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Charitable Gift Annuity

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CGA is actually not a trust but a contract between the donor and the charity whereby the door irrevocably transfers assets to the charity and the charity promises to pay certain amount of fixed income every year to no more than two beneficiaries, usually beginning immediately (but it may be deferred.) Income payments depend on the initial amount contributed and the ages of the income beneficiaries. The door receives an income tax deduction in the amount equal to the charity’s remainder interest. Typically, CRUT is preferred for older beneficiaries who want a guaranteed fixed income for the rest of their lives. The donor receives an income tax deduction equal to the difference between the fair market value of the gift and the present value of the annuity. As in CRT above, donors who do not need income may assign their future income stream to the remainderman (charity) presently and receive significant deductions, especially when interest rates are low.