The CGA

The DNA of a CGA (Charitable Gift Annuity)?

A Charitable Gift Annuity (CGA) is a contract (not a "trust) under which a charity, in return for a transfer of a Business, Marketable Securities, Cash or other assets (such as a company, company stock, real estate, or life insurance policy settlement proceeds), agrees to pay a fixed amount of money to a single individual or a pair of individuals. This remuneration can be claimed in the form of a life-pay structure, wherein the donor receives payment on a structured schedule for the entirety of their lifetime, or in the form of a one-time cash settlement, if such an arrangement is agreed upon by both parties. CGAs have been in existence for over 100 years, and are among the most respected, stable strategies in the arenas of retirement planning, estate planning, and planned giving in use in the United States. Laws governing CGAs are issued at the state level, and thus an issuing charity must adhere to the laws of their respective state.
The recipient of payment under a CGA arrangement is termed the "annuitant" or "beneficiary" or "donor". The payment(s) are fixed and unchanged for the term of the contract. A portion of the payment(s) is considered to be a partial, tax-free return upon the donor's gift, and is disbursed in equal payments on a fixed schedule over the life expectancy of the annuitant(s). A CGA is not a security or an insurance contract, but is a contractual agreement that can only be issued by an approved charity, bearing a 501(3)(c) designation as approved by a Letter of Determination by the Department of the Treasury of the United States and an in-good standing with the state of their operating domicile. Compliance to these terms and "good standing" status is required throughout the life of the CGA or until said agreement is paid in full per the obligations agreed upon by the respective charity and donor(s).
The contributed property (the gift), given irrevocably, becomes part of the charity's assets, and payments become general obligations of said charity. Annuities are backed by the whole of the charity's assets, not by the value of the contributed asset(s) alone. Annuity payments are guaranteed for the contract [life/lives of the annuitant(s)], regardless of the investment experience of the gift annuity fund, unless the CGA is settled by mutual agreement (single pay). As noted above, charities offering gift annuities (CGAs) are regulated by the state of issuance. Generally this regulation falls within the purview of the respective state's Insurance (or Securities) Laws. Such laws, codes, or statutes should be named and enumerated within the CGA agreement between the donor(s) and the issuing charity. Depending upon the state in which the CGA is issued, the charity may be required to comply with the regulations of not only the state of its domicile, but also the state of the donor's legal residence. Certain states, such as Indiana, Ohio, and Wyoming, are very accommodating to CGAs, much in the way that certain states (i.e. Delaware, Nevada, and Alaska) are very accommodating to corporations and trusts.
Under their respective regulation guidelines, most states require a CGA issuing charity to provide its published gift annuity rate chart of the maximum annuity rates offered by the charity, listed by actuarial age (age nearest to birthday on date of gift). However, this is state specific, and is put forward in the CGA agreement by the issuing charity per mandated state statutes. However, if the currently suggested gift annuity rates, published by the American Council on Gift Annuities (ACGA), are utilized, the charity will not be required to prove, through use of an actuary, that its annuity rate chart is within that state's regulatory law. Method of use of the compliant rate chart falls under the discretion of the charity. If the charity is involved with a regulating state, and chooses to offer gift annuity rates above those suggested by the ACGA, the regulating state may require the employment of an actuary to prove that the assumptions used in setting this increased annuity rate fall within the boundaries of that state's laws. The issuing charities that the CGA Exchange works with are within states that comply fully with this requirement. This would include utilization of the actual earnings rate of the charity's gift annuity fund rather than the more conservative ACGA calculations.
Annuity rates suggested by the ACGA assume that the gift will be invested, in its entirety, and that 1% (100 basis points) of the remaining fund balance will be expended annually for expenses (when using a life-pay annuity). While the charity may spend a portion of the contribution immediately, it must maintain sufficient reserves (as determined by state laws) to meet annuity obligations and satisfy applicable regulatory requirements. The charities used by The CGA Exchange utilize rates that assume the entire gift is invested and held in reserve until the termination of the contract, and/or the death of the sole surviving annuitant. The portion of the contribution that remains at this time is termed the "residuum". ACGA suggested rates assume that the residuum will be at least 50% of the initial gift amount if the annuitant(s) live only to their life expectancy, which is a requirement of many state's gift annuity laws. The CGA Exchange® is proud to state that the charities with which we work to issue CGAs will always assure not less than 80% (and typically 90%) to the families of the donor/annuitant, to grossly exceed the national average and all state requirements.
One of the most tax-trapped and illiquid assets is a closely held business. Due to The Small Business Jobs Protection Act of 1996, the law was enacted to allow an IRS approved 501(c)(3) Charity to legally be able to become a share-holder (or full owner) and sell the stock for the typical and standard benefit of the charity's obligations. Currently, the largest asset owned by a senior is their business. More than 90% of all businesses are sold by way of an asset sale so to not transfer liability but preserve opportunity. Unfortunately this creates a very large tax burden for the business owner, losing 45% of the transaction on average. The exchange of one's business for a CGA is a powerful way to exit and unlock that which is otherwise tax-trapped and inaccessible. The CGA Exchange specializes in the conversion of business holdings to a CGA settlement.
CGAs, which are widely used throughout the United States, are favorably regarded by many organizations as a proper method of receiving contributions. Numerous leading educational, charitable, and religious institutions have received significant gifts through CGA agreements. This has created great benefit to their works, while simultaneously providing their donors with practical benefits and personal satisfaction. The CGA Exchange is proud to offer the CGA to assist those in need of exchanging tax-trapped, illiquid assets for legitimate and transparent CGA settlements with complete legal oversight from in-good-standing legal counsel.
The recipient of payment under a CGA arrangement is termed the "annuitant" or "beneficiary" or "donor". The payment(s) are fixed and unchanged for the term of the contract. A portion of the payment(s) is considered to be a partial, tax-free return upon the donor's gift, and is disbursed in equal payments on a fixed schedule over the life expectancy of the annuitant(s). A CGA is not a security or an insurance contract, but is a contractual agreement that can only be issued by an approved charity, bearing a 501(3)(c) designation as approved by a Letter of Determination by the Department of the Treasury of the United States and an in-good standing with the state of their operating domicile. Compliance to these terms and "good standing" status is required throughout the life of the CGA or until said agreement is paid in full per the obligations agreed upon by the respective charity and donor(s).
The contributed property (the gift), given irrevocably, becomes part of the charity's assets, and payments become general obligations of said charity. Annuities are backed by the whole of the charity's assets, not by the value of the contributed asset(s) alone. Annuity payments are guaranteed for the contract [life/lives of the annuitant(s)], regardless of the investment experience of the gift annuity fund, unless the CGA is settled by mutual agreement (single pay). As noted above, charities offering gift annuities (CGAs) are regulated by the state of issuance. Generally this regulation falls within the purview of the respective state's Insurance (or Securities) Laws. Such laws, codes, or statutes should be named and enumerated within the CGA agreement between the donor(s) and the issuing charity. Depending upon the state in which the CGA is issued, the charity may be required to comply with the regulations of not only the state of its domicile, but also the state of the donor's legal residence. Certain states, such as Indiana, Ohio, and Wyoming, are very accommodating to CGAs, much in the way that certain states (i.e. Delaware, Nevada, and Alaska) are very accommodating to corporations and trusts.
Under their respective regulation guidelines, most states require a CGA issuing charity to provide its published gift annuity rate chart of the maximum annuity rates offered by the charity, listed by actuarial age (age nearest to birthday on date of gift). However, this is state specific, and is put forward in the CGA agreement by the issuing charity per mandated state statutes. However, if the currently suggested gift annuity rates, published by the American Council on Gift Annuities (ACGA), are utilized, the charity will not be required to prove, through use of an actuary, that its annuity rate chart is within that state's regulatory law. Method of use of the compliant rate chart falls under the discretion of the charity. If the charity is involved with a regulating state, and chooses to offer gift annuity rates above those suggested by the ACGA, the regulating state may require the employment of an actuary to prove that the assumptions used in setting this increased annuity rate fall within the boundaries of that state's laws. The issuing charities that the CGA Exchange works with are within states that comply fully with this requirement. This would include utilization of the actual earnings rate of the charity's gift annuity fund rather than the more conservative ACGA calculations.
Annuity rates suggested by the ACGA assume that the gift will be invested, in its entirety, and that 1% (100 basis points) of the remaining fund balance will be expended annually for expenses (when using a life-pay annuity). While the charity may spend a portion of the contribution immediately, it must maintain sufficient reserves (as determined by state laws) to meet annuity obligations and satisfy applicable regulatory requirements. The charities used by The CGA Exchange utilize rates that assume the entire gift is invested and held in reserve until the termination of the contract, and/or the death of the sole surviving annuitant. The portion of the contribution that remains at this time is termed the "residuum". ACGA suggested rates assume that the residuum will be at least 50% of the initial gift amount if the annuitant(s) live only to their life expectancy, which is a requirement of many state's gift annuity laws. The CGA Exchange® is proud to state that the charities with which we work to issue CGAs will always assure not less than 80% (and typically 90%) to the families of the donor/annuitant, to grossly exceed the national average and all state requirements.
One of the most tax-trapped and illiquid assets is a closely held business. Due to The Small Business Jobs Protection Act of 1996, the law was enacted to allow an IRS approved 501(c)(3) Charity to legally be able to become a share-holder (or full owner) and sell the stock for the typical and standard benefit of the charity's obligations. Currently, the largest asset owned by a senior is their business. More than 90% of all businesses are sold by way of an asset sale so to not transfer liability but preserve opportunity. Unfortunately this creates a very large tax burden for the business owner, losing 45% of the transaction on average. The exchange of one's business for a CGA is a powerful way to exit and unlock that which is otherwise tax-trapped and inaccessible. The CGA Exchange specializes in the conversion of business holdings to a CGA settlement.
CGAs, which are widely used throughout the United States, are favorably regarded by many organizations as a proper method of receiving contributions. Numerous leading educational, charitable, and religious institutions have received significant gifts through CGA agreements. This has created great benefit to their works, while simultaneously providing their donors with practical benefits and personal satisfaction. The CGA Exchange is proud to offer the CGA to assist those in need of exchanging tax-trapped, illiquid assets for legitimate and transparent CGA settlements with complete legal oversight from in-good-standing legal counsel.