Glossary term
Charitable Gift Annuity (CGA)
A charitable gift annuity is an arrangement in which a donor gives assets to a charity in exchange for fixed lifetime payments.
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What Is a Charitable Gift Annuity?
A charitable gift annuity, or CGA, is an arrangement in which a donor gives cash or other assets to a charity in exchange for fixed payments, usually for life. After the payment obligation ends, the charity keeps the remaining assets for its charitable mission.
A CGA sits between a charitable gift and an income arrangement. It can appeal to donors who want to support an organization while also receiving predictable payments. The tradeoff is that the donor gives up control of the assets contributed to the charity.
Key Takeaways
- A charitable gift annuity combines a charitable contribution with fixed payments to one or two annuitants.
- The charity, not an insurance company, typically promises the payments.
- Part of the gift may qualify for a charitable deduction if IRS requirements are met.
- Payment rates depend on age, timing, and the charity's policy.
- The donor should review the charity's financial strength, state rules, and tax consequences before funding one.
How a CGA Works
The donor transfers assets to a qualified charity. In return, the charity agrees to make fixed payments to the donor, another person, or two people jointly. Payments may begin immediately or be deferred until a later date.
The payment amount is usually set when the gift is made. Older donors generally receive higher payment rates because the expected payment period is shorter. The charity expects that, over time, some portion of the original gift will remain after payments and will support its mission.
Common CGA Features
Feature | What It Means |
|---|---|
Immediate CGA | Payments begin soon after the gift is made. |
Deferred CGA | Payments start at a future date chosen under the agreement. |
One-life annuity | Payments continue for one annuitant's life. |
Two-life annuity | Payments continue until the second annuitant dies, depending on terms. |
Remainder to charity | Assets left after payment obligations support the charity. |
Planning Considerations
A charitable gift annuity is not the same as a commercial annuity. The donor is relying on the charity's promise to pay. State regulation, reserve requirements, charity policies, and financial strength can all matter.
Tax treatment can also be layered. Depending on the gift, part of the payment may be taxable income, part may be tax-free return of basis for a period, and appreciated property may create capital-gain considerations. Donors making a large gift should coordinate the decision with their broader charitable, income, and estate plan.
The Bottom Line
A charitable gift annuity can turn a charitable gift into lifetime payments while leaving a future benefit for the charity. It works best when the donor values both pieces: steady income and a meaningful charitable commitment.