In short
In a charitable gift annuity, a donor transfers assets to a charity in exchange for fixed payments for life. The donor deducts the excess of the assets' value over the present value of the annuity.
Key takeaways
- Part of each payment is a tax-free return of investment, part ordinary income and, for appreciated property, part capital gain.
- Payments are backed by the charity's general assets, not a separate trust.
- It is simpler to set up than a charitable remainder trust.
Where it's tested
TCP: Estate & Gift Tax Planning — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A client's total estate is well below the $15 million exemption. The client asks whether to gift highly appreciated stock to children now or hold it until death. From a pure tax standpoint, which is generally better and why?