Articles by Avshalom Gad

Charitable Gift Annuities

Tuesday, December 28th, 2010

Presented by Avshalom Gad

Fundraising is the lifeblood of non-profits. When the economy is unsteady, as it has been for a while, these organizations must work harder than ever to maintain and expand donor contributions in order to advance their mission. The non-profits’ search for attractive ways to encourage donations has led to the rising popularity of Charitable Gift Annuities.

A “Win-Win” Situation
Many altruistic individuals express an interest in gifting assets to a non-profit they support. Yet, a common concern is that the donors themselves may need the assets personally, especially during retirement. A Charitable Gift Annuity (CGA) is an arrangement whereby the donor gifts cash or other assets to a non-profit in return for regular, guaranteed income payments for life. The contract is mutually beneficial: the charity gets a donation it may not have otherwise received, and the donor enjoys a tax deduction for a portion of the donation as well as guaranteed lifetime income.

The Risk of CGAs
As useful as they are for fundraising purposes, CGAs can be challenging for non-profit organizations to administer. Since a CGA promises to pay income to the donor for life, the non-profit must make sure there are always enough funds to meet its contractual obligations. Usually, the charity will invest the entire gift and not use any portion of the gift for its charitable endeavors until the payment obligation ends. Market risk can threaten the value of the organization’s investments. This is certainly happening now. And, the longevity of donors (and, hence, the number of years the non-profit must pay income to them) can erode the residual value of the gift – in some cases, leaving no gift at all for the non-profit.

Transferring the Risk
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Charitable Giving Can Begin With the Gift of Life Insurance

Tuesday, December 7th, 2010

Presented by Avshalom Gad

Even in a tough economic environment, with a little foresight and creativity, there are many ways you can support worthwhile endeavors and gain satisfaction knowing you’ll be able to contribute for the long term.

Regardless of your income level, you can continue to support your favorite philanthropic organizations by donating through life insurance. When you name your chosen charity as the beneficiary of your policy,1 you are contributing to a worthy cause and can benefit from potential tax deductions.

There are several methods of gifting life insurance as a charitable donation:

Designate a charity as owner and beneficiary. This benefits the charity and gives the donor a bonus in the form of income tax benefits. Premiums on such a policy are deductible to taxpayers who itemize their deductions. Consult a tax professional for details.

Designate charity as beneficiary. As policyowner, you retain the right to make changes to the policy including changing the beneficiary. While premium payments are not tax deductible, upon the donor’s death, the estate receives a charitable estate tax deduction for the proceeds, as allowed by law.

Donate an existing policy. If you own a policy with coverage that is no longer needed, you may consider donating it to a charity. The donor could irrevocably assign or transfer the policy to a charity as owner and beneficiary. This gift is generally not subject to gift tax, and, in most cases, may be eligible for a charitable income tax deduction.

Create a charitable remainder trust. This is a complex planning option for donors with unproductive appreciated assets, such as real estate. This transaction can be structured to benefit the donor, heirs and charity. Consult an attorney or accountant for advice.

This educational third-party article is being provided as a courtesy by Avshalom Gad. For additional information on the information or topic(s) discussed, please contact:

Avshalom Gad LL.B
www.AvshalomGad.com
Eagle Strategies Corp., a Registered Investment Adviser
11350 N. Meridian Street, Suite 500
Carmel, IN 46032
Bus. 317 580-8245
Mobile. 317 509-9441

Neither New York Life Insurance Company, nor its agents, provides tax, legal or accounting advice. Please consult your own tax, legal or accounting professional before making any decisions.

1Must be a qualified charity.
New York Life does not provide tax advice. For tax advice specific to your situation, please contact your professional tax advisor. Also, state laws vary with respect to charities and insurance. Consult your legal advisor for details.
(Revised on 10/19/10)

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