|
Gift Annuities - Then &
Now
Gift
annuities were much simpler then and I kept
thinking that it was the exception to the rule that says “if it looks
too good
to be true…it is”. Fewer
types of gift
annuities and fewer funding options (in NY State it was just cash or
marketable
securities) made it seem pretty basic.
Even getting the permit was
relatively easy – no pre-deposit required to
a segregated account and charitable gift annuity rates were rarely
revised more
often than every 2 or 3 years.
And
the benefits for the donor and the nonprofit were
as clear as day. Improved
income for
donors and the ability to make a gift to a favorite organization that
might not
have taken place without the annuity payments; a charitable deduction
and tax
advantaged treatment of capital gains and annuity payments. Guarantees
for the
donor; irrevocable deferred gift for a charitable
organization– do you
blame me for loving charitable gift annuities?
Yet like
just about everything else in life, charitable gift annuities have
become more
complex than they used to be. There is a wider variety available to
meet donors’
differing needs and more funding options, which is good.
We
are also in a very difficult economy to say the
least. Situations of all kinds have
arisen in many
areas and gift annuities have not been untouched.
Some nonprofits’ reserve funds
fell below
required levels due to the tumultuous market gyrations. This left
organization
executives and leadership feeling vulnerable, especially when other
resources
had to be tapped to replenish the reserve funds. It
was a situation that rarely (perhaps never)
had arisen before and it put many professionals into a state of shock
and
concern.
Negative
articles appeared in the Wall Street
Journal and Forbes a while back, which were misleading and full of
innuendo and
misinformation. They gave donors a scare too although their annuity
payments
were not in jeopardy.
Gift
annuities were issued back more than 150
years. To date, I know of no legitimate nonprofit
that has defaulted on
its annuity payments…ever.
More
complex also means added attention and even
unfavorable attention has some good points.
Charitable gift annuities fall
under the oversight of state insurance
agencies and many took a stronger look at their programs and tightened
their
requirements including reserve levels. Getting a permit to offer gift
annuities
is also more complicated and may require a deposit in a segregated
account as
part of the application process. I can’t count how many different
contracts
there are now to handle all the alternatives when this type of gift is
made.
The
ACGA revised its tables and formulas to more
appropriately track the current economic situation so that donors will
be
better protected and nonprofits
will be more likely to have a reasonable
gift remaining when the annuity payments end. That is after all, the whole
point…it’s a charitable
gift.
As
it is when the 7520 rate falls below 3% it
becomes difficult to maintain the required remainder value with certain
ages. In fact annuity payout rates and
internal
rates have been revised again by the ACGA (American Council on Gift
Annuities) and
will go into effect July 1, 2011. Go to www.acga-web.org for the new rate tables and
information about how they’ve
been refigured. I
think if you stay with ACGA recommendations your
annuity program should stay in good shape.
Still,
I know that there are several nonprofits
that were frightened by the negative articles and market dips. Some have even stopped
offering annuities,
which is a shame because the currently lower rates are a way to average
down
their annuity expenses. It’s
also
possible their donors are doing annuities with other organizations
because they
can’t get them where they once were able.
So, it appears that charitable gift
annuities are
not as much fun as they used to be. But, I still love them.
|
