Legal Definitions - charitable gift annuity

A charitable gift annuity is a type of annuity agreement between an individual and a charity that has been approved by the government. The individual pays a sum of money to the charity, and in return, the charity provides regular payments to the individual for the rest of their life. The amount of the payments is based on the individual's age and the amount of the contribution.

For example, let's say that John wants to make a donation to a charity. He decides to set up a charitable gift annuity with the charity, and he contributes $50,000. The charity agrees to pay John $3,000 per year for the rest of his life. If John lives for another 20 years, he will receive a total of $60,000 in payments from the charity.

One of the unique features of a charitable gift annuity is that the charity will receive any remaining assets after the individual passes away. For example, if John were to pass away after receiving $40,000 in payments, the charity would receive the remaining $10,000.

In addition to providing a regular income stream, a charitable gift annuity can also provide tax benefits for the individual. By making a charitable donation, the individual may be able to reduce their income and capital gains taxes.