A Gift that Pays You Income: Charitable Gift Annuity

With a charitable gift annuity, you make a gift to Hospice Hawaii and in return receive fixed payments for your lifetime. Payments can be received over a joint lifetime if you have a spouse or other loved one you would like to include. A gift annuity can be a great way to supplement retirement income and support Hospice Hawaii. You might also think about funding a gift annuity for another person, perhaps an aging parent or a loyal employee.

Example: Mary, age 75, receives pension income plus interest from bonds and CDs and dividends from various stocks. The return on the CDs is about 2% and the dividends on the stocks also average 2%. She would like to increase her cash flow and make a charitable gift. To accomplish her objectives, Mary contributes $10,000 from matured CDs for a gift annuity. Mary receives an annuity rate of 6.5% which means Hospice Hawaii will pay her an annual annuity of $650. Her payment is fixed in amount and won’t vary with fluctuations in the market. In addition, until the end of her life expectancy, $471 of each payment is free of income tax. Mary also receives an immediate tax deduction of $4,162 to save on her income taxes. At the end of her lifetime, Hospice Hawaii uses the remaining amount in support of its mission (the numbers assume quarterly payments and an IRS discount rate of 3.0%).

Here is how Mary’s situation changes:

Prior to the Gift

Invested in CD: $10,000
Interest: $200
Combined federal and state income tax on interest (33.9% rate): ($68)
Net spendable: $132

After the Gift

Contributed for gift annuity:  $10,000
Annual payment (6.5%): $650
Taxed as follows:  $179
Ordinary income:  $471*
Tax-free: ($61)
Income tax: (33.9% x $179)
Net spendable: $589

*At the end of her 12.4-year actuarial life expectancy, the annuity payments are fully taxable as ordinary income.

In addition to quadrupling her cash flow from the $10,000 that had been invested in CDs, Mary receives a charitable deduction of $4,162, which results in tax savings of $1,414.

Payment Start Date

You can choose when you want your gift annuity payments to begin. Most donors choose immediate payments. However, if you don’t need the income now, you can defer your payment start date to a future time of your choosing. The longer you defer your start date, the higher your payments will be.

Annuity Rate

Generally the older you are when payments start, the higher your gift annuity rate. Hospice Hawaii follows the maximum rates suggested by the American Council on Gift Annuities. As of July 1, 2011, these rates are:

To see how a gift annuity would work in your situation or to request a personalized illustration, please contact our Development Office at 808-924-9255 or email development@hospicehawaii.org. There is no obligation and your information will be kept strictly confidential.