A charitable gift annuity is a combination of a gift and an investment. In exchange for a gift of $5,000 or more (either in the form of cash or readily marketable securities), you will receive a fixed sum on a regular basis from Hillsdale College throughout your lifetime.

The benefits you can receive from a gift annuity are substantial:

• Guaranteed life income - a portion of which is tax-free
• Charitable contribution deduction
• Capital gains tax savings
• Estate tax savings
• Establishment of a charitable legacy
  

The annuity payout is based on the ages(s) of the annuitant(s), with older donors receiving a higher payout than younger donors (see table of one life rates or table of two lives rates).  Part of your income will be tax-free.

You can claim a charitable contribution deduction in the year of the gift for the portion of the gift's value which exceeds the value of the annuity you receive.  You may also specify how your gift will be used by Hillsdale College.
 

Appreciated Securities

By making gifts of appreciated securities to the annuity program, you can reduce any potential long-term capital gains tax which would be due upon sale.  The total capital gain is split into two parts: gain assignable to the annuity and gain assignable to the gift.  You pay no capital gains tax on the portion assigned to the gift.  The remaining part is spread out over your actuarially determined life expectancy.  Thus, your income payments are taxed as ordinary income, capital gain and tax-free return of principal.  If you outlive this estimate, your entire income is taxed to you as ordinary income.
 

Deferred Gift Annuity

As the name implies, the deferred gift annuity is useful for those who need to benefit from a current income tax deduction, while deferring income until some point in the future (most commonly, at retirement).

Depending on the period of deferral and the age of the annuitant, the payout rate for a deferred annuity can be quite a bit higher than that of a regular gift annuity.  At the end of the deferral period, the income payments are once again split into two or three parts, depending on the nature of the original investment (cash or appreciated securities).

For gifts of long-term appreciated securities, the gain assignable to the annuity is reported when payments begin and, thereafter, proportionately over your actuarial life expectancy.
 

College-Funding Option

Alternately, the deferred gift annuity may be used to fund a college plan for a young child or grandchild, with income payments going to the child during his or her college years. This income will be paid regardless of which school the child chooses to attend.
 

Security of Payments

A gift annuity is a contract between you and Hillsdale College and is backed by the College's assets.  You need not be concerned about the performance of the stock market or interest rates.  Your return is guaranteed by the College.
 

Tax Reporting

Hillsdale College will furnish you with a worksheet that shows the amount of your charitable income tax deduction and will prepare the necessary IRS Form 1099-R detailing your income payments under this plan. This form will be sent to you in January of each year. For property contributions over $500, you will also need to file Form 8283.

If you would like a complimentary and personal illustration of a gift annuity prepared for you, please click here.