Deferred Charitable Gift Annuity

A deferred charitable gift annuity is a contract between Wharton and a donor providing for the payment of a fixed income to one or two annuitants, payments to begin at a future date chosen by the donor. A longer delay between the creation of the deferred gift annuity and the commencement of payments result in a higher annuity rate and a larger income tax charitable deduction. Some donors view this as an attractive supplement to their retirement plan. Additional flexibility may be created by the donor specifying a range of start dates, one of which may be “triggered” by the donor in the future.

Benefits of a Deferred Charitable Gift Annuity

  • Guaranteed payments backed by the assets of the University of Pennsylvania
  • Partially tax-free income
  • Capital gains tax savings if appreciated property is donated
  • Eligibility for current income tax deduction
  • Supplement retirement planning without contribution limitations

PROVIDING INCOME FOR A LOVED ONE

Barbara Wilkins, W’75 would like to increase her future retirement income, but does not want to expose any more of her assets to the equities markets, which she believes will tread water for the next several years. She elects to fund a series of charitable gift annuities at $10,000 per year. She gets a partial income tax charitable deduction with each gift annuity, which helps to lower her current tax burden, and when she reaches retirement age the gift annuities start to provide her with guaranteed payments for life. She can pick the age now when the gift annuity payments will start, or for more flexibility, pick a range of years. In Barbara’s case, she uses a $10,000 cash bonus from her employer to fund the first gift annuity, and decides it should start making payments to her in ten years, when she is 66. Due to her age and the long deferral period until the start of payments, she will get 8.2% or $820 per year, of which approximately $405 is paid to her tax-free. When it is time to set up her gift annuity next year, she could decide to use stock instead of cash to fund the gift, and set the deferral period shorter or longer, depending upon her needs. When the gift annuities mature at her death, whatever funds remain will be used to provide loan forgiveness to Wharton grads pursuing public interest work.

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