A Charitable Gift Annuity is a type of Single Premium Immediate Annuity. Charitable Gift Annuities can be a great way to for the average person to help or contribute a significant amount of money to their favorite charity or church. With a Charitable Gift Annuity, a person can transfer cash, or marketable securities to a charitable organization, and receive a current income tax deduction, and a fixed annual amount guaranteed for life in exchange.

The payouts received from a Charitable Gift Annuity are much lower than those received under other type of annuities. Payouts from Charitable Gift Annuities are deliberately low and non-competitive on purpose because the primary purpose of buying a Charitable Gift Annuity is the giving part. It is not meant to be a competitive investment, and it was established in that way primarily to stem competition between providers in providing this type of annuity.

The low rates offered on Charitable Gift Annuities provide a safety margin for the charity. Under the regulations that set the limits on the payouts, the charity receives twice as much as needed to make payments to the annuitant. Another big difference between charitable gift annuities and other types of annuities is that Charitable Gift Annuities are never considered insurance products. In fact, many states have laws that require the annuity contract to specifically disclose that “a Charitable Gift Annuity is not insurance under the laws of this State, is not subject to regulation by the State’s Insurance Division and is not protected by the State’s Guaranty Fund.”

As with all other annuity types, care must be taken to ensure that the annuity is sound, and not fraudulent. Because state’s do not regulate Charitable Gift Annuities, the potential for fraud exists, and consumers must be on guard. Despite the extra care that must be taken when buying a Charitable Gift Annuity, these types of annuities are a great way to fund a favorite charity while providing a stable income stream in retirement.

Tags: annuities, Annuity, Charitable Gift Annuity, consumer advice, Financial Services, Income tax, Insurance, Insurance policy, Personal Finance, tax deductible, tax deduction

This entry was posted on Thursday, June 17th, 2010 at 4:56 PM and is filed under Annuity, Finance, Insurance, Personal Finance, Retirement. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.