The Baptist Foundation of Oklahoma

 A Case for the Charitable Gift Annuity

Economic bad news – it’s everywhere. Even if you were inclined to avoid it, for your own sanity’s sake, it is almost impossible to do. It is there when you turn on the television, radio or pick up a newspaper. Friends and family seem to talk about it at casual gatherings. You know things are tight when Entertainment Tonight is reporting that coupon clipping is the new chic.

Even the previously infrequent business news consumer has been introduced to a new lexicon of financial terms such as mortgage-backed securities, subprime lending, credit default swaps, foreclosure, bailout, recession, depression (both kinds), and stimulus package. I knew that economic news had become pervasive last week when while driving my 13-year-old son to school he knew what the acronym TARP was referring to when mentioned on a radio news report.

In light of all this bad economic news, the last thing you would want to consider is a new charitable giving arrangement – right? Not if that arrangement paid you a stable predictable income for the rest of your life. That is exactly what a charitable gift annuity does. In this economy, people are realizing that their single greatest financial asset is not their home or 401(k) but their income. Protecting that asset has become job one for most working age adults. Seniors, however, do not always have much control over the consistency of their income. In an economy where market values and yields are both on a downward trend it is often difficult to maintain previous year’s levels of revenue. At the time of writing this column, the national average for a one-year certificate of deposit (CD) was 2.22 percent which was down from 3.10 percent in February 2007 and 4.80 percent for the same time in 2006. Over a two-year period, this is a 46 percent drop in income for the average CD investor. Faced with these challenges, many seniors are establishing charitable gift annuities with a portion of their investment portfolio.

A charitable gift annuity is a contract between you and the underwriting charity. It is a hybrid arrangement that is part annuity contract and part charitable gift. In exchange for an irrevocable transfer of cash or marketable securities in the amount you choose you receive five primary benefits.

Five Benefits of a Charitable Gift Annuity

1. You receive an income for life.
2. A portion of the payout is tax free to you.
3. You get a charitable income tax deduction the year you establish the gift annuity.
4. You avoid part of the capital gains taxes if you fund your gift annuity with appreciated securities.
5. The Southern Baptist ministries of your choice receive the benefit of your gift at your death.

Eventually our economy will return to good health. But until it does, financial solutions to help us weather the uncertain times can be found in some unanticipated places. Giving money to your favorite Southern Baptist ministries, through a charitable gift annuity, might be just the arrangement you need to provide stable income in an unstable economy. To learn more about charitable gift annuities consult your professional advisors and contact us at 800.949.9988.