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How to Use a Charitable Gift Annuity Calculator

Charity gift annuities offer a popular method to combine tax-efficient giving with safe income planning. Simply donate a lump sum of money to a nonprofit, who then invest it and agree to pay out fixed payments, often monthly or quarterly, over time (or for both your lives or those of another individual). Your amount received depends on your age at establishment of the annuity and could potentially receive an up-front partial tax deduction; any excess funds may then go toward research or scholarships as you designate them by the charity.

As soon as you establish a gift annuity with a nonprofit organization, they typically will present you with a financial illustration to show exactly how much your donation will return in terms of an annuity payout rate and current investment rates. Knowing these returns as well as understanding that payments won’t rise with inflation can help determine its true worth and determine your overall annuity payments accordingly.

The American Council on Gift Annuities (ACGA) publishes tables of recommended payout rates for gift annuities. These rates aim to strike a balance between annuitant appeal and charity income when selecting gift annuity products, with at least 50% of original contributions received as terminating values upon termination (also known as terminating value).

Tracking investment returns of gift annuities and their respective residuum can be difficult or impossible for charities, making it essential that they implement a system to compute and update CGA market values regularly – whether this be monthly, quarterly or semi-annually – allowing them to monitor each CGA’s performance while making adjustments as needed in their payout rates.

Unfortunately, most charities lack this advanced system for managing gift annuity programs; some have run them for years without ever knowing how to calculate its terminating value in dollars.

As a result, CGA market values used for reporting purposes may not accurately represent each annuity’s individual experience; or are simply estimated based on formulae; this outdated and unreliable information could lead to costly misperceptions for donors considering gift annuities with charities; in all instances it is important to consult a qualified tax professional about what the actual return of any gift arrangement might be.