Below are some commonly asked questions about gift annuities:
1. If I live beyond my projected life expectancy, will my payments continue?
Absolutely. Your payments are guaranteed no matter how long you live.
2. I would like payments to continue to my spouse if I die first. Is that possible?
Yes. Married persons typically provide for payments to be made over both of their lives. When the first spouse dies, the payments continue at the same level to the survivor.
3. Can a beneficiary receive payments for a term of years rather than life?
Yes. You can specify that payments be made to you or another beneficiary for a certain period of time – 10 or 15 years, for example. The amount of the payments will decrease as the length of the period is extended.
4. Could I name someone other than a spouse as the second beneficiary?
Yes. For example, you could have the payments made to yourself and then to a sister or brother if that person survives you.
5. Could I name someone other than myself as beneficiary from the very beginning?
Again, yes. You could create a gift annuity to provide additional support for an aged parent, or for a sister or brother who needs financial assistance. However, if you name a spouse as the beneficiary, any taxable income paid to him or her may be attributed to you for taxation purposes.
6. Does the number of beneficiaries affect the annuity rate?
Having two beneficiaries, rather than one, will reduce the size of the payments. For instance, the annuity rate for one beneficiary, age 70, will be higher than the annuity rate for two beneficiaries, both age 70. That is because their joint life expectancy is longer than the life expectancy of either of them alone.
7. What is the minimum amount required to establish a gift annuity?
That depends on the policy of the particular church or charity. Some churches and charities require a minimum contribution of $10,000. Others have lower minimums. The minimum required by The Anglican Church of Canada is $1,000 for our self-insured annuities and $10,000 for those reinsured by an insurance company.
8. What kind of assets can I contribute for a gift annuity?
Almost all contributions consist of cash. The church would usually accept listed securities and mutual funds, but you would be taxed on any capital gain realized. (If you make an outright gift or establish a charitable remainder trust, then it can be advantageous to contribute appreciated listed securities and mutual funds.)
9. How does the church benefit from my contribution for a gift annuity?
If the church self-insures your gift annuity, it will use for charitable purposes the portion of your contribution that remains at the end of the beneficiary’s(ies’) life (lives). This could be more or less than your original contribution. If the church reinsures your gift annuity, it can spend or invest the portion of your contribution that remains after purchasing an annuity from an insurance company that covers the payment obligation. When this remaining portion is invested in the church’s endowment, it often equals or exceeds the original contribution by the end of the life (lives) of the beneficiary(ies).
Thus, churches that self-insure and churches that reinsure often realize similar benefits. Eight per cent of your contribution is allocated by General Synod for its current ministry and programme in the case of a self-insured annuity, with an annual administration fee of 1.25% based on the remaining capital at the end of each year. Five percent of the contribution is allocated for this ministry in the case of reinsured annuity agreements.
10. Can I direct the use of my gift?
Most churches and charities permit you to designate the use of the funds they realize, after taking into account the annuity obligation, subject to their guidelines. If your contribution is large enough, it may also be possible to establish an endowment named for you and/or other family members. In the case of the Anglican Church, you may direct your gift to your parish church, diocese, to General Synod, The Anglican Foundation of Canada, The Primate’s World Relief and Development Fund, or to a recognised Anglican theological college or other related ministry or programme.