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Charitable Gift Annuities

While many alumni and friends recognize the importance of Towson University Foundation as an institution of higher learning, some do not believe they have sufficient resources to support their family and the university. Through Towson University Foundation's gift annuity program, you can find harmony between family and philanthropic interests, satisfying both objectives. Gift annuities benefiting Towson are offered through the University System of Maryland Foundation (USMF).

Gift Annuities Defined
A gift annuity is part gift and part annuity under which, in exchange for cash and/or securities, USMF agrees to pay a specified annuity* to one or two beneficiaries for life. These payments are backed by the full faith and credit of USMF. As with a commercial annuity, a portion of the annuity payment- sometimes a substantial portion — is tax-free over the annuitant's life expectancy as a return of investment. This further increases your after-tax dollars available for spending or investing.

But here the similarity with a commercial annuity ends. As the name implies, a gift annuity is also part gift. At the death of the last beneficiary, the annuity is terminated and the residuum is paid to Towson University Foundation. The residuum can be made as an unrestricted gift or designated for scholarships, a particular college or in any way you find particularly meaningful.

An annuity funded with appreciated property results in these additional advantages: (1) the gain allocated to the gift portion completely avoids the capital gains tax, and (2) the portion of gain to be recognized can be spread over the expected term of the contract (provided that the donor is a primary annuitant and the annuity interest is assignable for the benefit of Towson University Foundation).

Deferred Gift Annuities:
A deferred gift annuity is appealing to younger donors who wish to improve future income, such as at retirement, and reduce current income taxes. With a deferred payment gift annuity, the start of payments is delayed until a specific date, initially determined by the donor. Deferral of payments increases the initial income tax charitable deduction, tax savings and the annuity rate. However, it also reduces the nontaxable amounts to be received.

Understanding Annuity Rates*
Annuity rates are higher for older annuitants and lower for younger annuitants, based on life expectancy. As a result, gift annuity contracts are generally more appealing to older donors because the purchasing power of a fixed dollar return can shrink over any long period, even with modest inflation.

Rates are also adjusted according to the number of annuitants, with rates for two-life contracts often lower due to the extended life expectancy. The age of an annuitant is the age reached at the nearest birthday when the contract is made, and rates are the same for men and women.

At Towson, the rates used for charitable gift annuities are those recommended by the American Council on Gift Annuities and are redetermined periodically. Below you'll see how annuity rates increase with age. Check with Ann Kolakowski at Towson University Foundation for current rates.


One Life
Two Lives
Your Age Rate of Return Ages Rate of Return
65 6.0% 65/65 5.6%
70 6.5% 70/70 5.9%
75 7.1% 75/75 6.3%
80 8.0% 80/80 6.9%
85 9.5% 85/85 7.9%
90 11.3% 90/90 9.3%
*Charitable gift annuities are regulated by state insurance commissions and are not available in all states. The minimum size of a charitable gift annuity is $10,000. Contact Towson University Foundation for specific information.


A Case Study of Benefits
Linda, age 75, plans to donate a maturing $25,000 certificate of deposit. Since she needs continuing income, Linda decides to use the cash for a one-life charitable gift annuity that we will issue at the suggested rate of 7.1 percent. Payments will be made quarterly. At the time of purchase, the charitable midterm federal rate (a figure used in calculating the charitable deduction) is 4.6 percent.

Although Linda's annuity rate is 7.1 percent, her actual earnings will be higher. Because Linda itemizes income tax deductions, she earns a federal income tax charitable deduction of $10,742. With a marginal income tax rate of 28 percent, the tax savings of $3,008 will reduce the net cost of the gift to $21,992. Her annual payments of $1,775 will mean an effective rate of total return of 8.1 percent, which is Linda's annual payment expressed as a percentage of the net cost. Secondly, for the next 12.4 years, more than half of every dollar Linda receives will be considered a return of her investment in the contract and will not be subject to tax.

By linking to our gift calculator, you can ascertain how a charitable gift annuity can benefit you.

Calculate how a charitable gift annuity can benefit you


If you would like to receive more information about charitable gift annuities, e-mail Ann Kolakowski at akolakowski@towson.edu to request your free ebrochure. Then, we'll send you a copy of the brochure via e-mail.


Learn More
Charitable gift annuities are an excellent method of achieving your philanthropic goals and gaining substantial tax benefits. As with most contract agreements, before establishing a charitable gift annuity, it is best to consult knowledgeable professionals.

Towson University Foundation is available to answer any questions and provide projected results for your specific situation, in confidence and with no obligation.

Please contact Ann Kolakowski at 410-704-3899, or via e-mail at akolakowski@towson.edu, before making such an arrangement for an illustration of how a charitable gift annuity can benefit you.

*Gift annuities benefiting Towson University Foundation are offered through the University System of Maryland Foundation.


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