Update Those Gift Annuity Agreements: Legacy IRA Options = New Gift Annuity Agreements

Lynn M. Gaumer, J.D., Stelter Senior Gift Planning Consultant, is here to help make sure your organization complies with the law and state regulations.

Let’s Start With the Basics

The Legacy IRA allows an IRA owner age 70½ and older to make a one-time election of up to $50,000 to fund a charitable gift annuity.

This option opens new avenues for philanthropy and empowers individuals to make a lasting impact on the causes they care about while also securing their financial future. In my role at Stelter, I routinely hear feedback from our clients that this new opportunity has generated a lot of donor interest and has helped incentivize giving. So, let’s make sure you have the tools you need to comply with the law and state regulations.

What You Need to Know

When creating a charitable gift annuity using IRA assets, the Legacy IRA option requires that the “income interest” of such an annuity be non-assignable. Many experts agree that the income interest in a CGA may not be assigned to anyone, including the issuing charity.

Review Your Gift Agreements

Your gift agreements may include a clause that states that the gift annuity is non-assignable “except that it may be assigned to the charity.” Because the law does not specifically include the “or assignable to the charity” language with respect to a QCD funding a CGA, the American Council on Gift Annuities recommends the following modification to remove that assignability-to-charity language:

1. State that the gift annuity contract is not assignable.
2. Remove an assignability of the contract to anyone other than the donor/annuitant.
3. Be certain to remove assignment to the charity.
4. Recommend removal of a right to revoke the annuity interest.

In most states, after you make the above changes, your work is done! However, if you are in Alabama, Arkansas, California, Maryland, New Jersey, New York, North Dakota, Tennessee or Washington state, you need to submit the new agreement for approval.

Submit Your Forms

You should submit to the applicable states any and all variations to which you are making changes. Each agreement should be submitted in prototype form, with variables noted as such. PG Calc recommends that in your communication, you note the following:

1. That your organization is registered in the state.
2. That you are submitting gift annuity forms for review and approval.
3. Indicate whether you are adding new variations, and thus leaving all previously submitted/approved forms as they are, or whether you are replacing previously submitted forms.
4. If adding, any new variation will need to have a form number that differs from any previously submitted.
5. If replacing, the same form number could be used, but it would need to include a revised date.

You can submit your revised or new forms of gift annuity agreements in a variety of ways including email, mail or a filing portal, as noted below.

Brush Up On the Options

With gift annuity rates higher than they have been in over a decade, it’s a great time to think about not only gift annuities funded with a qualified charitable distribution (QCD) but gift annuities funded with traditional assets like cash or appreciated property. But which gift funding option is best for your donors?

Come back for my next blog, where I’ll compare the available options and reveal the key distinctions you’ll need to consider when working with your donors on making this type of gift.