Deferred Gift Annuity

What is a Deferred Gift Annuity?

In exchange for your irrevocable gift of cash, securities, or other assets, Earlham agrees to pay one or two annuitants you name a fixed sum each year for life. Payments can be deferred until the point in your life when you or your income beneficiary are going to need additional income, like for retirement or college tuition. The older your designated annuitants are at the time of gift and the longer payments are deferred, the greater the fixed income Earlham can agree to pay.

In most cases, part of each payment is tax-free, increasing each payment's after-tax value. If you give appreciated property, you will pay capital gains tax on only part of the appreciation. In addition, if you name yourself as an annuitant the capital gains tax will be spread out over many years and the first installment will not be due until you receive your first annuity payment.

Payments are usually made annually, semiannually, or quarterly.

Minimum Gift Required:     $10,000

• Please send a calculation for a Deferred Gift Annuity (information will be treated confidentially).

Benefits Include:

1. You will qualify for a federal income tax deduction.
   Note that deductions for gifts of long-term appreciated property will be limited to 30% of your adjusted gross income and gifts of cash and non-appreciated property will be limited to 50% of your adjusted gross income. You may, if necessary, take unused deductions of either kind over the next five years, subject to the same 30% or 50% limitation.

2. The annuitants you name will receive fixed annual income for life, guaranteed by the general resources of Earlham, starting in the year you choose.

3. If you fund the annuity with an appreciated asset, you will incur tax on only part of the gain. If you name yourself as an annuitant, this tax will be spread out over many years and the first installment will not be due until after you receive your first payment.

4. Your estate may enjoy reduced probate costs and estate taxes.

5. You will provide generous support of Earlham.

Deferred Gift Annuity Examples

Mary Barrett is 56 years old and plans to retire when she 65 years old. She gave the College $25,000 in exchange for a charitable gift annuity that will begin to make payments to her in nine years when she will be looking for supplemental income during retirement. At the time of the gift, she received a charitable deduction of $11,135, which she can spread out over a six year time period if needed.

When she turns 65, she will begin to receive 10.9% annually from her investment with Earlham ($2,725) which will continue for her entire lifetime. In addition, since Mary used cash to fund her annuity, about one-third of her annual income will be tax-free.