Westmont Magazine Gift Annuity Time
During the past several weeks my phone has been ringing more frequently than usual. Callers are asking, “Does Westmont have a Gift Annuity Program?” I am pleased to answer, “Yes, Westmont has offered gift annuities for more than 50 years!”
Their comments explain why people are inquiring about Gift Annuities:
“The stock market has been so up and down. I’m looking for something with more stability.”
“The current rates on CDs and money- market funds are so low. I’m looking for something that will give me a decent income.”
“I’ve heard that gift annuity payments are fixed for life.”
“Someone told me a gift annuity could give me some tax-free income.”
“I don’t have a lot of money and I’m looking for something simple to understand and set up.”
I am always eager to explain how a Westmont Gift Annuity can benefit individuals during life and ultimately provide a gift that supports the college. Here are some common questions about gift annuities.
What would my gift annuity rate be? And, what would my payments be?
Gift Annuity rates are based on the age(s) of the annuitant(s). For example, the gift annuity rate for an 85-year-old is now 10.4 percent. For a 68-year-old, the rate is 7 percent. For couples of similar ages, the rates are a bit lower than for an individual due to the life expectancy factor for two people. Our highest gift annuity rate is 12 percent, which is for a person 90 years of age or older. Your payments would be based on your gift annuity rate and the amount of your gift annuity. They are fixed for your life or the lives of you and your spouse and are guaranteed by all Westmont’s assets.
Are there tax benefits?
Because gift annuities are considered part annuity and part gift, there are excellent tax benefits. The donor receives a very nice income tax charitable deduction when the gift annuity is set up. If a person can’t use the entire charitable deduction in that year the IRS allows them to use it in subsequent years, up to five additional years. You should always check with your tax adviser to discuss whether a gift annuity fits your situation. Another tax benefit has to do with the way gift annuity payments are taxed. A percentage of these payments will be taxed at less than ordinary income tax rates. In most cases, annuitants receive a nice amount of tax-free income.
How much tax-free income would I receive?
That depends. If you fund your gift annuity with cash, a percentage of your payments would be taxed as ordinary income and the other percentage would be tax-free income. If you fund your gift annuity with appreciated securities, a percentage of your payments would be taxed as ordinary income, a percentage would be taxed as capital gains income, and, depending on the cost basis of the asset, another percentage would be tax-free income. All the factors of the gift are included in the IRS formula that determines the taxation of your payments. I can calculate this for you on our Crescendo software.
Does Westmont charge a fee for setting up and handling gift annuities?
No. We believe that folks who set up gift annuities are ultimately making gifts to the college so we choose to provide these services to our donors at no charge.