Published: Spring 2008 in Giving

When Giving Means Receiving

With a gift annuity, you can make a gift to Westmont to support students and receive a tax deduction and income for life
Many alumni, parents and friends say they’d like to make a gift to Westmont, but their income is limited and they’re worried about retirement. They’re not sure their donation would be significant enough to make a difference — and they think they need to be putting funds aside for the future.

In truth, every single gift matters and helps Westmont. Contributions of all types and sizes join together to provide essential resources for students and faculty. And it’s not necessary to choose between philanthropy and planning; donors can do both.

Individuals preparing for retirement — and those already retired who want to increase their income — have an attractive option for supporting Westmont while assisting themselves at the same time: a charitable gift annuity.

In this legal contract, donors make a gift to Westmont and receive income for life. The annuity rate of return, set by the American Council on Gift Annuities, depends on the age of the recipient and increases with age. Annual payments can begin immediately or be deferred until retirement. The donor claims an immediate tax deduction, and a portion of the payment is tax-free.

While people of all ages and situations can benefit from a gift annuity, two groups are especially likely to appreciate the income and tax savings: those actively planning for retirement and retirees.

With life spans getting longer, people are focusing more time and attention on their income after they stop working. How will they fund their retirement? Will they have enough? What is the best use of their assets? A deferred annuity may provide answers, especially for those with highly appreciated stock or real estate. Cashing in the asset will trigger a capital gains tax, but using it to fund a gift annuity decreases the tax obligation and converts it into income, some of which is tax-free.

Consider the case of a 50-year-old couple who invested $20,000 in stock now worth $80,000. Applying it to a deferred gift annuity with Westmont avoids the capital gain and results in significant tax savings in the year it’s donated, about $42,000. A formula determines the exact deduction, and the annual payments (about $11,800) are partially tax-free and continue until both spouses pass away. Projected payments could be as much as $293,820. The amount left in the fund (about $100,000) goes to Westmont.

Retirees whose incomes have dropped because of declining interest rates will also benefit from a gift annuity. The older the donor, the higher the payout. An 84-year-old may be earning as little as 4 percent with a CD, but will receive 8.6 percent with an annuity — and make a gift to Westmont and receive a tax deduction at the same time. Even converting only part of the CD to an annuity will increase income and reduce taxes.

To explore how you could benefit from a Westmont gift annuity, contact the Office of Gift Planning at (805) 565-6058, giftplanning@westmont.edu or see www.westmontlegacy.org.

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