Gift Annuity Rates Are Up, Fund with Your IRA
Have you been thinking about a charitable gift annuity? Now is the time to take another look because payout rates for new gift annuities are the highest they have been since 2008, and recent legislation created a new funding opportunity for charitable gift annuities with IRA assets.
What do the new charitable gift annuity rates mean?
Rates increased for all age levels for both one-life and two-life charitable gift annuities.
| One Life | Two Lives | ||||
| Age | Previous Rate |
Rate Effective 1/1/2024 |
Ages | Previous Rate |
Rate Effective 1/1/2024 |
| 65 | 5.4% | 5.7% | 65-65 | 4.7% | 5.0% |
| 70 | 5.9% | 6.3% | 70-70 | 5.2% | 5.5% |
| 75 | 6.6% | 7.0% | 75-75 | 5.8% | 6.2% |
| 80 | 7.6% | 8.1% | 80-80 | 6.5% | 6.9% |
| 85 | 8.7% | 9.1% | 85-85 | 7.7% | 8.1% |
| 90 | 9.7% | 10.1% | 90-90 | 9.4% | 9.8% |
The benefits of a charitable gift annuity completed after January 1, 2024, include:
- Locking in the new, higher rates.
- Achieving the satisfaction of making a meaningful difference with your gift.
- Enjoying the security of guaranteed income payments for life.
- Obtaining relief from taxes. You may be able to claim an income-tax charitable deduction, and each payment may be partly tax-free for your life expectancy.
New Funding Opportunity! You Can Now Receive Life Income by Making an IRA Charitable Gift
Since 2006, it has been possible for persons who have an IRA and who are 70½ or older to make a direct, tax-free transfer of funds from their IRA to one of more charities and have the amount transferred count towards any required minimum distribution (RMD). The maximum amount that could be transferred in any year was initially $100,000, but, beginning in 2024, that amount was adjusted for inflation. Taking into account the inflation adjustment, the ceiling for 2025 is $108,000.
Starting in 2023, it is also possible for an IRA owner to make a one-time transfer of IRA funds for a life-income plan (gift annuity or charitable remainder trust) that will pay income to the donor and/or the donor’s spouse. The maximum amount started at $50,000 in 2023, but it is also adjusted for inflation. Taking into account that adjustment, the ceiling for 2025 is $54,000.
In the year in which a donor might transfer IRA funds both for a direct (outright) gift and a life-income plan, the combined limit in 2025 is $108,000. For example, in 2025 the IRA owner could transfer $54,000 for a life-income plan, such as a gift annuity, and $54,000 for an outright gift.
Example of new provision: Rachel, aged 75, has $800,000 in her IRA, and she has been considering a gift of $50,000 made with IRA funds. If she transfers $50,000 as an outright gift, the charity will have $50,000 to use now—but afterwards she will have only $750,000 to earn income and be distributed. If she transfers the $50,000 for a gift annuity, she will receive for life $3,500 per year and $750,000 will remain in her IRA to earn income and be available for distributions. The combination of IRA distributions and annuity payments enables her to sustain her income while making a gift.
The Type of IRA Gift Depends on Your Situation
If your IRA balance plus other assets are more than enough for a secure retirement, consider an outright transfer of IRA funds—as you may have been doing. Your gift will go to work right now for the cause you want to support.
If you want to make a gift that satisfies all or part of your distribution requirement but also pays life income, transfer some of your IRA funds for a gift annuity or a charitable remainder annuity trust or remainder trust. Because of the low minimum size, a gift annuity will be more common.
Consult Us for Information
Contact our office for an illustration showing what you would receive if you fund a life-income plan with your IRA and for an explanation of the procedure for making such a gift.
The information contained herein is offered for general informational and educational purposes. The figures cited are accurate at the time of writing. State law may affect the results illustrated. This is not legal advice. Any prospective donor should seek the advice of a qualified estate and/or tax professional to determine the consequences of their gift. Annuities are subject to regulation by the State of California. Payments under such agreements, however, are not protected or otherwise guaranteed by any government agency or the California Life and Health Insurance Guarantee Association. A charitable gift annuity is not regulated by the Oklahoma Insurance Department and is not protected by a guaranty association affiliated with the Oklahoma Insurance Department. Charitable gift annuities are not regulated by and are not under the jurisdiction of the South Dakota Division of Insurance.
© Pentera, Inc. Planned giving content. All rights reserved.
Disclaimer