June 6, 2017

We’ve all heard it before: “Don’t put all your eggs in one basket.” When it comes to your retirement income, you most definitely want more than one basket.

Whether you’re already retired or saving for your future retirement, it’s wise to diversify your sources of income. That way if one type of investment goes south, you don’t lose everything. The charitable gift annuity is a powerful tool to not only provide long-lasting support for Texas A&M but diversity your cash-flow.

You probably already know the basics about how a charitable gift annuity works. So here we’re going to focus on the mechanics of how to use appreciated, marketable securities to fund it. First, instruct your broker to transfer X shares of ABC stock. The stock will be valued on the date it transfers to us, and your gift annuity amount will be the average of the high and the low on that date.


Pay Fewer Taxes

Here’s how the capital gains tax plays into this scenario. Let’s say the stock is worth $20,000, and you paid $12,000 when you purchased it. If you sell the stock outright, you will owe capital gains tax on the $8,000 gain, and 100 percent of the tax would be due in the year of the sale. But when you fund a gift annuity with the stock, the capital gains tax is split between the “gift” and the “annuity”. The tax apportioned to the gift part will never be paid because Texas A&M Foundation is tax exempt. The amount apportioned to the annuity part will be paid by your over your estimated lifetime. What this means is that you pay a portion of the tax that will be due a little at a time over your life expectancy.

Each annuity payment you receive will have part taxed at the ordinary income tax rate, part taxed at the capital gains tax rate, and part tax-free.

A Charitable Gift Annuity Helps You Diversify Your Retirement

You can transfer a low yielding asset to Texas A&M Foundation, and enjoy a guaranteed, attractive fixed payments from your gift annuity. Just like that...Diversification and tax savings!

We'd be delighted to prepare a personalized gift annuity illustration for you and show you how it works with appreciated, marketable securities. Of course, there’s no obligation. If you think a charitable gift annuity would work for you, we'll do our part to make the process go smoothly. Just let us know how we can help.