Charitable Gift Annuities Guaranteed Life Income Charitable Gift Annuities INTRODUCTION This presentation will show you the tax and annuity benefits of the Charitable Gift Annuity. The charitable gift annuity is growing rapidly in popularity. It provides both secure fixed payments and a double tax benefit. The combination of the fixed payments and the tax savings make this gift annuity very attractive, especially for retired persons. .

Charitable Gift Annuity CGA is a Contract Between a Donor and CA-NV United Methodist Foundation Donor Makes a Gift to Foundation Foundation Agrees to Make Fixed Payments for Life of Income Beneficiaries. CHARITABLE GIFT ANNUITY (CGA) A donor wants to make a gift to charity but needs regular payments to supplement income. Donor and charity enter into a charitable gift annuity agreement. A charitable gift annuity (CGA) is a contract between a donor and charity. In exchange for a gift of cash or property, a charity agrees to make fixed payments for life. A gift annuity contract can begin making payments immediately (a current gift annuity) or defer payments for at least one year (a deferred gift annuity).

Sample Gift Annuity Rates AGE RATE 70 5.1% 75 5.8% 80 6.8% 85 7.8% 90 9.0% .

Prepared For Mary Jones Challenge Prepared For Mary Jones CD’s are Maturing Interest Paid is Only 1% You Would Like More Income CHALLENGE You may have CDs or other assets that are maturing. The income payable now may not be as high as it was in the past years. Since you would like to receive more income, you are now gathering information about other options. What options would pay more income? Can you move part of your CDs into a higher paying option and end up with the same overall income? We are going to review a method that would allow you to maintain your income at its current level or perhaps even increase your income. Let’s consider an example of Mary Jones, who is concerned that her income has been going down as CD payout rates decline. What Can You Do?

Changing CD Income Mary Jones Age 82 DECLINING CD INCOME Mary Jones has invested in CDs for many years. At one time, she was receiving as much as 4% from her CDs. However, as interest rates have gradually declined, her CD rates continue to be lower. She was receiving 3% initially and now many of her CDs are starting to approach 1%. Mary usually invests in one or two-year CDs. As the CDs mature, she then acquires new CDs at lower rates. As a result, her income has been declining.

Income With $100K CD Mary Jones Age 82 INCOME WITH $100,000 IN CDs When Mary Jones was earning 4% on her $100,000 in CDs, her income was $4,000 per year. As the CD rates moved lower and she rolled over her CDs into new CDs, she received less income. Mary Jones is quite concerned because the CD rates continue to move lower. This year, she may receive as little as 2% on some of her new CDs. After she has rolled over all the CDs at 2%, her income will now be reduced to $2,000 per year.

$100K CD & No Gift Annuity Mary Jones Age 82 CD Payout $1,000 In the current year, Mary is concerned that her $100,000 invested in CDs will be producing 1% return. If she has no gift annuity and simply invests the full $100,000 in 1% CDs, then her income is $1,000. It is understandable that Mary is concerned. Her income has been reduced from $3,000 to $1,000. She would prefer to receive a higher income. What could Mary do? CD Payout $1,000

$65K CD & $35K Gift Annuity Mary Jones - Age 82 Total Income $2,734 Gift Annuity 7.2% Payout $2,084 PLUS Charitable Deduction Partly Tax-Free $65,000 CD & $35,000 GIFT ANNUITY Mary could take approximately one-third of her CDs and purchase a gift annuity. The gift annuity pays fixed payments based upon age. At Mary’s age of 82, the gift annuity would pay 7.2%. For example, if Mary takes $35,000 to invest in the gift annuity and continues to invest $65,000 in CDs, she would receive about $2,734 in income. First, the $35,000 in the 7.2% gift annuity would pay $2,084. Second, investing $65,000 in a 1% CD would produce $650. Her total income is $2,734. In addition, Mary receives a charitable deduction of $17,711. Plus, over two-thirds of her $2,765 annuity payment is tax-free. Mary not only has more income, but has extra tax savings that give her yet more spendable dollars. She is delighted with this plan that enabled her to maintain her security and increase her income. CD - 1% Payout $650

Consider A Gift Annuity Solution: Consider A Gift Annuity Fixed Payments for Life Higher Rates - Senior Ages Income Tax Deduction SOLUTION Let’s now look at the gift annuity created by Mary Jones. The Charitable Gift Annuity will provide fixed payments during her life. Based on Mary’s age on the date of the gift, the payment rate was calculated using the rate schedule set by the American Council on Gift Annuities. In addition, she will receive an income tax deduction which may be used in her next tax return or spread over this year and up to five additional years.

Gift Annuity Property $35,000 Principal $35,000 Church $35,000 Mary Jones - Age 82 Property $35,000 Income Tax Deduction $17,711. May Save $4,428. Principal $35,000 One Life 7.2% Annuity Annuity $2,520. Tax-free $2,084. Effective rate 10.5%. Church $35,000 After one life, property to church. DETAILED FLOW CHART In order to understand better your benefits with a gift annuity, let's view a more detailed chart of the gift annuity plan. The more detailed chart for the Gift Annuity shows the property in the box on the top left. When you give this property to charity, you will receive a contract for annuity payment. Under benefit one there is an income tax deduction and, based upon your income tax rate, the estimated savings. For some persons, this deduction will be used this year. For others, it may be used partially and then spread over as many as five additional years. In the center section of the chart you will see your annuity payout rate, which is based upon your age. The charity receives the property and places that value into the charity's annuity reserve fund. This reserve fund is now invested and an annuity is paid out for one or two lives. A very nice benefit of the payment is that part of the payment is tax free. Note under benefit two that your tax free payment and your estimated total payout are displayed. Since there is a tax deduction and part of the payments are tax free, your effective payout rate is higher than the rate listed above. Considering these two tax benefits, a Gift Annuity truly does have a very attractive payment rate for one or two lives. After all payments are made for one or two lives, the annuity value will be distributed to charity. This property passes to charity with no probate fees and no estate tax. It is an excellent method for receiving high fixed payments and then helping your favorite charity.

Prepared for Mary Jones Gift Annuity Prepared for Mary Jones Income Tax Deduction $17,711 Annuity Payout $ 2,520 Tax Free Payout $ 2,084 Annuity Payout 7.2% Effective Rate 10.5% SUMMARY OF BENEFITS This chart shows in summary form the benefits of your gift annuity. The gift annuity provides a tax deduction. This could save significant taxes in the year that you create the annuity. There is an annuity payout. This payout will come to a person or a couple for one-life or two lives. Part of this payout is excluded from taxation. You can view the amount that is tax-free. You will not have to pay income taxes on the tax-free portion. Finally, considering the tax savings and the tax-free payout, your effective rate is a very attractive payout. I know that you will enjoy the fixed payments and tax benefits of a gift annuity for many years.

We invite you to visit the Foundation’s Planned Giving web page and design your own Charitable Gift Annuity! www.canvumfgiving.org .

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