Examples of Types of Gift Annuities

Joanne, age 70, wants to increase her retirement income and support Wheaton College at the same time.

Based on her age, Joanne is eligible for a Wheaton College gift annuity that pays an annuity rate of 5.9%. In exchange for her cash gift of $10,000, Wheaton will provide Joanne with an annuity of $590 per year for as long as she is living. Of that $590, $227.74 will be treated as ordinary income and the remaining $362.26 as tax-free income (until the year 2038). In addition, Joanne can claim a current Federal charitable income tax deduction of $4,237.35.

Instead of using cash to fund her gift annuity, Joanne could fund her gift annuity with appreciated stock and receive additional tax benefits. By funding her gift annuity with stock that has appreciated in value and that has been owned for longer than one year, Joanne significantly reduces the federal and state capital gains taxes that she would have incurred had she sold the stock herself.

Janice, age 75, and her husband, Joe, also age 75, want to increase their retirement income and to support the ministry of Wheaton College through a $10,000 charitable gift annuity.

Based upon their ages, Janice and Joe are eligible for a Wheaton College current gift annuity that pays an annuity rate of 5.8% or $580 each year for as long as either of them is living. Of that $580 annuity amount, $212.28 is treated as ordinary income and $367.72 as tax-free income (until the year 2038). Janice and Joe can also claim a current Federal charitable income tax deduction in the amount of $3,973.45.

Instead of using cash to fund their gift annuity, Janice and Joe could fund their gift annuity with appreciated stock and receive additional tax benefits. By funding their gift annuity with stock that has appreciated in value and that has been owned for longer than one year, Janice and Joe significantly reduce the federal (15%) and Illinois state (5%) capital gains taxes that they would have incurred had they sold the stock themselves.

Jerry is 50 years old, and is interested in establishing an income stream for retirement that will supplement his 401(k) account. He is still in his high-earning years and can utilize a current charitable income tax deduction to reduce his income taxes. He is also interested in supporting Wheaton College.

Jerry can establish a deferred payment charitable gift annuity with Wheaton College, in which he funds the annuity now and receives a current charitable income tax deduction, but the annuity payments are deferred until Jerry's 65th birthday, his anticipated retirement date.

Based upon his age of 50 and the deferral of his annuity payments for 15 years, Jerry is eligible for a Wheaton College deferred payment gift annuity, paying an annuity rate of 10%. If Jerry funds the annuity with $10,000, he will receive an annual annuity of $1,000 for as long as he lives, with payments beginning on his 65th birthday. Of that $1,000, $744 will be ordinary income, while $256 will be tax-free income (until the year 2045). In addition, Jerry can claim $4,914.50 as a current federal charitable income tax deduction.

If Jerry chooses to include his wife, Jean, also age 50, on the annuity payments, they are eligible for a Wheaton College two-life deferred payment gift annuity paying an annuity rate of 8.7%. By funding this annuity with $10,000, Wheaton College provides annual annuity payments of $870 for as long as either spouse is living. Of that $870, $637.71 is ordinary income, while $232.29 is tax-free income (until the year 2061). Jerry and Jean can also claim a current federal charitable income tax deduction of $4,223.37.

This deferred payment charitable gift annuity can also be funded with appreciated stock instead of cash. By utilizing stock that has appreciated in value and has been owned for longer than one year, Jerry and Jean significantly reduce the federal and state capital gains taxes that they would have incurred had they sold the stock themselves.