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Deferred Gift Annuity
A gift annuity is a contract between a donor and Amherst College. In exchange for a gift of cash or appreciated securities, the College agrees to pay the donor and/or other named beneficiaries a fixed income each year for the lifetime of those named in the contract (the annuitants(s)). A gift annuity is part gift and part purchase of a lifetime annuity contract. The portion that represents a gift to the College is deductible on your federal income tax return in the year of the gift if you itemize your deductions.
Gift annuities also offer the opportunity to receive income on a tax-favored basis. When the annuity is funded with cash, a significant portion of the income is treated as tax-free return of principal over the annuitant's life expectancy. When appreciated securities or other assets are used to fund the annuity, the income will be taxed as tax-free income, capital gain income and ordinary income, once again generally over the life expectancy of the annuitant.
What is a deferred payment charitable gift annuity?
Annuity rates are determined according to the age of the annuitant. A deferred payment gift annuity is one in which payments are not to begin until some later point in time, at least one year after the date of the gift. This option can be an attractive retirement planning alternative, for the fixed income payment, as well as the income tax deduction, is significantly greater the longer any payment is deferred.
Example: Jeffery A., a successful 52 year old, does not need any additional income now, but is concerned about maintaining his lifestyle during retirement. He decides to contribute $50,000 to Amherst in exchange for a deferred payment gift annuity that will begin when he retires at age 65. In return, Jeffery will receive annual payments from the College of $3,400, and he will be able to declare a charitable income-tax deduction of approximately $13,244 in the year of his gift. If he can wait until he is even older, say age 70, his payments would be $4,250 per year and his deduction approximately $18,138. His personal goals are met, and he also is able to receive the satisfaction of providing a meaningful gift to Amherst.
For donors who can not predict an exact date for the deferred payments to begin, they may wish to explore the flexible payment gift annuity, which enables them to choose a date that might best meet their needs.
Information contained in this website should not be considered legal, accounting, or other professional advice. Individuals considering a planned gift to Amherst should consult with their financial advisor.
For more information about making a planned gift to Amherst, please contact the Gift Planning staff.