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Charitable Gift Annuity

The concept of the charitable gift annuity in America dates back to 1843, when a merchant in Boston first donated a gift of money to the American Bible Society in exchange for a flow of income. Today, the concept includes valuable tax benefits for donors. But perhaps more valuable than the financial advantages is the satisfaction donors gain by helping to continue the mission and good works of TCNJ Foundation.

Gift Annuities Defined

A gift annuity is a simple and irrevocable contractual agreement between a donor and TCNJ Foundation in which you transfer assets to us in exchange for our promise to pay one or two annuitants payments for life.

By donating through a gift annuity, you:

  • contract for a fixed payment for yourself or yourself and another individual, if you choose, and
  • you make a gift to TCNJ. If you itemize deductions on your tax return, savings from the charitable deduction reduce the net cost of the gift.

For a period of years, based on a government table of life expectancies, a portion of each payment received is considered a nontaxable return of your investment in the gift. This further increases your after-tax dollars available for spending or investing.

An annuity funded with appreciated property results in these additional advantages: (1) the gain allocated to the gift portion completely avoids an immediate capital gains tax, and (2) the portion of gain to be recognized can be spread over the expected term of the contract (provided that the donor is a primary annuitant and the annuity interest is assignable only to the charitable organization).

Deferred Gift Annuities

Creating a deferred gift annuity enables you to receive an immediate tax deduction and defer income until a later date. By deferring your payments, you receive a higher guaranteed annuity rate and potential tax savings. However, it also reduces the nontaxable income received in the future. This option is appealing to younger donors who wish to improve future income, such as retirement.

Deferred gift annuities also have an option at the time they are created to have a flexible starting date. This enables the donor to decide when the annuity payments will begin. The annuity rate increases annually when you defer the payments. It also provides comfort in knowing that if you do not wish to take the money, you can defer but if your financial situation changes, you can begin to receive annuity payments.

“Parent” Annuities

This is similar to a regular annuity. The difference is that you may name your parent(s) as the annuity recipients. Some find this beneficial as they wish to help their parents financially but the parents resist taking the money. With these annuities, TCNJ pays the parents, not the children. The children also receive a very nice tax deduction. The annuity rates are based on the age(s) of the parent(s) so the rates are annuity payments are higher. Lastly, the child making the donation can designate that the remainder of the annuity, after the parent(s)’ passing, can be used to create a gift in honor of their parents – thanking them for supporting them as students at TCNJ.

Understanding Annuity Rates

TCNJ Foundation utilizes gift annuity rates as established by the American Council on Gift Annuities. Rates are generally higher for older annuitants and lower for younger annuitants and are based solely on life expectancy. As a result, gift annuity contracts are generally more appealing to older donors because of the guaranteed fix rate.

Rates can also be adjusted according to the number of annuitants. Rates for two-life contracts are lower due to the extended life expectancy. Rates are based upon the age of the annuitant at the nearest birthday when the contract is made – rates are the same for men and women.

Each age has its own rate of return. There are infinite combinations available for two-life contracts and the rates below are merely an example. Contacting our office will enable us to provide you with no obligation illustrations for your consideration.

Annuity rates are higher for older annuitants and lower for younger annuitants, and are based on life expectancy. As a result, gift annuity contracts are generally more appealing to older donors because the purchasing power of a fixed dollar return can shrink over any long period, even with modest inflation.

Rates are also adjusted according to the number of annuitants, with rates for two-life contracts are lower due to the extended life expectancies. The age of an annuitant is the age reached at the nearest birthday when the contract is made, and rates are the same for men and women. The illustration below only show samples of a few ages. Use the Gift Calculator or contact our office for rates specific to your situation.

This data also shows how rates increase with age. These rates are recommended by the American Council on Gift Annuities and are adjusted periodically, however the rates have remained constant since 2012.


Rates effective since 1/1/2012.

One Life Two Lives
Your Age Annuity Rate Ages 
Annuity Rate
55 * Current Rate 4.0 % 65/65 Current Rate 4.2 %
60 * Current Rate 4.4 % 70/70 Current Rate 4.6 %
62 * Current Rate 4.5 % 75/75 Current Rate 5.0%
65 Current Rate 4.7 % 80/80 Current Rate 5.7%
70 Current Rate 5.1 % 85/85 Current Rate 6.7 %
75 Current Rate 5.8 % 90/90 Current Rate 8.2 %
80 Current Rate 6.8 %
85 Current Rate 7.8 %
90 Current Rate 9.0 %

* Due to the structure of CGAs, donors at these ages may not be able to create an immediate CGA under current IRS guidelines. Deferred CGAs may be feasible. Contact the office for options that may be available.

Please be advised that not all organizations offer CGAs at the above ages and rates and that CGAs are not available in all states.

A Case Study of Benefits

Linda, age 75, plans to donate a maturing $25,000 certificate of deposit. Since she needs continuing income, Linda decides to use the cash for a one-life charitable gift annuity that we will issue at the suggested rate of 5.8 percent. Payments will be made quarterly. At the time of purchase, the charitable midterm federal rate (a figure used in calculating the charitable deduction) is 2.2 percent. (Note – this rate fluxuates monthly and does alter the tax deduction rate – but not the annuity amount received.)

Although Linda’s annuity rate is 5.8 percent, her actual earnings will be higher. Assuming Linda already itemizes income tax deductions, she receives a federal income tax charitable deduction of $11,257 on making the gift annuity. With a marginal income tax rate of 28 percent, the tax savings of $3,152 will reduce the net cost of the gift to $21,848. Her annual payments of $1,450 ($25,000 times 5.8%) will result in an effective payout rate of the annuity of 8.6% due to the income tax savings and the tax-free return of principal over the annuity payments. In fact over the first 12.4 years of the annuity almost 76% of every dollar Linda receives will be considered a return of her gift in the contract and not be subject to tax.

As always, please make sure you consult your own professional advisors.

Please call The College of New Jersey Gift Planning Office at 609-771-3285, or e-mail for more information.

Find out how you might benefit from a planned gift.