Questions and Answers about CGAs

One of the most attractive methods of making a significant charitable gift, while preserving a future income stream, is a Charitable Gift Annuity (CGA). Many people from 55-75 are finding CGAs a financially sound method of receiving secure income while making a commitment to the organizations they care about at the same time, in this case PARC.

How do they work?

A CGA is a simple contract between the donor and PARC. The donor transfers cash or appreciated stock to PARC in exchange for a commitment by PARC to pay the donor (or the donor and spouse) a fixed income for life.

What is the security behind a flexible CGA?

All charitable gift annuities are backed by the full faith and credit of PARC’s endowment, and its long history stands behind every gift annuity issued. Furthermore, the state insurance commissions, which oversee the issuance of gift annuities by non-profit organizations in their respective states, mandate that every non-profit that signs such contracts keeps a segregated reserve account sufficient to make the payments stated in all its annuity contracts.

How are the rates set?

The rates for all CGAs are determined by a national oversight organization (the American Council on Gift Annuities) and are based solely on one factor: the age(s) of the beneficiary(ies) at the time the annuity begins payments.

How do charitable gift annuities compare to Roth and other IRAs?

With a CGA, an individual knows at the time of donation what his/her annual income will be and those returns are guaranteed regardless of market fluctuations. With an IRA, annual income and returns are dependent on the market value of the assets owned by the IRA.

Often donors think about a CGA as a complement to IRAs or other retirement plans that take advantage of the potential increases in market value, but that also carry risk that the market may decrease in value. A CGA, because its returns are fixed, provides a hedge against market fluctuations and, therefore, a balance to the traditional methods of planning for retirement income. And they allow the donor to make a gift at the same time.

How does a CGA compare to a commercial annuity?

Like a commercial annuity, a CGA allows a donor to receive income for life, but unlike a commercial annuity, a CGA allows the donor to make a significant gift to PARC and receive a tax deduction at the same time. Also unlike a commercial annuity in which commissions and fees may take a significant percentage of the initial investment, especially when the annuity is established, with a CGA, all the money goes to PARC. There are no commissions or fees to anyone.

So what are the benefits?

The CGA offers several benefits:

· First, donors can make a significant gift without sacrificing future needs for income

· Second, donors receive an immediate charitable income tax deduction

· Third, a portion of the continuing income comes tax-free.