A charitable gift annuity is a simple arrangement between you and the Archdiocese of Detroit Endowment Foundation. In exchange for your gift of cash or marketable stocks and bonds, the foundation promises to pay a fixed sum each year to one or two annuitants that you name. The payments are guaranteed by the general resources of the foundation, not by just the amount you give.
Annuity payments continue as long as at least one of the annuitants is living. A portion of the payment may be tax-free as a return of your investment in the annuity contract. If you give appreciated stock to the foundation for the annuity, a portion will be taxed as capital gain.
The annuity payment rate is based on the age or ages of the annuitants using tables developed by the American Council on Gift Annuities (ACGA). These rates are less than offered in commercial annuities because a portion of your gift is a charitable contribution and deductible on your income tax return if you itemize deductions.
Favorable tax treatment on the transfer of property to the foundation for an annuity arrangement makes a charitable gift annuity an excellent way to diversify an investment portfolio to provide some fixed income at the least capital gain tax cost. In addition, you may enjoy additional cash flow since the annuity rate will often be significantly higher than the dividend or interest paid on the stock or cash you transfer to the foundation.