Question Category: Planned Giving
Question
How does an organization begin a Gift Annuity program?
Answer
In essence, a gift annuity is a contract between the donor and your organization saying that in exchange for a gift of x (say $100,000) you will pay the donor and up to one other person a specific amount (say $5,600 based on a 5.6 per cent rate for persons of their ages) for life. The underlying planning assumptions project that you will end up with about half of the gift ($50,000) when they die and your payment obligation ends. A few organizations reinsure this commitment and use the balance of the gift ($100,000) left after purchasing a commercial gift annuity for current purposes, but that can have its downsides.
BEE strongly recommends that as a first step you go to the web site of the American Council on Gift Annuities (www.ACGA-web.org) to get basic background on the philosophy of gift annuities and how they are established. Then, determine what legal requirements your state has set for you to offer such arrangements (some require registration and a reserve fund among other things). You will also need to get legal counsel to develop a contract (these are typically fairly simple one-page agreements). BEE suggests that you adhere to the ACGA recommend rates. Finally, you should get the strong endorsement of your board after you have informed them of the implications of such a program.
In addition to legal counsel, BEE recommends you get experienced planned giving counsel as well before beginning a program.
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