Stelter’s senior technical consultant, Lynn Gaumer, J.D., is back to give you an update on the new schedule of CGA rates.
The American Council on Gift Annuities has released a new schedule of suggested maximum gift annuity rates for gifts established on or after July 1, 2018. On average, rates will increase from 30 to 50 basis points. The top rate will be 9.5 percent for donors who are 90 and older.
The table below shows selected current and new comparative rates. A more complete listing of the current and new rates can be found here.
One Life |
Two Lives |
||||
|
Age |
Current Rate |
Gifts made on or after July 1, 2018 |
Ages |
Current Rate |
Gifts made on or after July 1, 2018 |
|
60 |
4.4% |
4.7% |
60/65 |
4.0% |
4.3% |
|
65 |
4.7% |
5.1% |
65/70 |
4.4% |
4.7% |
|
70 |
5.1% |
5.6% |
70/75 |
4.8% |
5.2% |
|
75 |
5.8% |
6.2% |
75/80 |
5.3% |
5.7% |
|
80 |
6.8% |
7.3% |
80/85 |
6.1% |
6.6% |
|
85 |
7.8% |
8.3% |
85/90 |
7.3% |
8.0% |
|
90+ |
9.0% |
9.5% |
90/95 |
8.8% |
9.3% |
Your Donors Will Benefit: An Illustration
Under the current rate schedule, Barbara, 72, transfers $25,000 in exchange for a charitable gift annuity. She will receive annual payments of $1,350, a rate of 5.4 percent. Instead, if Barbara waits to make her gift on or after the new rate schedule is in place on July 1, the same gift amount will provide $1,450 in annual payments, reflecting a 5.8 percent rate. That’s a payout rate increase of approximately 7.4 percent.
Now Is the Time
Not only have the gift annuity rates increased, but Stelter research* shows that individuals in the mature and boomer generations are concerned about having enough income to retire. A charitable gift annuity is a great way to receive income and make a gift to a nonprofit organization. As an added benefit, your donors may be able to transfer low-yield securities to fund a charitable gift annuity and increase their income while minimizing capital gains taxes.
In addition, the new tax law increased the estate tax exemption to $11.18 million for individuals and $22.36 million for couples. Only about .1 percent of taxpayers will now be subject to estate tax. With the increased exemption amount, more individuals may focus on lifetime giving—such as charitable gift annuities—and potential income tax savings.
If a donor is more focused on the income tax charitable deduction, remember that the discount rate that is used to determine the charitable interest of split interest gifts (otherwise known as the CMFR) is on the rise and is at 3.2 percent this month. That is a full 1 percent more than it was as recently as October. The discount rate has not been this high since June 2010. Generally, higher discount rates produce higher income tax charitable deductions (when the donor itemizes) for gifts in which a donor reserves an income interest such as charitable gift annuities (CGAs), charitable remainder annuity trusts (CRATs) and charitable remainder unitrusts (CRUTs).
Stelter Is Here to Help You Prepare
We recommend you begin communicating now with your donors who may be interested in making a gift on or after July 1 to take advantage of the recent rate increase. To assist you with this, we are providing a letter that you can customize and use for your donor communications.
Access our sample copy by clicking on the link below.
*2017 NMI Healthy Aging Database® study sponsored in part by The Stelter Company
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