The Role of Gift Annuities in a Planned Giving Program

Frank Minton, Ph.D., Vice-Chair, American Council on Gift Annuities

October 2005 |

Planned giving programs at colleges and universities, as well as at other charitable institutions, often provide a number of giving vehicles to their alumni and other donors. Gifts are generally categorized by their timing, either present gifts or deferred gifts. Deferred gifts are becoming more popular as individuals live longer and want to make sure they don’t outlive their assets. Although bequests (provisions in wills and in living trusts) constitute the greatest volume of deferred gifts, life income gifts are a significant and growing component. In recent years, gift annuities have emerged as the most popular form of life income vehicle through charities. As a brief description, a gift annuity is a contract under which a charity, in return for a transfer of cash or other property, agrees to pay a fixed sum of money for a period measured by one or two lives.

Colleges and universities are appropriate institutions for offering gift annuities since many of their donors are older and would be interested in life income. They also are perceived as enduring institutions and normally have sufficient endowments and reserves to reassure donors who might be apprehensive about the safety of a gift annuity. Not surprisingly, colleges account for a large share of gift annuities, and alumni have come to expect their alma maters to offer this giving option.

This issue of Trends and Issues describes how a gift annuity accomplishes a donor’s objective of making a gift to his or her college/university endowment (or other charity), while gaining important tax advantages and the security of lifetime income. Comparisons between gift annuities and other types of life income vehicles are also provided, as well as some examples of gift annuity scenarios.

© 2014 and prior years, Teachers Insurance and Annuity Association - College Retirement Equities Fund (TIAA-CREF), New York, NY 10017