Charitable Gift Annuities

A charitable gift annuity is a simple agreement in which you give cash or securities in exchange for lifetime fixed payments for one or two individuals (annuitants). These annuitants can be you and/or your spouse. You can even establish a gift annuity for or with another person(s), providing them with lifetime payments. You can start payments immediately or choose to defer payments until some date in the future, which provides for a higher payment amount. When the annuity payments end, the remaining amount supports your area of choice at Valley.

In exchange for your irrevocable gift of cash, securities, or other assets, Valley will pay you a fixed amount each year for life. The amount of the payment depends on the amount donated and the age of the payment recipient.

1. Payments last for your lifetime. You cannot outlive your payments.
2. Payments are predictable. Your payments will not be affected by investment performance or market conditions. You will get the same amount each year.
3. Payments are very secure. They are backed by the general resources of Valley, not just by the assets you donate.

You decide who will get the payments from your gift annuity. Usually, this will be you, or you and your spouse. Alternatively, you can select one or two other people to receive the payments from your gift annuity. For example, you may wish to provide income for parents, a sibling, or a faithful employee.

The older you are when you make your gift, the greater the payment rate you will receive. If you choose other people to receive the payments from your gift annuity, their ages at the time of your gift will determine their payment rate. Our minimum age for a payment recipient is 65.

Sample Annuity Rates for Gift Amount of $25,000

Part of each payment typically will be tax-free for many years. This tax-free portion makes the payments more valuable than an equal amount of fully taxable income. The amount of this tax-free portion will be greater if you give cash than if you give stock or other appreciated property.

Additional Tax Benefits

You will earn an immediate income tax charitable deduction in the year of your gift, providing tax savings if you itemize. The amount of this deduction will depend on several factors. If you cannot use the entire deduction that year, you may carry forward your unused deduction for up to five additional years.

If you give stock or other appreciated property to create a gift annuity, you will pay tax on only a portion of your capital gain in the property. Even better, if you are the payment recipient of your gift annuity, you will be able to report this capital gain in installments over many years. In this case, your capital gain income will replace some of the tax-free portion you would receive if you were to give cash.

By removing the gift assets from your estate, you may also reduce future estate taxes and probate costs. The amount of these savings will depend on the size of your estate and on estate tax law in force at the time your estate is settled.

Lillian Wise is a 71 year-old widow. She would like to make a significant gift to Valley, but she is dependent on the income produced by her investments. One of these investments is stock in XYZ Widget Corporation that she and her late husband purchased many years ago for $3,000.

Her stock is now worth $25,000 but provides little income - about $315 after tax. Lillian is reluctant to sell her XYZ Widget stock to reinvest in higher yielding assets because she will have to pay $4,400 in capital gains tax. This would leave her with just $20,600 to reinvest.

Lillian is pleased to learn that she can make a significant gift to Valley and increase her cash flow by giving her XYZ Widget stock to Valley in exchange for a gift annuity. She can also save substantial income taxes plus avoid and defer capital gains taxes, and will receive an income tax deduction that may provide additional tax savings at the same time.

*Deduction amount and capital gains tax avoided may vary depending on the timing of the gift.