11 reasons why donors and organizations love charitable gift annuities

Why donors like CGAs

1. CGAs help them feel good because they get to make a gift to support a cause they believe in while also getting the benefit of a financial payout in return for as long as they live;
2. They help donors get a reliable, fixed income until death (which may be particularly attractive for people who are concerned about outliving the amount they have saved);
3. They help donors gain tax advantages:
   • Could get an income tax deduction now for making the charitable donation;
   • May possibly lower their income tax the year the donation was made;
   • Portions of each gift annuity payment might also be tax-free because they might be considered a return on the original principal;
4. They give supporters a vehicle for doing good with money they feel they do not want to pass on to others (besides the charity);
5. As a result of the fact that the money goes to the organization after the donor’s death, most CGAs provide higher payout rates when compared with CDs, Treasury bonds, or money market accounts making them very attractive;
6. They are easy to understand and simple to execute.

Why organizations like CGAs

1. The charity gets to keep what remains of the annuity when the donor dies (as long as the donor doesn’t outlive their life expectancy);
2. They employ the law of reciprocity to encourage hesitant donors to make a donation (because they will receive something in return);
3. They widen the funnel because CGAs can generate donations from people who don’t necessarily support the cause passionately but want the benefits associated with the instrument;
4. They tie the organization and the donor together in a long-term relationship that can result in additional giving opportunities such as gift annuities, bequests (after their lifetime) and even major gifts (during their lifetime);
5. They provide flexibility with regard to how the nonprofit uses the money/donation:
   • Use the money/gift immediately;
   • Invest the money/gift to generate earnings used to make the payments to the donor;
   • Possibly even sell the annuity (usually done in bulk).

Related Posts:

>>Can you tell your supporters that a CGA can deliver “guaranteed” income or not?
>>eCourse: Online Charitable Gift Planning by Dr. Russell James

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