Legacy Planning Using the Flexible Deferred Gift Annuity

9/18/2015

Lewis is a 54-year-old executive at a large healthcare organization. He purchased company stock when the stock price was low, and now the stock has grown substantially.

Lewis and his wife, Ann, sold a vacation home in the mountains earlier this year and are looking for a way to offset the capital gains tax owed on the sale. Lewis enjoys the challenge and responsibility of his job and is planning on continuing to work until he is 70 years old. Ann has spent years volunteering at their United Methodist church. They have supported the church generously and would like to find a way to make a lasting gift to the church.

They are both in good health and are very active. They are looking for ways to plan for retirement in the future. Even though Lewis is planning on working until he is 70, he is not certain when he will retire. They want to find an income source that will permit them to be flexible with Lewis’ retirement date.

Lewis and Ann learned that a flexible deferred gift annuity would help them meet their goals. Instead of selling appreciated company stock and paying high capital gains tax, they could give it to the Foundation and receive an immediate charitable income tax deduction that will offset the current tax on the sale of their vacation home and avoid capital gains tax. The flexible deferred gift annuity would permit them to elect to begin taking payments for life when Lewis is ready to retire.

They decided to set up a two-life flexible deferred gift annuity. They will receive a charitable income tax deduction this year, which will give them an immediate tax savings. When Lewis is ready to retire, he will contact the Foundation to begin the payments on the deferred gift annuity. This gives him the flexibility to continue working as long as he would like. Also, the longer he waits to begin the annuity payments, the greater the fixed payments will be. Another attractive tax benefit is that a portion of the payments will be income tax free. Upon the deaths of Lewis and Ann, the remainder will be used to establish an endowment to benefit their church.

Please note: Since the flexible deferred gift annuity amount is based on the current ages of the annuitants and the ages when payments begin, your benefits may be different. If Lewis decides to defer payments until he is 70 years old, the deferred gift annuity payout percentage would be 7.5%. The charitable income tax deduction would be 26.7% of the property given.

If you would like a personalized illustration of the flexible deferred gift annuity, please contact David Battles, CPA, at 800-259-6863 or dbattles@okumf.org.  There is no obligation and all inquiries are confidential.

 

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