CGA: Key Questions to Ask


When you enter into discussion with a donor prospect about CGAs, have these six considerations in mind: 

1. Completing the contract.

Before meeting with a donor to talk about setting up a CGA, see your organization's checklist to make certain you have all the information and resources needed to complete a contract.

2. Which is more important: deduction or annuity payment?

Ask the donor which is most important to them: the largest possible charitable deduction or having the annuity payment consist of as much tax-free income as possible?

3. Ask: What type of asset would you choose to give to fund your annuity?

If the donor's intention is to use an appreciated security, remind them that some of the annuity payment will be taxed at a capital gains rate (determined by a set calculation).

The lower the monthly AFR, the lower the charitable deduction and the higher the tax-free portion of the annuity payment. The donor has the right to choose between three AFRs: that of the current month or either of the past two months. 

4. Ask: CGA or DPCGA?

With the donor's permission, show them an example of a CGA, as well as one of a DPCGA (deferred payment charitable gift annuity) by which any payments would be delayed for a minimum of 12 months.

The donor most likely does not need the annuity payments in order to survive. The primary advantage of a DPCGA is that if the donor chooses to wait the required year (or more) to begin receiving payments, the charitable deduction will be both will be larger and immediately available.

5. Flexible annuity rates

Another way to increase the size of the charitable deduction is to choose an annuity rate less than the rate suggested by the ACGA.

Or: the donor and your organization could enter into a larger annuity. 

Be aware that most charities have no problem entering into a CGA in which the annuity rate is lower than the suggested rate. However, only under special circumstances would a charity agree to a rate higher than the suggested rate. Totally a call by the administration of your charity.

6. Ask: Has the donor considered a CGA for a loved one via their estate plan? 

Obviously, it would not begin until after the death of the donor. But CGAs can offer a great way for a parent to provide a safety net of annuity payments to an heir.