SPRING 2025

Charitable Gift Annuities: A Smart Giving Strategy with Lifetime Benefits

Advisors are seeing a growing interest in charitable gift annuities (CGAs) among their clients. The appeal is clear: CGAs provide a reliable, fixed income stream for life, offer an immediate charitable tax deduction, and ensure that a meaningful gift supports a favorite nonprofit in the future.

This renewed interest in CGAs is driven by several factors.

A $54,000 Opportunity

Word is finally getting out about the availability of a one-time qualified charitable distribution (QCD) transfer via a split-interest gift such as a CGA or a charitable remainder trust (CRT) under the Legacy IRA provisions enacted a couple of years ago. Adjusted for inflation, the ceiling for 2025 is $54,000. Because the law effectively mandates that the CGA or CRT be created solely for the purpose of receiving a QCD, your clients may gravitate toward the CGA, which is less complicated than going through the process of creating a relatively small CRT.

Payout Rates are Still High

Current charitable gift annuity payout rates, as suggested by the American Council on Gift Annuities (ACGA), are generally higher than in previous years. Rates were increased in January 2024 and remain in effect for 2025. With the status of interest rates unpredictable as 2026 approaches, some clients may want to take advantage of a CGA this year.

So what do you need to know about how and why a charitable gift annuity can be an effective planning tool for some clients? Here are the basics:

• Through a charitable gift annuity, your client makes a transfer of assets to a charitable organization and in return receives a lifetime income stream and a partial tax deduction.
• When the client dies, the remaining funds are retained by the charity.
• The charitable donation portion of the transaction is calculated based on IRS rules for determining the amount of the contribution that is in excess of the present value of the annuity (these are the rates that are relatively high right now).
• Your client can fund a charitable gift annuity with a variety of assets, including marketable securities and cash. 
• Actuarial calculations are used to establish the payout amounts, paid in equal installment payments that are considered a partial tax-free return of the client’s original gift.
• Generally a large residual flows to the charity after the client’s death.
• The charity’s own assets, not just the donated assets themselves, back the annuity payouts. Because of this dynamic, charitable gift annuities are regulated by most states to ensure that the charity has enough reserves to meet obligations.

The State of Hawai‘i requires charities offering CGAs to be registered, and HCF’s CGA program has been available to donors for more than 25 years. Here are a few basics to know about HCF’s CGA program:

• A CGA is considered when requested by an existing donor.

• ACGA (American Council on Gift Annuities) rates are applied.

• Minimum donor age is 65 years.

• Maximum amount is $500,000 (exceptions may apply if funded with real estate).

• Minimum amount is $50,000.

• Remainder of CGAs go to HCF’s Catalyst Fund, which supports HCF’s ability to anticipate and address the future needs of Hawai‘i and its residents, including allowing us to rapidly respond to urgent community needs like the recent fires in Maui and the COVID pandemic.