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Investing FAQs

What is a charitable gift annuity, and how does it help the Library?

A charitable gift annuity is an irrevocable gift of $10,000 or more to the Cary Memorial Library Foundation that guarantees you or your designee income for life. It is a contract by which a donor transfers cash or other property to the Cary Memorial Library Foundation. In return, the Foundation agrees to pay a fixed sum of money to the annuitant (or “beneficiary”) for a period measured by one or two lives. The donor is usually, but not necessarily, the annuitant. The maximum number of annuitants is two. Payments can be made to them jointly or successively. When the last individual annuitant dies, the gift annuity terminates and the remaining assets are used to support the Library according to the wishes of the donor.

How are charitable gift annuity payments paid?

Payments from a charitable gift annuity are fixed from the outset. They do not fluctuate. The Foundation is contractually obligated to make the payments, even if it means dipping into its general funds to do so. Payments are made on a quarterly basis.

What is the amount of the payments?

The amount of the payments from a charitable gift annuity depends on (1) the age(s) of the annuitant(s), (2) the number of annuitants, (3) the value of the contribution, and (4) the gift annuity rate offered by the Foundation.

What rates are used to determine gift annuity payments?

The Foundation offers charitable gift annuity rates recommended by the American Council on Gift Annuities.

Is a charitable gift annuity right for me?

Most gift annuity donors are retired, want to increase their cash flow, seek the security of guaranteed payments, and would like to save taxes. You might want to consider a charitable gift annuity if:

  • The interest rates on your CDs or other fixed-income investments have declined, and you would like to increase your cash flow.
  • You own appreciated stock or mutual fund shares and have considered selling some of the shares and reinvesting the proceeds to generate more income, but have hesitated because you don’t want to pay tax on the capital gain.
  • You would like to count on fixed payments, which are unaffected by interest rates and stock prices.
  • You want to assure continuation of payments to a surviving spouse without the delay of probate proceedings.
  • ​You wish to provide financial assistance to an elderly parent, sibling, or other person in a tax-advantaged manner.

How are gift annuity payments taxed?

If the gift annuity is funded with cash, part of the payments will be taxed as ordinary income and part will be tax-free.

If funded with appreciated securities or real estate owned more than one year, and the donor is the annuitant, part of the payments will be taxed as ordinary income, part as capital gain, and part may be tax-free.

The Foundation’s administrator will send a Form 1099-R to the annuitant each year. This form will specify how the payments should be reported for income tax purposes.

For details on the taxation of gift annuity payments, please consult the Foundation as well as financial advisors.

Are income tax charitable deductions available?

Taxpayers who itemize deductions can claim a charitable deduction for a portion of the original gift. The deduction is equal to the amount of the contribution less the present value of the payments that will be made to the annuitant during life. The present value is determined using IRS tables regarding life expectancy and assumed earnings, and taking into consideration the amount contributed and the gift annuity rate.

How do I establish a charitable gift annuity with the Cary Memorial Library Foundation?

  • Contact the Cary Memorial Library Foundation’s Director of Development at 781-862-6299 extension 322, or cmlfoundation@carylibrary.org , and explain that you are considering establishing a charitable gift annuity to benefit Cary Memorial Library.
  • You should contact an attorney or financial advisor regarding the amount of payments, how they will be taxed, and the charitable deduction generated by the gift.
  • Establish with the Library and the Foundation the charitable purpose of your gift.
  • Execute a contract with an authorized representative of the Foundation, and transfer the assets to the Foundation. The gift is now complete.