By Irv Geffen
MorseLife Foundation
A Charitable Alternative May Be a Great Choice for You
Joe Brown is 85 years old and a widower. At his age he prefers conservative, low-risk investments like Certificates of Deposit (CDs) from reputable banks, U.S. Treasury Notes and dividend yielding stocks.
Joe purchased a $50,000 CD with a local bank five years ago. It was coming due in October 2019, so he started to explore his options for reinvesting and was disappointed with his choices. He had hoped that yields would have increased since he purchased his CD, but they had not. As of mid-September, the best five-year rates he could find were below 3% and a five-year Treasury note was yielding just 1.85%. Joe was not worried about running out of money, but like most people, he had hoped to get the best return on his investment at the level of risk he was willing to accept.
Just when Joe was going to roll over his CD, his friend Bob told him about a vehicle that offered a great, guaranteed return for his lifetime and some very generous tax savings as well. It even provided a significant gift to a favorite charity. The vehicle was called a Charitable Gift Annuity, or CGA, for short, and Bob explained how it worked for him:
- Bob transferred $100,000 to the MorseLife Foundation in return for a guaranteed payment of 8.3% or $8,300 each year for the rest of his life.
- He received a charitable income tax deduction of about $54,000 which at Bob’s marginal tax bracket yielded a savings of $17,000 for the year in which he made the gift.
- In addition to the tax savings, a significant portion of Bob’s annual payments are treated as return of principal and as such are not subject to income tax.
- As a result, Bob’s effective payout rate, the rate of return he would have to receive on an ordinary investment like a CD to match the CGA return, is over 14%!
- When Bob passes, MorseLife will use the remaining dollars in the CGA to provide care to seniors living in poverty.
Bob also explained that if he lived to his life expectancy, his CGA would produce nearly $70,000 of income, while a CD at 3% would yield about $25,000. When you include the income tax savings, Bob receives more than three times what he would have received with the CD.
Joe learned that CGAs are an excellent option for people who want to earn significantly better returns than CDs, Treasury Notes and dividend-producing stocks currently offer. They provide tax savings those other investments don’t and produce a meaningful charitable gift as well.
Charitable Gift Annuities are viable options for those seeking the peace of mind that safe and secure income streams can provide. The generous, guaranteed income, tax savings and charitable gift make the CGA an attractive vehicle for seniors and those living on fixed incomes.
Charitable Gift Annuities are legally binding contracts between the donor and the charity. There are no fees for establishing a CGA. They can be created for one or two lives. The payout amount is set at the establishment of the CGA and is determined by the age of the donor(s). The older the donor(s), the higher the rates.
The MorseLife Foundation supports the charitable work of the MorseLife Health System, which provides comprehensive living and healthcare solutions for 3,600 seniors every day. MorseLife is the only organization to be designated by the Florida legislature as a Teaching Nursing Home and a Teaching Hospice.
Its 50-acre campus is home to exceptional all-inclusive independent and assisted living, state-of-the-art short-term rehabilitation, award-winning long-term care and innovative memory care. MorseLife’s community-based services offer private and skilled home health care and compassionate end-of-life support through its hospice.
MorseLife delivers more than $10 million worth of free or subsidized services annually for the poor elderly living in our community, including many Holocaust Survivors. Contributions to the MorseLife Foundation, like those through Charitable Gift Annuities, are used to support services for the poor and to enhance the lives of all seniors in MorseLife’s care.
Please contact Irv Geffen, Senior Vice President, MorseLife Foundation, at 561-209-6154 to explore if a Charitable Gift Annuity makes sense for you.
Irv Geffen is the Senior Vice President of the MorseLife Foundation. The Foundation supports the charitable work of the MorseLife Health System which provides comprehensive living and healthcare solutions for seniors. Irv has worked with non-profits for over 30 years designing charitable gifts to accomplish the donors’ charitable, personal and financial goals in coordination with their professional advisors.