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NRDC's Charitable Gift Annuities
An NRDC Charitable Gift Annuity can provide for your future and help NRDC build a safer,
healthier planet for generations to come. The Charitable Gift Annuity is an especially popular gift
plan among people seeking to increase their retirement income. In legal terms, a charitable gift
annuity is a gift that is governed by a contractual agreement between the donor and NRDC. The
legal contract specifies that NRDC agrees to pay the donor -- or up to two beneficiaries named by
the donor -- a lifetime income. Upon the death of the beneficiaries, what remains of the original
gift principal is available to NRDC to further its work for the environment.
Beneficiaries age 60 or older are eligible to receive immediate income from an NRDC Charitable
Gift Annuity. For those younger than 60, NRDC's Deferred-Payment Charitable Gift Annuity may
be a suitable option.
With a minimum gift of $10,000 of cash or securities, you can fund a Charitable Gift Annuity that
will help protect the environment forever, and provide you or your loved ones with a fixed income
for life. Valuable benefits of this gift plan include:
- Guaranteed, fixed income -- partly tax-free in most instances;
- Significant relief from capital gains taxes on gifts of appreciated securities;
- Immediate tax savings from the charitable deduction;
- Removal of the asset from estate tax liability;
- No management fee;
- Membership in NRDC's Legacy Leaders; and
- An opportunity to make an important legacy to NRDC's critical environmental programs.
Using low-yielding, highly appreciated stocks or mutual fund shares to fund your Charitable
Gift Annuity can provide extra benefits. In addition to capital gains tax relief, by converting
these assets into a Charitable Gift Annuity you escape the vagaries of the stock market and
low dividend payments for the security of a high fixed-rate of return.
New Rate Schedule For Charitable Gift Annuities (Single-Life Rates)
NRDC uses rates recommended by the American Council on Gift Annuities, an association of
non-profit, charitable organizations. The following is the current rate schedule for Charitable Gift
Annuities that provide immediate income to one beneficiary:
| Age |
Rate*
|
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90+ |
5.7
5.8
5.9
5.9
6.0
6.0
6.1
6.2
6.3
6.4
6.5
6.6
6.7
6.8
6.9
7.1
7.2
7.4
7.6
7.8
8.0
8.3
8.5
8.8
9.2
9.5
9.9
10.2
10.6
11.0
11.3
|
*rate as of 7/1/2003
These rates are recommended by the American Council on Gift Annuities.
NRDC's Deferred-Payment Charitable Gift Annuity
In a deferred-payment Charitable Gift Annuity, you make the gift now (the minimum gift amount is
$10,000), realize an immediate charitable deduction, but defer receiving income until a later time.
The deferral increases the gift value to NRDC and the rate of return to you or your
beneficiary(ies). In addition, because of the deferral of income, the IRS rewards you, as the
donor, with an increased charitable deduction for use the year the donation is made. The deferral
of income must be until at least age 60.
Further Information about NRDC's Charitable Gift Annuity
Please click on NRDC Charitable Gift Annuity Information Statement for detailed information that
you may wish to share with your financial advisors.
Guaranteed Rate
NRDC observes strict adherence to the regulations of the New York State Department of
Insurance. By contractual agreement between NRDC and you (the annuitant), NRDC is obligated
to pay a guaranteed rate of payment for the remainder of your lifetime. NRDC is required by law
to recognize annuitants as creditors of all unencumbered assets of NRDC.
NRDC voluntarily adheres to rates recommended by the American Council on Gift Annuities
(ACGA), an association of over 1,200 charitable institutions. The American Council on Gift
Annuities monitors and adjusts its rates monthly based on the rates of commercial annuities, and
according to current and projected market conditions. The rate of payment is determined by the
age of the annuitant(s) at the time of the gift.
The current ACGA annuity rates are based on three assumptions for the charity:
- NRDC will earn a minimum of 6.75% on its investments
- NRDC will incur administrative costs of no more than .75% of annuity assets per year.
- NRDC will realize an average residuum (remainder) of no less than 50% at the death of
the last annuitant.
NRDC formally initiated its Gift Annuity Fund in 1989 and was granted a permit to issue charitable
gift annuities by the New York State Department of Insurance, pursuant to Section 1110 of the
New York Insurance Law. By requirement of New York State, NRDC maintains a segregated
annuity account, which is valued annually through actuarial calculations to determine a reserve
liability. While regulated by rules of the New York State Department of Insurance, NRDC is not
required to qualify as a commercial insurance company.
As of December 31, 1998, NRDC had accumulated assets of $7.1 million in its gift annuity fund
from over 265 donors. The legally required reserve as of June 30, 1998 is actuarily calculated at
$3,474,022.
NRDC's Gift Annuity Fund is managed through a custodial relationship between NRDC and State
Street Bank & Trust Company in Boston. NRDC compensates State Street Bank for that service;
no fees are transferred to the donor or the annuitant. Your gift is commingled with those of other
annuitants in a segregated account (the Fund).
The property you give for an annuity may be retained as an investment or it may be sold by the
custodian and the proceeds reinvested. The custodian has discretion whether to retain or sell in
adherence with the limitations on investments required by the New York State Department of
Insurance. As custodian, State Street Bank manages the assets, and NRDC exercises ongoing
oversight of the portfolio.
NRDC meets the limitations on investments of the segregated annuity fund which are required by
New York State; generally, the State permits investments of no more than 5% in any one
corporation's stocks or bonds. NRDC's investment portfolio is included for review in the financial
statement submitted annually to the state Department of Insurance. Historically, the Fund is
invested to realize a reasonable rate of return and growth of principal; consequently, the Fund's
portfolio ranges from 60-65% in bonds and 30-35% in stocks, and a small percentage of cash.
The gift portion of the Fund (the amount in excess of the required reserve) is invested more
aggressively in stocks to enhance the growth of principal.
Charitable Deduction
The donor is entitled to a charitable income tax based on their irrevocable gift. The valuation of
the deduction depends on the number and age of the annuitant(s), and the Federal Midterm Rate.
The Federal Midterm Rate is a monthly interest rate determined by the IRS. The IRS permits the
donor to use the current month's rate or the rate from either of the two previous months. NRDC
will select the highest rate of that three month period to provide you with the largest possible
charitable deduction.
A donor may deduct a gift of cash up to 50% of his/her adjusted gross income annually and gifts
of appreciated stock up to 30% of adjusted gross income. The deduction must be claimed in the
tax year of the gift, but excess contributions may be carried over for up to five additional years.
The donor will receive a charitable deduction for the gift portion of the annuity and realize an
income tax savings.
Under federal income tax law, certain limitations apply to the amount of the charitable deduction.
Under current law, gifts of cash are deductible up to 50% of the donor's adjusted gross income.
Gifts of appreciated stock are deductible up to 30% of the donor's adjusted gross income. The
deduction must be claimed in the tax year of the gift, but any "excess" contribution may be 'carried
over' up to five additional years.
Federal Tax Considerations
- Taxable Nature of Annuity Payment
That portion of the gift which is considered by the IRS to be a sale will be taxable as ordinary
income, while the portion considered a gift will be treated as tax-free income.
If funded with long-term appreciated securities, the gift annuity will receive favorable tax
treatment on the capital gains. Because a charitable gift annuity is part gift and part sale, a gift
of securities to acquire an annuity results in some of the income being taxable as capital gain
income. The tax basis in the property must be allocated proportionately between the sale
element of the transaction (the value of the annuity) and the gift element (the value of the
property in excess of the annuity value).
A donor who acquire a charitable gift annuity with appreciated securities for the benefit of
beneficiaries other than him or herself will be required to pay the capital gains tax, attributable
to the value of the annuity, up-front in a lump sum in the tax year in which the gift is made.
- Reporting Requirements
The annuitant will receive IRS Form 1099R annually from NRDC, confirming the types and
amounts of income they must report for that tax year.
Acceptable Assets / Date of Gift /Minimum Age /Gift Fees
A charitable gift annuity may be established using assets in the form of cash or securities. For all
purposes the date of the gift annuity agreement will be considered the delivery date of the
securities (in the case of electronically deliverable securities), or the postmark date on the mailing
envelope of your gift of cash or personally held stock certificates. The value of a gift of stock is
determined by calculating the average of the security's highest and lowest quoted selling price on
the date of transfer.
The minimum gift amount for establishing a charitable gift annuity is $10,000. The minimum age at
which an annuitant may begin to receive payments is 60. Donors who are below the age of 60
may acquire a charitable gift annuity by deferring the age at which payments begin to age 60 or
later.
There are no fees to the donor or the annuitant.
Irrevocability of Gifts
All gifts made for a charitable gift annuity are irrevocable; once made, they cannot be undone.
Under the terms of the Gift Agreement, you will have the right to receive the annuity or to have
your designated beneficiary receive the payment. You will not have access to the principal assets
in the annuity. The designation of the annuitant is also irrevocable, unless you retain the power to
revoke the income interest of the annuitant.
Donor's Federal Gift & Estate Tax
A donor who is also the annuitant will not be subject to federal gift and estate taxes. A donor and
spouse who are joint and survivor annuitants will not be subject to gift or estate tax because of the
gift and estate tax marital deduction.
A donor who is not the annuitant and who is not one of the annuitants in a two-life agreement will
be subject to gift tax on the value of the annuity. The tax may be avoided if the donor retains the
power to revoke the income interest of the annuitant. If the annuity is acquired for just one other
annuitant, the gift may qualify for the $10,000 annual gift exclusion.
Federal Securities Law
As provided by the Philanthropy Protection Act of 1995 (PPA of 1995) charitable gift annuities are
exempt from securities registration.
This Information Statement provides a full and fair 'disclosure' of the gift annuity fund's operation
and management to all prospective donors and participants in the fund, as required by law.
Development staff and volunteers are exempted from the broker-dealer provisions of federal
securities laws. NRDC development staff receive no commission, nor is their payment based on
the amount contributed or the number of gifts that are made.
To contact NRDC for more information:
NRDC Office of Gift Planning
40 West 20th Street
New York, NY 10011
Phone: (212) 727-2700
legacygifts@nrdc.org
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