Charitable gift annuities, or CGAs, are one of the oldest and most reliable charitable tools available for retirees and senior citizens.  Religious organizations began offering CGAs to provide cash flow for elderly supporters in the 19^th century.

Today, Mount Vernon is among a variety of organizations that make available this form of planned gift – a simple contract between the two parties – because it represents an excellent way for donors to make a significant contribution to a charity, while also benefiting themselves with partially tax-free payments and other appealing tax features.

Establishing a Mount Vernon CGA means you are helping to preserve George Washington’s home as well as leaving a legacy of preservation and education for millions of visitors, schoolchildren and patriotic Americans in years to come.

How a Charitable Gift Annuity Works

You irrevocably transfer cash, real estate, marketable securities (e.g., stock, bonds, mutual fund shares, etc.) or other property worth at least $10,000 to Mount Vernon.  In exchange, Mount Vernon pays you a guaranteed fixed amount for life on a monthly, quarterly, or annual basis.  You also receive a substantial tax deduction in the year you make the gift.

The amount of your annuity depends on the size of your gift and your age.  The larger your gift and the older you are, the more income you will receive and the greater your tax deduction will be.

Here are some additional advantages to establishing a charitable gift annuity with Mount Vernon:

• CGAs can be set up to provide annuity payments for two people, such as a husband and wife or a brother and sister.  However, two people need not be legally related to each other.
• A CGA can be established to pay one individual until he or she passes away and then pay a survivor until that survivor’s death.
• The beneficiary need not be the donor.  For example, a younger adult may want to fund a CGA for an elderly parent.
• The fixed payments protect against market fluctuations.
• A CGA is much easier to arrange than a charitable trust.  There are no legal or asset management fees involved with a CGA.  The application is only a single page.
• Payments to you can be deposited directly to your bank account.
• Mount Vernon already has a number of annuitants, so you will be in good company if you choose to support us through a CGA.
• Mount Vernon has always promptly and fully met its annuity payment obligations.

Like most charities nationwide, Mount Vernon uses rates recommended by the American Council on Gift Annuities (ACGA).  These are our maximum rates; donors sometimes accept less than the maximum rate as a charitable gesture. 

Based on actuarial data, CGA rates are dependent on age, currently topping out at 11.3% for someone age 90 or older.  Slightly lower rates apply when payments are made over the course of two lives.

Example

Anna, age 70, would like to contribute more to Mount Vernon, but she also wants to assure that she will have sufficient cash flow to cover her expenses as she grows older.

By setting up a one-life $10,000 CGA now with cash, Anna will receive a rate of 6.5%, resulting in an income of $650 every year from Mount Vernon for the rest of her life.  She can also take a tax deduction of around $4,300 in the year she makes her gift.  For the first 16 years or so, over half of each annuity payment will be tax free to her, with the rest taxed as ordinary income.  When Anna reaches age 86 – which is her life expectancy at the time she establishes the annuity – each payment becomes entirely ordinary income.

If Anna donates $10,000 cash to set up a two-life CGA with her husband Bob, age 75, then the rate drops to 6.1%.  Their annual payment would be $610 and they would receive a tax deduction of approximately $3,800.

In either case, Anna would benefit from a CGA because her cash flow would be greater than it is from the low-yield certificate of deposit in which the $10,000 is currently invested.  The CGA actually produces an effective benefit greater than the nominal annuity rate because of the tax deduction and the significant portion of each annuity payment that will be tax free for many years. 

The big difference from a certificate of deposit, of course, is that the funds used to establish the CGA are given irrevocably to a charity.  The CGA principal does not return to the donor or any heirs of the donor’s estate, as would be the case with a certificate of deposit or many other types of investments.

Funding an Annuity with Appreciated Stock or Other Assets Reduces Capital Gains

If you make an outright gift of appreciated stock, real estate, or other property to any public charity, you are not taxed on any of the capital gains.  If these same appreciated assets are donated to fund a CGA that makes payments to you, you do not eliminate capital gains completely, but they are reduced significantly and then spread over a period of years so that their impact on your taxable income does not occur all in the first year.  (Even if someone other than you receives the annuity payments initially, a portion of the capital gains will escape taxation, although the rest will be taxable to you in the year you make your contribution.)

By setting up a one-life $10,000 CGA with stock that has a cost basis of $6,000, Anna reduces her capital gains by around 40%.  The total reportable capital gain is approximately $2,300, but the recognition of this gain is amortized across almost 16 years of the life of the annuity at a little less than $150 per year.  If she had sold the stock instead, her total reportable gain would have been $4,000 and she would have recognized it all in one year.  Meanwhile, Anna still obtains an annuity rate of 6.5% for a person age 70, still receives $650 every year from Mount Vernon for the rest of her life, and can still take a tax deduction of approximately $4,300 in the first year of the annuity.

Defer Your Annuity Payments if Receiving Extra Cash Flow Now Is Not a Priority for You

If Anna is willing to wait until she turns 75 to begin receiving payments, she could set up a deferred CGA.  The amount of her annuity would increase to $910, which is 9.1% of $10,000.  In addition, her charitable deduction in the first year jumps to a little more than $5,700.

Anna could also elect to establish what is known as a flexible CGA, in which she agrees to defer the start of her payments but waits until later to decide exactly when they will begin.  At that point, she will notify Mount Vernon to start payments.

College CGAs Can Provide Cash Flow for a Young Person in Your Life

Sometimes donors say they are unable to give to a charity because they feel obligated to fund the education of a grandchild or some other loved one in their life who is very young.  One method of simultaneously giving to charity and helping a young person is what is known at Mount Vernon as a college CGA, technically referred to as a commuted CGA.

If Anna were to fund a college CGA with $10,000 cash for her five-year-old grandson Mark and to set up four annual payments beginning when Mark turns 18, then Mark would receive almost $3,400 per year for the four years he is most likely to be in college.  Mark, who as a full-time student would probably be paying income tax at the lowest rate, would need to recognize only about $2,000 of each annual payment as ordinary income; the remaining portion of each payment would be tax free.  Anna, meanwhile, would receive this year a charitable deduction of around $4,500.

Testamentary CGAs Can Be Established with Your Will

You can arrange through your will, as well as through certain other types of estate planning documents, to establish a testamentary CGA that will pay one person or two people a fixed sum of money on a tax-favored basis for their rest of life or lives.  Such an annuity would be funded through a gift from your estate of cash or other assets, such as securities or funds in a retirement plan.

Donating Annuity Payments Back to Mount Vernon

Annuitants sometime decide to donate some or all of what they receive from an annuity back to the charity with which the annuity was established.  Such cash gifts are, of course, fully tax-deductible.  If you would like to consider this option, please let us know and we can have your payments automatically revert to Mount Vernon, recognizing that you would be free to resume receiving the payments at any time.

Assisting You with CGA Information Is Easy and Takes Only Minutes

In just a few minutes, we can analyze a number of CGA scenarios in order to acquaint you with the tax effects of your gift.  This service is provided without obligation.

Call us toll free at 1-800-780-1799 or email us at specialgifts@mountvernon.org and we can run analyses while you wait, discuss them with you, and then email, fax, or mail you the results.  All we need to know is whether the annuity will cover one or two people, the applicable date(s) of birth, the amount you are thinking of donating, the date you will make the gift, and the date you'd like the payments to begin.

We also need to know if the asset funding the gift will be cash, stock or some other asset.  For non-cash donations, we will need the cost basis of the asset to properly run the scenarios.  In some cases, we may be able to help you determine the cost basis if you do not know it.

Special Considerations

Please contact us about restricting your gift to the specific Mount Vernon program(s) of your choice.

Unrestricted contributions are preferred; however, we also welcome a conversation if funding a specific program is critical to you.  We have many projects – both short-term and ongoing – at Mount Vernon for which we seek support.  We can tell you about all the available options today – and tomorrow, when posterity will visit and revere George Washington’s home and legacy.

Gifts to Mount Vernon may be made in memory of any deceased person(s) or in honor of any living person(s).  If you give us permission to list your planned gift in our annual report, then we will list your name along with your brief gift dedication.

Join Our Legacy Society with Your CGA

If you obtain a Mount Vernon CGA, you become a member of our legacy group: the Ann Pamela Cunningham Society.  Ann Pamela Cunningham founded the Mount Vernon Ladies' Association in 1853 and tirelessly gathered support from across America to rescue George Washington's home, sparking the U.S. historic preservation movement.

Our hope is that you will let us know about your planned gift so we can thank and recognize you.

You will receive these privileges of membership in the Ann Pamela Cunningham Society:

·              Personalized certificate of appreciation

·              Complimentary subscription to Mount Vernon’s Yesterday, Today, Tomorrow newsletter

·              Mount Vernon’s annual report

·              Updates on Mount Vernon news

·              Invitations to events and special evenings

·              Recognition of your planned gift in Mount Vernon publications

            (unless you prefer to remain anonymous)

Other Types of Planned Gifts that May Interest and Benefit You

If you are considering a CGA, be aware that other gift types – such as an outright donation of securities or real estate, a charitable remainder trust, or a retained life estate arrangement involving a personal residence – may be suitable or preferable, taking into account your goals and needs.

Of course, arranging a gift for Mount Vernon through a will or through some other element of an estate plan – e.g., including our organization as a beneficiary of a financial, retirement, or insurance account or asset – is also an act of considerable generosity that many people can afford even if a large lifetime gift is not realistic.

Indeed, if you have a life insurance policy, a retirement plan (such as an IRA or a 401(k) account), or an investment/brokerage account, you can change your beneficiary designations at any time at no cost.  These assets make excellent gifts to leave to charity; as the funds go immediately to the recipient and bypass probate, the sometimes cumbersome, lengthy and expensive legal process of settling the estate of a deceased person, specifically resolving all claims and distributing the decedent's property.

When planning your estate, you may want to consider that – from a tax standpoint – a qualified retirement plan is among the most expensive assets for your heirs to inherit and thus makes an excellent candidate for a charitable donation upon death.  Many people plan to give to charity only through their wills, but a more proactive estate plan can have additional tax benefits.  Contact us today so we can work with you and your advisors to help you make a more informed decision.

Our development staff can help you plan the right gift in light of your assets, income, and family and other estate or financial obligations.  You may be able to be a greater philanthropist than you realize.  Would you consider making the gift of a lifetime to Mount Vernon if we can show you how?