People may hesitate to make a large gift to Knowledge because they cannot afford to surrender an income-producing asset. One alternative is a charitable gift annuity, known as the gift that gives back. Individuals with guaranteed investment certificates (GICs) and other fixed-income investments have seen their income decline. For them, the gift annuity is a way to support Knowledge while maintaining – often even increasing – the amount they have to spend.

Q: What is a gift annuity?

A: A gift annuity is an arrangement under which you make a contribution to a charity and receive, in turn, guaranteed payments for life.

Let’s say you have a $10,000 GIC coming due and you decide you would like to do something different with the money. If you make an irrevocable gift of capital to Knowledge for a charitable gift annuity, part of the funds, as determined by you (25% minimum), becomes an immediate gift. The remaining funds are used to purchase an annuity from an insurance company to meet the gift annuity income obligation to you. You will receive a guaranteed income payment for life, paid to you monthly, quarterly, semi-annually, or annually.

You can also arrange for a prescribed annuity that will provide you with lifetime income, the full return of your investment capital, and a tax deduction while allowing you to provide a regular income to Knowledge with the taxable portion of the annuity.

Q: Can the payments continue to a surviving spouse?

A: Yes, the annuity can be written so that payments are made as long as either spouse is living.

When the first spouse dies, the survivor will continue to receive the full amount without interruption.

Q: Is the amount of my payments subject to change?

A: No, the payments will remain constant throughout your lifetime, unaffected by changes in the economy or interest rates, leaving you free from investment decisions.

Q: How large will my annuity payments be?

A: The amount of your payments depends on your age, the amount you contribute, and the annuity rates in effect at the time you make your gift.

Q: What are the tax benefits of a gift annuity?

A: All or a major portion of your annuity payments will be tax-free.

The tax-free percentage will depend on your age and sex, but for older donors, the payments may be entirely tax-free. The amount of the donation receipt you may use in any given year is limited to 75% of your income, but the excess may be carried forward for up to five years beyond the year of the gift.

Consider these examples:

In return for a contribution of $10,000, Rose D, age 78, receives a lifetime annuity of almost $800 per year, 91.2% tax-free, and a donation receipt for $2,500 in the year of the gift. For a contribution of $25,000, Morton B, age 74, receives an annuity of $1,972 per year, 84.1% tax-free, and a donation receipt for $6,250 that will reduce his income tax in the year of the gift.

Prescribed Annuity: Amy, age 69, purchases a $10,000 life and ten annuity that will pay her $780 per year with a $190 annual taxable portion of the payment to report on her tax return. She directs the insurance company to pay the taxable portion directly to Knowledge. Knowledge issues a tax receipt for the gift, which effectively eliminates any tax owing. Amy is free to change the amount gifted or the recipient charity at any time.

Q: Can I get my principal back when I want?

A: There is an initial 10-day period during which you can rescind the gift. After that, the principal cannot be returned.

The tax benefits are allowed only when the gift is irrevocable. You should always retain enough assets to meet your anticipated needs.

Q: How do I go about arranging for a gift annuity?

A: Just let us know you’re interested. A representative of Knowledge would be happy to answer any questions you may have.

We also encourage you to contact your financial advisor, or we can refer you to listings of advisors in your area. Once the annuity has been finalized, your payments would be deposited automatically into your bank account.

The regular payments from a gift annuity can provide a higher rate of return than many low-risk investments. Also, unlike the interest earned from an investment, a gift annuity can provide you with a tax-free source of income.

Sample rates are solely for illustrative purposes and are not exact quotes or guarantees. Each annuity is calculated specifically based on the exact amount of the deposit, the exact age (in completed years and months), sex, and health status of the annuitant or annuitants, the actual date of purchase, and the actual date of the first payment.

Errors and omissions excepted.