to contact us.