An Opportunity to be Creative

The Advantages of a CGA with a Deferred Component

Right now the annuity rates currently suggested by the American Council on Gift Annuities (ACGA) are the lowest they have ever been. 

For that reason, and others, if you are talking with your donors about a CGA, make sure you are proposing a deferred payment charitable gift annuity (DPCGA) alongside a regular CGA. 

A DPCGA most likely offers greater tax benefits to the donor, so the smart move is to make sure the donor's aware of it. When presenting a proposal for a CGA, it's in everybody's interest to consider a comparable proposal of at least a 1-year DPCGA. Simply by waiting one year for payments to begin, both the annuity rate and the charitable deduction available to the donor will be significantly higher than an immediate-payment annuity.

Even a one-year deferment (which is the minimum timespan) makes quite a difference. Of your donors who enter into a CGA, most won't be doing so because of the immediacy of payments, so the differences in annuity rate and charitable deduction afforded by deferring payments may be attractive.  

You may well be surprised to learn that your business office is likely to prefer to manage a pool of DPCGAs compared to immediate payment CGAs. So you definitely want to check with them and find out.

And, finally, it's worth saying again that donors don't enter into a charitable gift annuity because of the tax and/or income benefits. Rather, they're doing so because it's a smart way to make a gift to your institution.

If you're a little fuzzy on this, now might be a good time for a brush-up on CGA's in the Gift Planning Field Guide, and DPGA's here.