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Ways to Plan a Gift - Charitable Gift Annuities
Definition
A St. Lawrence Charitable Gift Annuity is a contract between the donor(s) and St. Lawrence University that guarantees annual fixed payments to one or two income beneficiaries for life.
Further Information
A charitable gift annuity provides a fixed annual income for one or two lives, guaranteed by the assets of St. Lawrence University. Because the donor makes an irrevocable gift to create the annuity, some level of income tax charitable deduction may be generated in the year the gift is made. St. Lawrence University holds and invests all of your gift to generate income for your annuity payments. When the annuity terminates, St. Lawrence uses the remainder in the annuity for the purpose(s) designated when the annuity was created.
Annuity payout rates are determined by the age(s) of the annuitant(s), following the rate schedule established by the American Council on Gift Annuities (ACGA). Annuitants must be at least 50 years old when payments begin. The minimum amount to create a first annuity at St. Lawrence is $10,000. Additional annuities may be created for a minimum of $5,000. At the time the annuity is created, income payments may be arranged on a monthly, quarterly, semiannual or annual basis. Payments may be made by check or electronic deposit. A donor may not add future gifts to an existing annuity, but it is very easy to create another annuity, usually at a higher payout rate.
Gift annuities are most often created with cash or publicly traded securities held long term (more than one year). In special circumstances, real estate maybe used to fund a gift annuity. St. Lawrence does not charge any fees to generate financial projections or annuity contracts, although the university encourages donors to also consult with their legal and financial advisors before creating a gift annuity.
St. Lawrence invests its annuity assets with State Street Global Advisors.
Create your own (simplified) Gift Annuity Financial Projection.
Request a Gift Annuity Projection from St. Lawrence.
View a Comparison Chart of gift-with-income plans.
Tax and Financial Implications
A donor may generally receive an income tax charitable deduction for some portion of the gift in the year that the annuity is created. The amount of the charitable deduction depends on the number and age(s) of the income beneficiaries and the IRS Discount Rate in effect at the time of the gift.
Income from a gift annuity is taxable. Depending on the type of gift used to create the annuity, the income stream may include some mix of ordinary, capital gain and tax-free income for the projected life of the annuity. If cash is used to fund the annuity, more of the income may be tax-free return of principal. If an appreciated security is used, more of the income may be capital gain.
In general, if an appreciated asset, held long-term, is used to fund an annuity, the donor avoids paying capital gain on some portion of the appreciation. However, if income payments go to someone other than the donor or the donor's spouse, the donor may be required to recognize the capital gain at the time the annuity is created.
If a donor wishes to use a depreciated security to fund an annuity, consideration should be given to selling the security first and then using the cash proceeds to create the annuity.
If an annuity makes income payments to someone other than the donor and/or the donor's spouse, the donor may need to recognize a gift to the income recipient(s).
A gift annuity may be a good mechanism to convert a low yielding asset to a higher yield. A gift annuity may also be a tax-advantageous way to diversify a large block of a single stock, or to transition to a more fixed-income position.
"Types" of Gift Annuities
Immediate payment gift annuity - This is the most common annuity, created for one or two lives. The donor is usually an income beneficiary. It is termed "immediate" because the start of income payments is not deferred. So, for example, if quarterly payments are selected, the first payment is made at the end of the next quarter.
Deferred payment gift annuity - A donor may make a gift to create an annuity (and generate an immediate income tax charitable deduction), but delay the start of income payments until some time in the future. The beginning date of payments is defined in the annuity agreement. The longer the deferral period, the higher the payout rate when payments begin. The income recipient(s) must be at least 50 years old when payments begin. Deferred gift annuities are often used to plan retirement income, or simply generate a higher payout rate by waiting for payments to begin.
Income for someone else - This is a gift annuity that provides income for someone other than you or your spouse. It can be a creative way to make a gift to St. Lawrence and also provide fixed income to a parent, sibling or other loved one. Generally, an income tax charitable deduction is generated for the donor at the time the annuity is created. The donor must be careful, however, in deciding what asset should fund the annuity, and what level of income to provide to the beneficiary. If appreciated stock is used to fund the annuity, the donor may be required to declare some or all of the capital gain on the stock. Also, the income payments are considered a "gift" from the donor to the beneficiary, and if payments are above the annual exclusion (currently $12,000 per person per year), gift tax may be an issue as well. With careful planning, problems can be avoided. Income payments are taxable to income beneficiaries, usually as ordinary income.
Testamentary gift annuity - This is a gift annuity that is created to provide income to someone else when your estate is settled. A donor may wish to plan a gift to St. Lawrence, but also wish to provide income for an heir before the gift goes to St. Lawrence. A testamentary gift annuity is a way to provide a fixed income stream to a sibling, relative, caregiver or other loved one. The payout rate and any tax benefits are determined at the time the annuity is created by your estate.
Process to Create
While every gift situation is unique, there are several steps that may be outlined to help clarify the process. When an individual creates a gift annuity at St. Lawrence, he\she will most likely follow steps similar to the ones below. The process often begins with a conversation:
  1. We talk. An initial conversation with the planned giving office is advisable to help the university understand your priorities and goals and determine which plan(s) may best fit your needs. The planned giving office will then prepare a proposal for your review.
  2. You review. The proposal will include a financial projection with explanations and background information for review by you and your advisors. Additional information or further projections may be required to answer questions and clarify the exact benefits and circumstances that will be right for you.
  3. You decide. Once all of the information is presented and reviewed, it is time to decide if the timing and circumstances are right to proceed and create your gift annuity.
  4. You arrange transfer. At this point you write the check, authorize transfer of the stock, or otherwise arrange for ownership of the asset(s) to pass to the St. Lawrence gift annuity account. Once ownership of the asset passes to the account, the planned giving office determines the gift date and the value of the gift (it's easy with cash, but gets more complicated with multiple transfers of stock, for example). That data then allows the office to prepare final projections and a gift annuity contract.
  5. You sign. Final materials and contracts are sent for signature, along with a gift receipt. At this point the planned giving office will arrange the method for future payments. The office will also wish to make sure the university has documented your wishes for the final use of your gift at St. Lawrence.
  6. You relax, payments begin. Unless payments are deferred, the first payment is made at the end of the period as established by the annuity contract. A first payment may be a partial payment, depending on the date of the gift. The planned giving office will also contact you to ensure that the first payment was processed correctly.
What to Expect After Your Plan is Created
The creation of your gift annuity is the start of a new relationship with St. Lawrence:
  • If you are a new member of the Manley Society, you will receive letters of welcome.
  • At the end of each payment period, you will receive either your check, or a printed "cash advise" of your electronic payment directly from State Street Global Advisors through their Boston offices.
  • You will receive an aunnual financial report from the planned giving office each January.
  • 1099R income tax statements will be mailed to you directly from State Street by January 31 each year.
  • As a Manley Society member, you will receive the society annual report each year, and an invitation to the annual meeting held during reunion each June.
  • We ask that you report to us any change in address or bank account information as soon as possible, so that there is no interruption in the processing and receipt of your payments.

This web page does not provide legal or financial advice, nor is it intended as a comprehensive review of the topic. You should consult your attorney, tax advisor and St. Lawrence before making or planning your gift.