Case Study: Simplifying CGAs to Solve Multiple Problems

Charitable Gift Annuities don’t need to be complicated and can address straight forward tax situations. A few months ago, a prospect came to us after having sold her residence for a price that resulted in capital gains in excess of the $250,000 lifetime exclusion. How could she minimize this capital gains tax exposure while using the proceeds of the sale in a smart way?

She took some of the proceeds of the sale and entered into a CGA contract with NGAF naming her nonprofit retirement community as the remainder beneficiary, giving her a win-win-win outcome. She is using the annuity income to make her monthly rent payments to her new nonprofit retirement community where she now lives, she has a tax benefit from the annuity that covers her capital gains tax liability on the property sale, and with a longer term view she can support the nonprofit community for the great care and compassion she will enjoy until her passing.

The planning was simple: take the cash flow and charitable deduction she received for the annuity to offset the burdens of monthly rent and residual tax liability from the property sale of her house. The basic charitable gift annuity was the perfect vehicle to accomplish her goals.

The National Gift Annuity Foundation (NGAF) having issued this contract and like the rest of our 500 annuity contracts for $30 million under management, will administer all aspects of the contract terms and investment oversight through the end of her life, and then provide the residual funds to her retirement community on her passing.

Working closely with Charitable Solutions LLC, the NGAF is one of the largest independent issuers of charitable annuity contracts in the country - we completed $6 million in new CGAs in the last month! 

More information can be found on our websites  www.nationalgiftannuity.org and www.charitablesolutionsllc.com).

If you have questions about annuities or other lifetime income vehicles, especially if a situation arises outside of your internal capabilities, feel free to give us a call. Thanks as always for considering the benefits of charitable annuities for your clients, whether funded by cash or other illiquid assets.