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Commuted Payment Gift Annuity: The Details

Is this gift right for you?

A commuted payment gift annuity is for you if…

  • You are in high-earnings years, looking for both income tax savings now and an additional source of revenue for a period of years in the future.
  • You want to make a significant gift to us and receive payments in return.
  • You want the security of fixed payments to provide income during a set period of years.
  • You also appreciate the safety of your payments being a general financial obligation of the Roman Catholic Foundation, benefiting your favorite parish, school, or ministry.

Please Note: Commuted payment gift annuities are not available to residents of New York.

The commuted payment charitable gift annuity is especially designed for donors who need payments for a set period of years rather than for a lifetime. It makes fixed payments to you and/or another beneficiary for a set period of years starting in the future. Because of the deferral of income and short payment period:

  • the Roman Catholic Foundation, benefiting your favorite parish, school, or ministry, can offer a higher income rate for these annuities than for annuities whose income starts immediately, and
  • You can receive more income in a shorter period of time to meet particular cash flow needs.

These two features make the commuted payment gift annuity quite attractive to donors in high-earnings years who are concerned about securing both current tax deductions and either paying for college for children or grandchildren, or bridging the income gap between early retirement and the availability of funds from qualified retirement plans or Social Security.

Use a commuted payment gift annuity to provide income if you retire early

Many individuals elect to retire early. Unfortunately, they are not eligible to start collecting Social Security right away, or end up having to take a smaller Social Security payment if they start withdrawals prior to full retirement age. Many the Roman Catholic Foundation, benefiting your favorite parish, school, or ministry, donors consider using a commuted payment gift annuity to help bridge this gap. Funded with as little as $10,000, you could fund a commuted payment gift annuity with the Roman Catholic Foundation, benefiting your favorite parish, school, or ministry. In exchange for your gift the Roman Catholic Foundation, benefiting your favorite parish, school, or ministry, would provide you with the total sum of payments you would have received from a lifetime annuity during a short period of years, say from age 60-67 when you can claim full Social Security benefits. When the annuity ends, you direct the remaining funds to the area at the Roman Catholic Foundation, benefiting your favorite parish, school, or ministry, that is most important to you, allowing you to see your philanthropy at work.

Use a commuted payment gift annuity to pay for college for children or grandchildren

While most families will find that Section 529 College Savings Plans are the most effective way to pay for college for children or grandchildren, those who are charitably-minded to the Roman Catholic Foundation, benefiting your favorite parish, school, or ministry, may want to consider a commuted payment gift annuity. Your gift will allow you to provide payments to benefit a child or grandchild for a period of four or five years to pay for college. When the payment period ends, the remaining principal can be directed to an the Roman Catholic Foundation, benefiting your favorite parish, school, or ministry, program of your choice.

Planning points

The commuted payment gift annuity offers the same benefits of simplicity, security, and attractive income taxation that the deferred gift annuity provides our donors:

  • Your commuted payment gift annuity is a contract between the Roman Catholic Foundation, benefiting your favorite parish, school, or ministry, and you, and your annuity payments are an obligation backed by our corporate assets;
  • You secure a charitable income tax deduction based on the market value of the assets you contributed, minus the present value of the life-income interest you retained;
  • No up-front capital gains tax is payable if you fund your commuted payment gift annuity with appreciated securities; only a portion of your gain is recognized, with the tax spread over your annuity payments;
  • Part of each annuity payment to you comes tax-free as the return of principal;

    Please Note: The IRS provides that the capital gain and tax-free income benefits are in effect during your life expectancy. If you live longer, the entire annuity payment will be taxed to you.

  • The balance remaining in your commuted payment gift annuity after the death of the beneficiaries will be used by the Roman Catholic Foundation, benefiting your favorite parish, school, or ministry, for the purpose you designated when you created the gift annuity.
  • A commuted payment gift annuity at the Roman Catholic Foundation, benefiting your favorite parish, school, or ministry, can be made with a gift of 10,000 or more.

How do you create a commuted payment gift annuity?

We will provide a draft of the commuted payment gift annuity agreement for review by you. As always, we encourage you to seek the advice of your attorney or financial advisor. We’d be happy to share additional material with them.

Please Note: This information is for illustrative purposes only and is not intended as legal, tax or financial advice. Consult your legal, tax and financial advisors prior to making any material decisions based on this data.

Please contact us so that we can assist you through every step of the process.

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