As market volatility continues many donors are considering how to continue to support Trinity College even as they prepare for retirement. What is the best way to achieve both your financial and philanthropic goals? A deferred charitable gift annuity (DCGA) may offer a solution. A deferred charitable gift annuity allows you to align your charitable giving with your retirement planning.
You may be in your high income-earning years, and if so, you would like to benefit from an income tax charitable deduction. You may also be looking toward the future, and are considering how to augment your income after you retire. Moreover, the current market conditions have prompted you to consider your overall portfolio, and you would like more guaranteed income during your retirement years. And finally, you want to invest in Trinity in a meaningful way so as to create a positive impact for future Bantams. Here’s where a DCGA can be the right gift plan for you.
A DCGA is similar to an immediate charitable gift annuity (CGA, described in the previous article), except that your guaranteed payments will start at a future time, at least one year after the DCGA is established. You receive an income tax charitable deduction in the year that you make your gift, presumably when you are in a higher tax bracket than you will be once you retire. So why defer payments? First, you may not need – or want – the additional income while you are still working. And second, by deferring the beginning of your annual payments, you will be entitled to a higher payout rate once those payments begin. The longer the deferral period, the higher the payout rate will be.
As with an immediate charitable gift annuity, payments will continue for the rest of your life (or your combined lives, if you make your gift in exchange for a 2-life DCGA). And, like an immediate charitable gift annuity, a significant portion of your annual payments will be tax-free.
But what if you are not sure when you will retire? No problem. You also have the option of not choosing the exact starting date for your payments when you make the gift. With a flexible DCGA, you simply give Trinity a range of potential start dates, and Trinity will provide a schedule showing what the payment amount will be, depending on when you choose to have the payments begin. The payout rate does not become fixed until you notify Trinity that you wish to begin receiving payments. The longer you postpone the start of your payments, the more generous your payments become. Once you elect to start receiving payments, they will continue at the same amount for the rest of your lifetime.
To read more on deferred charitable gift annuities and create your own personalized illustration, click here.
