Charitable Gift Annuities
Frequently Asked Questions
- What is a charitable gift annuity (G.A.)?
- How many beneficiaries or annuitants may a G.A. have?
- How is the payment to the annuitant or annuitants determined?
- Are the G.A. payments only paid on an annual basis?
- After I receive payments from the G.A., can I request a change in the payment schedule?
- What kind of assets may I use to establish a G.A.?
- Cash, publicly listed and publicly traded stocks or bonds, and mutual funds may be used.
- How much value is required to establish a G.A.?
- You mentioned that the G.A. is a contract. Who prepares it?
- How does the Foundation and the University of Florida benefit from the G.A.?
- What are the benefits I, as a donor, derive from creating a G.A.?
- What reasons have previous donors given for doing a G.A.?
- If I needed to, could I get some of the assets back from a G.A. that I created?
- You mentioned an estate tax deduction. Can I do a G.A. through my will or revocable living trust?
- Is there an age limit specified with regard to creating a G.A.?
- You mentioned funding a G.A. with cash or with appreciated assets (publicly listed and publicly traded securities). Does the income received differ with the different type of assets used to fund the G.A.?
- Once I have funded a G.A.contract, can I add more gifts to it?
- I have heard there is a deferred gift annuity. How does it differ from a regular or immediate G.A.?
- Who regulates a G.A.?
- How secure is a G.A.?
- Am I charged a fee on the services provided by the Foundation relative to the G.A.?
- What kind of tax statement do I receive at the end of the year?
- What annuity rate might I expect to receive?
Q: What is a charitable gift annuity (G.A.)?
A: It is a contract between the donor or donors and a charitable organization, such as the University of Florida Foundation, Inc. (Foundation), which establishes a life income program for the income beneficiary or beneficiaries named by the donor or donors.
Q: How many beneficiaries or annuitants may a G.A. have?
A:No more than two.
Q: How is the payment to the annuitant or annuitants determined?
A: The fixed-dollar, annual amount paid to the annuitant or annuitants is based upon the age of the annuitant or annuitants, at the time the annuity is created. The annuity rate or percent being paid is higher for an older annuitant or annuitants. The Foundation has indicated to the State of Florida's Insurance Commissioner that it will not a pay rate that is higher than the rate recommended by the American Council on Gift Annuities.
Q: Are the G.A. payments only paid on an annual basis?
A: No, payments may be done annually, semi-annually, quarterly, or monthly. Normally, payments are done quarterly, at the end of the quarter.
Q: After I receive payments from the G.A., can I request a change in the payment schedule?
A: No.
Q: What kind of assets may I use to establish a G.A.?
A: Cash, publicly listed and publicly traded stocks or bonds, and mutual funds may be used.
Q: How much value is required to establish a G.A.?
A:Ten Thousand Dollars or more is currently required.
Q: You mentioned that the G.A. is a contract. Who prepares it?
A: It is prepared in-house by Foundation staff. There is no cost to the donor or donors for preparation of the contract.
Q: How does the Foundation and the University of Florida benefit from the G.A.?
A:The remainder or residual left in the G.A. fund at the demise of the last income beneficiary goes to the Foundation to benefit the University as you, the donor or donors, designate.
Q: What are the benefits I, as a donor, derive from creating a G.A.?
A:You may derive the following benefits:
- You are making a gift that will support the University of Florida, its students, faculty, research, facilities, or programs.
- You receive an income tax or estate tax charitable deduction for part of the value of the assets you transfer to fund the G.A.
- If you fund your G.A. with appreciated assets (and you are an annuitant), part of the capital gains will not have to be reported by you, and those you do have to report may be prorated over your lifetime.
- Part of the payment you receive may be viewed as return of principal, and as such is nontaxable to you.
- Part of the payment you may receive may be tax-advantaged or taxed at lower rates than ordinary income.
- You may reduce or eliminate gift tax liability associated with your gift to UF and to your other beneficiaries.
- You may reduce or eliminate estate tax liability associated with your gift.
Q: What reasons have previous donors given for doing a G.A.?
A: Here are some of the reasons that donors have indicated:
- A large portion of my portfolio consisted of a single highly appreciated stock. I wanted to diversify, but I did not like the idea of having to pay all of the capital gains tax I would incur if I sold the stock. The G.A. reduced that liability and I got a deduction.
- My portfolio consisted entirely of stocks. I wanted to have a fixed income mix. The G.A. would let me obtain that and help UF at the same time.
- I had an employee who assisted me for a number of years, but did not have much in the way of retirement assets. It gave me another way to express my appreciation to that person.
- I wanted to provide monies for my parents, to ensure that they were not concerned how they would afford to live. The gift annuity allowed me to do that for them and to still have some tax advantages.
- I wanted to make sure my heirs are provided for and the G.A. seemed like a way I could ensure the heirs would have a guaranteed cash flow for their lifetime.
- I wanted to know that I had a specific income that I would be guaranteed throughout my lifetime and that I could build a budget around.
Q: If I needed to, could I get some of the assets back from a G.A. that I created?
A: No, a G.A. is an irrevocable gift, for which you will have received an income tax deduction.
Q: You mentioned an estate tax deduction. Can I do a G.A. through my will or revocable living trust?
A: Yes, and if you wish to do so, please contact the Planned Giving Office at the Foundation for the wording necessary to establish one in your estate plan.
Q: Is there an age limit specified with regard to creating a G.A.?
A: Yes, the current Foundation Board requires the annuitants or income beneficiaries must be 55 years of age when the G.A. is created and funded.
Q: You mentioned funding a G.A. with cash or with appreciated assets (publicly listed and publicly traded securities). Does the income received differ with the different type of assets used to fund the G.A.?
A: Yes. If you fund a G.A. with only cash, you will receive tax-free income (viewed as return of principal) and ordinary income. If you fund the G.A. with appreciated assets, you will normally receive ordinary income, tax-free income (return of principal), and some capital gain income.
Q: Once I have funded a G.A.contract, can I add more gifts to it?
A: No. You have to do a new contract each time you wish to make a gift.
Q: I have heard there is a deferred gift annuity. How does it differ from a regular or immediate G.A.?
A: A deferred gift annuity (D.G.A.) delays the start of payments for a year or more. Because the entire principal is invested for the deferred time specified in the contract, the Foundation may elect to enhance the payment and the charitable deduction.
Q: Who regulates a G.A.?
A: Both the Federal and State of Florida government. In Florida, it is the State Insurance Commissioner's Office. The Foundation has to provide an annual statement of compliance on contract wording and reserve requirements to the Commissioner.
Q: How secure is a G.A.?
A: As secure as the charitable organization doing the contract. Even if the assets you transfer to the Foundation are dissipated, the Foundation is legally obligated to use its assets to make payments to you for your lifetime or lifetimes. The State of Florida is not obligated, however.
Q: Am I charged a fee on the services provided by the Foundation relative to the G.A.?
A: Yes, your G.A. fund is charged an administrative fee. However, that does not impact the annual or lifetime income you receive. The Foundation is required to provide a disclosure to you prior to your doing a G.A. That disclosure indicates how the G.A. pool is invested, what fee is charged, and the total dollar amount held within the G.A. pool.
Q: What kind of tax statement do I receive at the end of the year?
A: Income beneficiary or beneficiaries receive a 1099-R. It has to be to you by the end of January. The G.A. does not have its own tax identification number. It operates from your social security number.
Q: What annuity rate might I expect to receive?
A:The following annuity rates are based upon the guidelines suggested by the American Council on Gift Annuities and became effective July 1, 2003. The Foundation has told the Insurance Commissioner's Office that it will not pay more than the suggested rate.
| One-Life G.A. | Annuity Rate | Two-Life G.A. | Annuity Rate | |
| 55 | 5.5% | 55 and 55+ | 5.0% | |
| 60 | 5.7% | 60 and 61+ | 5.5% | |
| 65 | 6.0% | 65 and 71+ | 5.8% | |
| 70 | 6.5% | 70 and 83+ | 6.3% | |
| 75 | 7.1% | 75 and 89+ | 6.9% | |
| 80 | 8.0% | 80 and 95+ | 7.8% | |
| 85 | 9.5% | 85 and 95+ | 8.8% | |
| 90 and over | 11.3% | 90 and 95+ | 10.1% |
If you have other questions, please contact the Planned Giving Office.
