A charitable gift pension involves a contract between a charity and the donor in a traditional retirement contract format. The charity assumes the role of the insurance company and the donor as a buyer and donor or anyone other than the annuitant who is entitled to annuity payments. If the donor designates another person who is not the donor`s spouse as the annuitant, the tax results differ as if the donor and/or spouse are the annuitants under the contract. These pensions are determined by an agreement between the charity and the annuitant or the individual couple. Pensions simultaneously provide a charitable gift, a partial deduction of income tax for the donation and a guaranteed source of income for the annuitant and sometimes a spouse or other beneficiary. Jeremy Arkin, Assistant Vice President of Gift Planning, describes in this three-minute video how a charity pension at Duke can be part of a smart financial plan. The purpose of the use of standardised tariffs is to prevent competitive rates between charities and thus ensure that a significant portion of the transmission is available for charitable purposes. However, in 1995, a donor filed a complaint accusing charities that were harmful to gifts, conspired to set the prices they proposed, and that such practices were contrary to both cartel and securities law. Congress, which recognizes the primacy of gift annuities as a fundraising tool, has passed two laws to explicitly exclude charitable gift pensions from antitrust laws1 exempt from annuities: a certain portion of gift pensions is tax-exempt, as it is partly a return of the “donor`s investment in the contract” (as this term is used in Section 72 of the IRC).
The investment in the contract corresponds to the initial current value of the pension. The donor (provided the donor is the annuitant) recovers his investment in the “life expectancy” contract2 in accordance with Table V (or Table VI for a two-year pension) under the Income Tax Regulation, section 1.72-9. If someone other than the donor is the annuitant, the investment in that person`s life expectancy contract is substantially recovered. The annuity rate depends on the age and number of annuities. The last published sentences apply to gift pensions issued on or after July 1, 2008. Rates start at 3.3% for single-life annuities aged 0 to 5 years and increase to 10.5% for annuitants aged 90 and over. The prices of living pensions with joints and survivors are less to think about a longer actuarial life expectancy. As it says, charitable pensions are limited to one or two annuitants. Donation tax deduction: The donaire deduction is significantly higher for a deferred gift pension than for a corresponding gift donation.
This is due to the fact that the present value of the pension is lower in the case of a deferred gift pension, which means, among other things, that if the pension is established with an estimated property, the benefit made by the donor will be relatively small.