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What Is a Gift Annuity and How Does It Work?

What Is a Gift Annuity and How Does It Work?

A charitable gift annuity is a simple contract between the American Alpine Club and a donor.  The AAC agrees to pay a fixed amount of money for life to one or two individuals, in exchange for an irrevocable gift of cash, marketable securities or other assets. 

A person who receives annuity payments is called an "annuitant." This person may or may not be the donor.  The annuity payments are fixed and unchanged for the term of the contract. 

The annuity payment amount will be determined by several factors, including the prevailing annuity rate schedule at the time the gift is made, the age(s) of the annuitant(s), and the date payments begin.  The AAC follows the rate schedule provided by the American Council on Gift Annuities, as highlighted below:

One Life 

Your
Age

Rate of
Return

50

3.7%

55

4.0%

60

4.4%

65

4.7%

70

5.1%

75

5.8%

80

6.8%

85

7.8%

90+

9.0%

Two Lives

Your
Ages

Rate of
Return

50/55

3.3%

55/60

3.7%

60/65

4.0%

65/70

4.4%

70/75

4.8%

75/80

5.3%

80/85

6.1%

85/90

7.3%

90/95+

8.8%

Rates effective as of January, 2013

A donor typically receives a charitable income tax for a portion of the gift.  This deductible amount is determined by an IRS formula that distinguishes between the annuity payments and the gift portion available for use by the AAC.  In addition, part of each annuity payment is considered a tax-free return of the donor's original gift.  This ‘tax-free’ portion will be spread equally over the life expectancy of the annuitant(s). 

The annuity payments become a general obligation of the American Alpine Club, backed by our entire assets, not just by the property contributed.  Payments continue for the life/lives of the annuitant(s) no matter what the investment experience of the gift annuity fund.

A charitable gift annuity does not make sense in every situation, but for some it can be the perfect way to support to the American Alpine Club.  For more information, please contact us at 303-384-0110 or give@americanalpineclub.org.