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Charitable Gift Annuity
A charitable gift annuity is a contract between Wake Forest and a donor whereby the University agrees to pay fixed annual income to the donor and/or other designee for life in return for a gift.
Annuities may be established with gifts of cash or stock. Many donors use certificates of deposit to fund gift annuities, which typically offer more attractive interest rates than CDs. In addition to a higher rate of return, part of the income from the gift annuity may be exempt from income taxes.
A portion of the gift used to fund the annuity is tax deductible as a charitable contribution. Funding a gift annuity with long-term appreciated securities offers additional tax advantages. Part of the appreciation escapes capital-gains tax entirely, and any reportable capital gain is spread out over the donor's life expectancy rather than all in the year of the gift.
At the end of the annuity term, the principal is used by Wake Forest for purposes originally designated by the donor.
EXAMPLE CALCULATION (Based on rates available July 2003)
Gift of $25,000 cash made by an individual age 65.
Gift to Wake Forest | $25,000 |
Annual income at 6.3% return | $1,575 |
Tax-free income | $940 |
Ordinary income | $635 |
Charitable income tax deduction | $6,280 |
