A charitable gift annuity is known as a gift that gives back. You make a donation to Citadel Foundation, and in return for your donation, Citadel Foundation will purchase an annuity from a life insurance company. The amount of your annuity is determined by the size of your contribution, your age, and the interest rate environment.
Your gift annuity guarantees fixed payments for as long as you live. The payments can be monthly, quarterly, semi-annually, whatever meets your cash requirement needs. All or substantially all of your payments are tax free. Charitable gift annuities provide security for the remaining life of the donor. The donor’s spouse may also be named in the agreement, therefore providing income and security for loved ones beyond the life of the donor.
Example
(assuming combined tax savings credit of 50%)
John, 80 years old, and has a $100,000 Government of Canada bond that is maturing. John continues to need a $5,000 annual income stream but would also like to make a donation to Citadel Foundation .
| Re-invest in GIC’s (4.3%) | Purchase life annuity | |
|---|---|---|
| Annual Income Before Tax | $4,300 | *$6,800 |
| Annual Income That Is Taxable | $4,300 | $416 |
| Tax Payable | $2,150 | $208 |
| Annual Income After Tax | $2,150 | $5,872 |
| Cost Of Annuity | N/A | $50,000 |
| Remaining Funds For Gift | $0 | $50,000 |
| Tax Savings From Donation | $0 | $25,000 |
*6,800 annuity payment based on an actuarial table, with John’s life expectancy of 8 years
John’s decision increases his after tax income from $2,150 to $5,872. The purchase of the charitable gift annuity allows John to support Citadel Foundation with a $50,000 donation and he receives a tax credit for $25,000.