Solutions

No more stretch IRA? A charitable gift annuity is a great alternative for givers

Did you know you can extend a gift to one or multiple charities and beneficiaries over many years? Though recent legislation eliminated the stretch IRA, a charitable gift annuity (CGA) is a great option that allows you to stretch payments over time, while also including charity in your financial plan.

The stretch IRA was a strategy for leaving an individual retirement account (IRA) to someone other than a spouse in an estate plan. While it didn’t include a charitable component, it did allow an IRA to be passed from one generation to the next or from one person to another, thus stretching the required minimum distributions over a longer period while providing the advantage of tax-free (or tax-deferred) growth of the funds in the account.

However, the SECURE Act, effective January 2020, eliminated the option for this strategy by requiring assets in an IRA inherited by someone other than a spouse be distributed within 10 years.

For those who have a heart to give to charity but also desire a source of ongoing income for themselves or for another, a CGA is a nice alternative.

What is a CGA? 

A CGA is a simple arrangement that involves a charitable gift and an annuity. You make the gift (a portion of which is tax deductible in the year of the gift), and then you (or a recipient you designate) receive fixed annuity payments each year for the remainder of your life (or the life of the designated recipient).

Because NCF typically “reinsures” your annuity payments, a portion of your gift goes to the charity or charities you select soon after funding. Through NCF, “reinsures” means your payments are covered by a large insurance company, which ensures payment, no matter what.

Reinsurance also protects you from exhausting the money in your CGA.

CGAs aren’t just for older people. When a younger person decides to fund a CGA, the money in the annuity has even longer to grow.

Rates for CGAs are recommended by the American Council on Gift Annuities (ACGA), and they’re calculated so charities receiving CGAs will receive (on average) 50 percent of the amount of the gift at the end of the annuitant’s life expectancy. And 96 percent of charities use the ACGA recommendations. So, you don’t have to shop from one place to another wondering if you’ve found the best rate.

And the best news? CGA rates are up this year.

To learn more about opening a CGA with NCF, download the concept sheet, or contact your local NCF team.

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