18. Navigating Generosity: Charitable Gift Annuities

In this episode of Navigating Generosity, Nicole Donelson sits down with David Torre to explore how charitable gift annuities (CGAs) can enhance the value you bring to client conversations. From retirement income strategies to charitable tax deductions, CGAs offer a unique way to align financial planning with philanthropic goals.

You’ll walk away with practical talking points, planning considerations, and a better understanding of how the Central Florida Foundation can serve as a trusted partner—not just for executing CGAs, but as an extension of your advisory team in philanthropic planning.

🎧 Whether you’re guiding clients through retirement or legacy decisions, this episode will equip you with the tools to introduce CGAs with confidence.

Guests:

• David Torre, CEPA®, CFP®, AEP®, TEP®, CAP® | Wealth & Philanthropy Strategist
• Nicole Donelson, CAP® | Director of Community Engagement, AdventHealth

Navigating Generosity is an off-shoot of First You Talk, Central Florida Foundation's podcast focused on breaking down complex social issues. Navigating Generosity episodes are designed for professional advisors and anyone who wants to be better informed when discussing charitable giving with their advisors. Our hosts include Chartered Advisors in Philanthropy® and other professionals in this field, including wealth and financial advisors.

Visit the First You Talk website.

Visit the First You Talk Podcast on Instagram.

Visit Central Florida Foundation's Instagram.

As our region’s community foundation, Central Florida Foundation serves as a launchpad for high-impact philanthropy. Championing the collective power of head, heart and dollar, we coordinate the commitment and investment of philanthropists, nonprofits, and community partners to target today’s most critical challenges and those on the horizon to truly transform our community. The Foundation also offers expert giving advice, a personalized approach to managing charitable funds, and the capacity to convene collaboration across sectors. Learn more at cffound.org.

Transcript

Transcript

00:00:00 Nicole Donelson

All right. I'm thrilled to be here with David Torre for another episode of navigating Generosity. David, it's  good to see you.

00:00:10 David Torre

It's very good to see you as well, Nicole. Thank you.

00:00:12 Nicole Donelson

Now I  to think that everyone is following each episode and listening back-to-back, but since there may be some new listeners, would you mind taking a second and  introducing yourself?

00:00:24 David Torre

Sure, sure, absolutely. And welcome to the new listeners. My name is David Torre and I'm a wealth and estate planning strategist based in Winter Park, FL.

00:00:33 David Torre

I'm also an adjunct instructor at the Edith Bush Institute for Philanthropy and nonprofit leadership at Rollins College, and I should add to that.

00:00:41 David Torre

Nicole.

00:00:42 David Torre

That in my world I have to give. I pride myself on my disclaimers.  in the spirit of disclaimers which  are near and dear to my heart.

00:00:53 David Torre

You'll have to say that the views and opinions expressed in this podcast are solely my own. This podcast is for informational purposes only and does not constitute financial, legal, tax or professional.

00:01:08 David Torre

Nice.

00:01:09 Nicole Donelson

Wow. Wow, that was really, really well done.

00:01:10 David Torre

Yes.

00:01:12 David Torre

Done and done.

00:01:13 Nicole Donelson

I almost want to call it there.  That is an episode in itself.

00:01:17 David Torre

It really is. It really is. There's an art to disclaimers and I feel I'm getting better at them. Yeah, I feel we're making progress.

00:01:22 Nicole Donelson

I think you are getting better every time.

00:01:26 Nicole Donelson

Today we're going to be talking about charitable gift annuities and because there.

00:01:32 Nicole Donelson

Is.

00:01:33 Nicole Donelson

Not it's not philanthropy, unless we make an acronym out of it.  We also refer to this as a CGA, and I'm not, in the world that you and I are in, we know what CGAs are, however, even for advisors out there and kind of

00:01:42 David Torre

Correct.

00:01:52 Nicole Donelson

The general person who's philanthropic, they may not be familiar with the charitable gift annuities.  David, can you give us a little bit of the high level? What is a charitable gift annuity?

00:02:03 David Torre

Yes, absolutely. And yes, this is a new addition to our alphabet soup toolbox, CGA.

00:02:10 David Torre

Charitable gift annuity is a very common.

00:02:14 David Torre

Planned giving vehicle and has been around for a long, long time. In fact, it's one of the oldest planned giving vehicles. Historically, many of the early charitable gift annuities came out of.

00:02:27 David Torre

faith-based denominations and nonprofit hospitals, and the local communities from the 19th, 18th century, and they're still with us very much with us today.  Charitable gift annuities, I think in keeping with our theme of

00:02:45 David Torre

Adding more vehicles to our litany here as that we're going to discuss, this is the next in line after bequests, retirement accounts, donor advised funds. Now we're into CGA's charitable gift annuities.

00:02:58 Nicole Donelson

Taking it up a notch.

00:02:59 David Torre

We're taking it up a notch and at its basic core, a charitable gift annuity is a very simple, straightforward annuity contract between a donor and a nonprofit or charitable organization, whereby the donor gives some property to the nonprofit, whether it's cash or stock or some other

00:03:19 David Torre

Valuable asset.

00:03:21 David Torre

In return, the nonprofit agrees to pay the donor an agreed upon percentage, interest rate percentage for the rest of their life, and you might be, yes. And you might be wondering, why would anyone do this? And we're going to talk about that in this episode. But at its core, that is the basic kind of.

00:03:31 Nicole Donelson

It's amazing.

00:03:40 David Torre

Two party simple annuity contract.

00:03:43 Nicole Donelson

OK. And the donor is receiving a deduction for this, correct?

00:03:48 David Torre

Correct. One of the main differences between a commercial annuity that you might buy from an investment company or an insurance company, we've all seen ads,

00:03:58 David Torre

is that you're making this

00:04:01 David Torre

Contract with a nonprofit entity. Some portion of that gift is a charitable gift, meaning it calculates for a charitable deduction and the return amount of stream of payments that the donor receives are based on whatever formula or calculation that the two parties.

00:04:22 David Torre

Agreed to when they enter the contract. Typically it's a set percentage.

00:04:26 David Torre

The rate.

00:04:27 David Torre

That's based on the age of the donor at the time of the gift, right?  Most of the charities that are doing these will publish a schedule, they'll say, OK, at 70 years old, we will pay out 7% at 80 years old. We'll pay out 8% and  on and  forth. And once that contract is entered into and the.

00:04:48 David Torre

Payments change hands, so to speak. The gifts change hands. That rate is locked in for the life of the donor.  Very quickly for a simple.

00:04:58 David Torre

Example, if I gave a $10,000 gift to a charity and they said at your age at that amount of gift we will pay you 5% for the rest of your life.  I give them the 10,000 up front and then for the rest of my life I get 5% of that 10,000 which is quick math.

00:05:20 Nicole Donelson

$500.

00:05:21 David Torre

$500.

00:05:23 David Torre

The look of fear in Nicole's eyes.

00:05:25 Nicole Donelson

Don't put me on the spot to do math. It was my it was my favorite subject, but wow.

00:05:27 David Torre

Was that?

00:05:28 David Torre

Worth it that?

00:05:28 David Torre

Worth it?

00:05:30 David Torre

Woo. Wow. That was that was. Yeah, it's.

00:05:32 Nicole Donelson

Can we cut the pause on that and make it sound faster?

00:05:34 David Torre

This was a fastball.

00:05:36 David Torre

That was a fastball. Yes. So $500 payment each and every year for the rest of my life as a.

00:05:43 David Torre

Donor.  You can imagine depending on the numbers, depending on the rate, it could be quite an attractive payment stream for the donor as well.

00:05:51 Nicole Donelson

Something to not this is not a part of the contract for CGA, but I do think that the running joke in philanthropy is that if you want to live forever, take out a CGA.

00:06:03 Nicole Donelson

Because as you said, this is guaranteed for the rest of their life.  These formulas are really based on what's anticipated to be, quote UN quote “the rest of your life,” based on.

00:06:16 Nicole Donelson

different charts that kind of indicate what you're expected to live to, but what happens if a donor outlives that?

00:06:25 David Torre

Yes.  I don't want to burst the bubble for anybody listening, but there are numbers on each and every one of us. The IRS has actuarial tables. The insurance industry has actuarial tables that will very precisely calculate what the life expectancy is for any given person based on their.

00:06:45 David Torre

Birthdate, , health factors, whatever. And  the obligation of the charity is for the rest of the donors life.  when you do the calculations  as a round Number, say,  someone's 70 years old, they enter into one of these contracts, you plug their birthday into the software and the software.

00:07:06 David Torre

Says we expect them to live 16.4 more years.

00:07:11 David Torre

You enter into the contract under those assumptions, but that person might live 20 or 25 or even longer nowadays, and it doesn't really matter because when you enter into that contract, it is signed, sealed, and delivered, and it's irrevocable.  The charity is on the hook for both payments till the end of that

00:07:30 David Torre

Person’s life.

00:07:32 David Torre

To your point about living forever, there are lots of anecdotal examples of people living well past their life expectancy, and the, the joke is, well, they're hanging on to get another CGA check, whether that's - there's a little bit of tongue in cheek there. But yeah, it could be.

00:07:48 Nicole Donelson

Right, right.

00:07:53 David Torre

Next day it could be 40 years from now. It's a little bit of the of the unknown in terms of.

00:08:00 David Torre

00:08:01 David Torre

the probabilities of these things.

00:08:03 Nicole Donelson

Why might somebody want to think about a charitable gift annuity or, or even for advisors to be thinking about it? Because it may not be the advisor that is  the one recommending it. It could be more often than not, it's likely  the client.

00:08:21 Nicole Donelson

Bringing it up to their advisor because it's something that they've learned about through a nonprofit that they support.  who's kind of a who's a good profile for this type of gift.

00:08:33 Nicole Donelson

And why might it be advantageous, especially outside of giving an outright donation to the nonprofit?

00:08:41 David Torre

Correct. The one of the reasons this is such a staple in the planned giving world because a lot of plan giving is giving with assets and a lot of plan giving involves the strategy involves.

00:08:53 David Torre

Giving some portion of the asset, but maybe not all of it right away, there's some amount of now and then or income versus principal down the line or some splitting off of that asset. And the CGA fits right in there. Typically with clients or donors that I've worked.

00:09:11 David Torre

When I've seen these, it's usually in the context of retirement planning.

00:09:15 David Torre

Generally CGA donors are going to skew a little bit older because of the math and all the probabilities we discussed right. We don't want to the charity's not going to want to do a CGA with a 20 year old triathlete right? That’s not a worthy risk to take. But oftentimes the client is planning their overall retirement.

00:09:35 David Torre

They have pools of assets and they're trying to derive income for their retirement from those various assets.  Whether it's cash or even better sometimes is some kind of.

00:09:48 David Torre

Appreciated asset that if they realized the appreciation, they would be taxed on that. But they know it's appreciated, right?  The typical is the stock they've held for 40 years. That's the basis is a dollar a share and now it's $500 a share or what have you and they know it's there. It's a valuable asset, but they can't quite turn it into.

00:10:09 David Torre

A guaranteed income stream, or at least a dependable income stream.  one strategy might be OK. I have this pool of assets I want to get X amount of income out of that, and I don't want the risk of it being up and down, depending on the market or what have you.

00:10:25 David Torre

And the charitable gift annuity, in a commercial annuity, could solve that problem, right. You're exchanging some pool of asset now for a guaranteed set it and forget it. Type payment for the rest of your life. And the charity themselves has to back that with all of their assets.

00:10:39 Nicole Donelson

Mm-hmm.

00:10:46 David Torre

That they have as an as an entity, right? They are obligated for the rest of that donor’s life. But, assuming it's a stable charity with assets and endowment, and we're not really worried about that.

00:10:58 David Torre

From the advisor’s point of view, you might be able to find a pretty attractive payout for your client.

00:11:05 David Torre

Which is solving one problem. You might be able to avoid a hefty capital gain depending on the asset you might use to fund it, which is.

00:11:12 David Torre

Another.

00:11:13 David Torre

Great problem to solve and you could help the client get a charitable deduction or otherwise.

00:11:20 David Torre

Check off a box charitable that they want to check off anyway, right? And there's a little bit of flexibility, creativity, but it can very much fill that niche in the overall planning for your client.

00:11:34 Nicole Donelson

What David is anticipated to be in an ideal state if the.

00:11:40 Nicole Donelson

CGA works out as it's supposed to, what's left behind then for that nonprofit because there is charitable intent.

00:11:48 David Torre

There is charitable intent, it's a bit of a,

00:11:51 David Torre

from the charities point of view, you want to have a fairly large diversified pool in your charitable gift annuity program, right? We don't want to have two donors in there if we can help it, right? It’s just like anything else, insurance wise. You want to spread out the risk.  You want a range of ages, a range of dollar amounts.

00:12:11 David Torre

Different rates of return and throw it all in.

00:12:14 David Torre

I've seen some rules of thumb out there, where if the charity can net 50% of the face value. So, I don't know if we mention the beginning, but when the when the donor passes does finally pass away whatever's left in that gift goes to the charity outright; It's a bit of a deferred gift, right?  I'm giving the charity.

00:12:30 Nicole Donelson

Right.

00:12:34 David Torre

My money or my assets, they're going to then invest it, hopefully well,

00:12:41 David Torre

Pay my return every year, right?  Hopefully they're paying me 5% as the donor. Hopefully they're earning 6, 7, 8, whatever on the investment, and then the triggering event is when I pass away.

00:12:54 David Torre

They stopped the payments and whatever's left in there they immediately can put to their mission and their.

00:13:01 David Torre

Use. If you add it all up for a charity, the big pool of donors say you have $1,000,000 face value of charitable gift annuities. You hope by the time it all kind of cycles through over time that the charities netting at least 500,000 of usable dollars. Once all those donors pass away.

00:13:19 Nicole Donelson

You took my math opportunity.

00:13:21 Nicole Donelson

I was going to say, in your earlier example of 10,000, I, as the nonprofit would hope to have at least 5000 remaining and.

00:13:29 David Torre

Yes.

00:13:31 Nicole Donelson

And I wanted to show you my excellent math skills there.  coming back full circle.

00:13:34 David Torre

It's I have a I have a Gold Star for you. I'll put it on your

00:13:37 Nicole Donelson

Thank.

00:13:39 Nicole Donelson

On my chart on the wall.

00:13:39 David Torre

Quiz.

00:13:40 David Torre

Yes, it's – that's  a rule of thumb now. There's, obviously you want to do better than that if you're the charity. And it really does matter. It's very dependent on the interest rates. Those go up and down basically every month. There's a group called the

00:13:54 David Torre

American Council on Gift Annuities, ACGA,

00:13:59 David Torre

And they will publish suggested rates that.

00:14:02 David Torre

Charities don't have to follow. It's not a mandate. But most charities will follow those rates because they crunch the numbers. They're looking at all the data, all the actuarial data and all that stuff and they'll say, OK, a reasonable rate for an 80 year old is X. And most charities will follow that. If you really want to dig into the numbers and see historical.

00:14:22 David Torre

Patterns and all that ACGA is the place to go.

00:14:26

Great.

00:14:26 Nicole Donelson

I was going to say too, at the Central Florida Foundation, we have some calculators available to run some scenarios and kind of play around with it to better understand, what would that final gift look like? What would some tax implications be? And we'll link to that.

00:14:47 Nicole Donelson

As well as to make that available. There are

00:14:52 Nicole Donelson

Because in this case the CGA is a contract between the donor and the nonprofit, there's no attorneys involved. You're not setting up a trust. What are some things that are important to understand, both for a donor or a client that's thinking about it working with their advisor

00:15:14 Nicole Donelson

To understand when entering into a CGA and also even for a nonprofit as well, who's thinking about incorporating CGAs with their donors?

00:15:27 David Torre

Yeah, it – that's a, that's a great question and yes.

00:15:31 David Torre

The attractiveness of the CGA is its simplicity. Typically the contract is like, a 2-page contract with an illustration. You do it all in the software. It does all the calculations and the donor either says yeah that looks great or no, I'll wait six months and see if the rate improves or whatever they want to do.

00:15:52 David Torre

Now they certainly can get professional advice. They don't have to. But you're right. There's no trustee. There's no documents that need to be drafted.

00:16:00 David Torre

The administrative burden is all on the charity or potentially someone they contract with to do that function for them, a community foundation. If they don't have their own program.  from the point of view of the charity, it's really about can they administer it, whether in house.

00:16:18 David Torre

Or with a third party vendor who's going to do it on their behalf.

00:16:22 David Torre

Do they have an asset pool, hard assets of the charity that can backup these obligations? Right. You're out there, an insurance company, right? You're writing quote UN quote policies and contracts, and you have to be able to have a steady income stream, have assets to back it. There’s that part of it.

00:16:40 David Torre

Most of the charities will want to set some kind of minimum age threshold, right?  I said, we don't want the 20 year old triathlete, we want 60 years old, 65 years old, whatever and up and then a minimum dollar amount. Usually right? We don't want to do these for 500 bucks. They take some care and feeding from the from the client and advisors.

00:16:44

Hmm.

00:16:53 Nicole Donelson

Right.

00:17:00 David Torre

Point of view.

00:17:02 David Torre

Obviously, we talked about the interest rate that they would be quoted, remembering that this is an irrevocable gift. Once it's signed and the dollars change hands, it's done and frozen in place.

00:17:16 David Torre

That also means that you can't add to it later. That's a differentiator, right?  say three months later and I and I think a lot of donors that do these, they start really liking them because usually the rates are pretty good.  it fluctuates, but I've had clients and donors that do them couple times a year, right. They kind of a rolling portfolio of these.

00:17:36 David Torre

Well, maybe the one you did in January had a 7% rate and then you come around to it again in June and now they're quoting you 5.2. You can't add more money to the 7% rate from January, it's done. There's that to consider.

00:17:47 Nicole Donelson

Right.

00:17:51 David Torre

The other thing I think that often sometimes gets overlooked: with any other planned gift, whether it's a bequest or something else, is the use of the money once the

00:18:00 David Torre

CGA matures, so to speak, right?  Depending on the policies of the charity and the amounts of dollars involved, you might say, OK, here's $100,000.

00:18:13 David Torre

And when I'm gone, whatever's left, we don't know what it's going to be exactly. But whatever's left, I'd – those dollars to go to X program or a scholarship or whatever the mission related.

00:18:27 David Torre

Thing is, you don't have to do that. You could say the charity will do whatever they need to do with it, right? Their highest and best use.

00:18:35 David Torre

But oftentimes, if it's a larger number, sometimes clients want to do that extra step of saying how those dollars would to be used. Oftentimes that gets kind of overlooked, but that's another thing to keep in mind as if you're the advisor or if you're the donor yourself. The other thing I would add too with these that often adds a little bit of a.

00:18:56 David Torre

The goal is a lot of times donors will do these. A married couple will do these together.  Sometimes the calculation changes, sometimes for the better, often not  much for the better. When you're doing one for two lives because the calculation has to incorporate both spouses, you might have,

00:19:01 Nicole Donelson

OK.

00:19:16 David Torre

A spread of ages depending on how all the calculations work. There's that to consider is that is it a single life or is it the survivor of the two spouses? So to throw that out there, the other thing I would say is.

00:19:33 David Torre

Oftentimes, I don't say oftentimes, but I've seen it several times.

00:19:39 David Torre

When people are preparing for retirement and they're investing their money and they're doing their financial planning and they're figuring how much income they're going to get and how much they need to survive in retirement and all those great things, they might think they need.

00:19:52 David Torre

As much income as possible from as many sources as possible, and some people do and some people.

00:19:58 David Torre

They have more assets, maybe they think or they don't spend as much as they might think. And there's there sometimes what happens is we get a couple years into the charitable gift annuity and the donor realizes,  what, I really don't need that stream of payments  I thought I did. There is an option where the donor, if it the contract allows it,

00:20:18 David Torre

Could relinquish the obligation and tell the charity now got to a formal process. But they could say, Thanks so much. You guys are doing a great job. I don't need this 7% that I thought I did. And

00:20:33 David Torre

Let's  finish this thing out and collapse it, and that's another option where basically we  treat it as if the donor passed away then and it all flows out the way it normally would.  That's another thing to keep in mind.

00:20:41

MHM.

00:20:45 Nicole Donelson

That's a really great point because I think that also can come up at the in the situation where someone outlives their CGA as well when there's no longer really much charitable value left in it.

00:20:59 Nicole Donelson

And as not to place additional burden on the nonprofit if they aren't reliant upon that income, they may choose to go ahead and close it down. And I think that's probably why it's important that throughout, this is a lifetime gift,  it's important that the nonprofits.

00:21:16 David Torre

Yes.

00:21:19 Nicole Donelson

And those donors are having regular interaction and conversation that stewardship. That way there's an understanding and you hope that this is not something.

00:21:32 Nicole Donelson

That's established because of something that could be tax advantageous, but because there really is charitable intent and you want for it to be a win on both sides for both the donor and the nonprofit.

00:21:45 David Torre

That's exactly right. They are charitable, even in the name. It's charitable gift annuity, right.  the charitable part is first, right?  That’s an excellent

00:21:53 David Torre

Point. I think that the charities that do these really well really focus in on that stewardship angle, because if you think about it, a lot of these are paying out monthly, quarterly, whatever.

00:22:08 David Torre

And it's such a great opportunity from the charities point of view to steward these donors, because if you think about it, this donor has come forward.

00:22:15 David Torre

They've done this gift with you, therefore you are fused for the rest of their life and you're sending them regular payments, write checks, literally going out or deposits going out to them on a regular basis. The chance to send them an annual letter. Hey, this is what new thing that's going on at our place.

00:22:34 David Torre

Invitation to events, the sky's the limit. And these donors are special. I think, or should be treated as special because they are, the quality over quantity.

00:22:48 David Torre

The other thing I would add to that.

00:22:50 David Torre

Is in a previous episode, we talked about bequests, right? Your garden variety, in someone's will. I give $50,000 to charity X, period. OK, and that's great. But what did we learn about bequest? They're revocable. Meaning the donor

00:22:55

Mm-hmm.

00:23:11 David Torre

Can go and rip that up and do a new one kind of anytime they want. It's  a passive, right? It's legitimate, but it's sitting there in this document until the person passes away.

00:23:21 David Torre

One angle or one strategy for the charity you might be if you knew someone ass put you in there as a bequest.

00:23:29 David Torre

They want to support you.

00:23:35 David Torre

There is an argument to be made of. You could instead of that bequest that's sitting there,  revocable and passive. Could the donor take those funds and do a charitable gift annuity now, which is now an irrevocable gift?

00:23:49 David Torre

And.

00:23:50 David Torre

Basically active, right? There's something happened now. Not going to apply to everybody, but that is a strategy I've seen where you take something, it's still the same gift, maybe the same dollar amount, but it's transforming it in a different way that helps the charity and helps the donor at the same time.

00:23:52 Nicole Donelson

Right.

00:24:09 Nicole Donelson

Yeah, yeah.

00:24:10 Nicole Donelson

 David,

00:24:12 Nicole Donelson

Another piece I think is important to know is that you're receiving this stream of income. You as the donor, gets a partial tax deduction.

00:24:20 David Torre

00:24:24 David Torre

Mm-hmm.

00:24:25 Nicole Donelson

But you're going to have to pay taxes on some of this. How does that? How does that look and what's the considerations for that donor?

00:24:33 David Torre

Right. It's a great question and usually when you do the calculation it'll spell that all out, the software breaks that all down. You have two pieces of this. You have the

00:24:44 David Torre

One gift of assets the bulk of assets, whether it's cash or stock or whatever. And part of that is going to have a charitable deduction and a part of it is going to be non charitable  principle, so to speak, right and it really depends on all those factors, your age, your life expectancy, those kinds of things, right. It'll do that calculation.

00:25:04 David Torre

The second piece is the payment stream. Now I say payment stream and not income stream because it's not technically all income. There's going to be some portion of that payment that is taxable and some portion that is.

00:25:18 David Torre

Not. And typically the function for that amount is your life expectancy that is calculated on your behalf.  it might say something on the on the piece of paper that says, , you will receive $700.00 a year for the rest of your life for the next 14.3 years, $580.

00:25:39 David Torre

That 7 is taxable and the other rest is non taxable. Well, what that generally is getting at is that portion of time is your

00:25:49 David Torre

Life expectancy, according to the IRS and all the right.  we're not saying that's exactly, we don't know exactly.

00:25:52 Nicole Donelson

Yeah. Yes.

00:25:56 Nicole Donelson

Not making an official prediction.

00:25:58 David Torre

But in terms of calculating what is taxable non taxable, what is charitable? That is all comes out in the wash depending on basically your life expectancy and obviously the dollar amounts go up or down depending. But yeah, it's it's something to keep in mind that we said the real.

00:26:19 David Torre

Kind of double benefit is being able to

00:26:21 David Torre

Use.

00:26:22 David Torre

Those appreciated assets that haven't had realized capital gains, similar to giving to a donor advised fund.

00:26:30 David Torre

taking something off of your balance sheet that has a lot of embedded capital gains, which are going to be taxed when you liquidate, getting them over the fence to the charitable gift annuity.  you avoid those capital gains. But then you have the face value of the gift to calculate your income, your income tax, charitable deduction in the year.

00:26:50 David Torre

To make it so, that's really the most bang for your buck, so to speak, yeah.

00:26:54 Nicole Donelson

Perfect.

00:26:56 Nicole Donelson

And we should probably mention because we've talked  as maybe a final point we've talked before about using retirement assets and recently there were some updates with the Secure Act 2.0 about qualified charitable distributions we talked about qualified.

00:27:16 Nicole Donelson

Terrible distributions on a prior episode, but how does that also tie in with CGA's?

00:27:24 David Torre

 one of the options that we referenced was there's this a newer A newer version of the QCD, the qualified charitable distribution.

00:27:32 David Torre

Is this one time lifetime gift out of your IRA?

00:27:38 David Torre

And it can go to two specific types of vehicles, one of which is a charitable gift annuity. Now that version of the charitable gift annuity, there's some regulatory specifics that you have to make sure you're hitting, but one of the vehicles you can make that one time gift out of is into a charitable gift annuity.

00:28:00 David Torre

The original amount was $50,000. It was a $50,000 one time in your life, so to speak, option. It's index for inflation every year. Every year it's going to tick up a little bit, but that is another option to connect the two, right. The IRA, the Swiss Army knife of giving right, you have your annual.

00:28:20 David Torre

QCD, the 100,000 index for inflation every year. You also have this one time 50,000 index for inflation that can go to fund to charitable gift annuity.

00:28:31 David Torre

The fine print really matters on that, there's some specifics that you have to make sure you're hitting on that with the charity, but that is a very much an option that's available for folks. And that's also going back to the spouses. They can do that together. You could do A50 plus.

00:28:41 Nicole Donelson

Great.

00:28:49 David Torre

From each spouse to fund a charitable gift annuity for the lives of the two spouses. If, if you if you'd like.

00:28:55 Nicole Donelson

Perfect.

00:28:56 Nicole Donelson

OK.

00:28:57 David Torre

OK, but details apply.

00:28:59 Nicole Donelson

Details apply.

00:29:00 Nicole Donelson

OK.

00:29:01 Nicole Donelson

Talk to your advisors.

00:29:02 David Torre

Yes, yes.

00:29:04 Nicole Donelson

All right, I know that we've covered a lot of information in this short period of time. And why don't we kind of bring this, wrap it all up a nice little present, the bow on top. So, let's start number one quick recap, basic definition.

00:29:23 Nicole Donelson

CGA.

00:29:26 David Torre

Yes, basic definition CGA is a contract between a donor and a charitable entity, whereby you the – whereby that was good.

00:29:35 Nicole Donelson

Wow, that sounds very legal. The attorney’s coming out.

00:29:37 David Torre

Whereby.

00:29:38 David Torre

The donor gives some type of asset in exchange for a stream of payments from the charity for the rest.

00:29:44 David Torre

Of their life.

00:29:45 Nicole Donelson

Perfect. All right.

00:29:47 Nicole Donelson

Now.

00:29:49 Nicole Donelson

I'm an advisor.

00:29:52 Nicole Donelson

Where, where might I see CGA popping up with my client?

00:29:57 David Torre

I would say the most common time you're going to see this popping up with your client is in the context of retirement planning for retirement. And when I say planning for retirement,  planning for income during retirement. Think about your clients that are maybe 63, 65,

00:30:13 David Torre

67 years of age and they're trying to find all the various sources of income that might be available to them during retirement. One piece of that puzzle very well could be a charitable gift annuity with their favorite charitable entity.

00:30:27 David Torre

One because they have a charitable goal in mind that they want to hit 2 because they can't afford maybe to part with those assets outright. They need some kind of split program. And three, because the charity might be offering a very attractive interest rate depending on what's going on in the economy at.

00:30:45 David Torre

That time, OK, so.

00:30:45 Nicole Donelson

Perfect.

00:30:47 Nicole Donelson

And then Third Point is.

00:30:50 Nicole Donelson

Who?

00:30:51 Nicole Donelson

Should consider or be thinking about a CGA. You kind of touched on this in what you  shared.

00:30:57 Nicole Donelson

To.

00:30:58 David Torre

I think it, I think again, it's those folks that are looking for income retirement that have again we don't want to overlook have a charitable intent. They have a charitable goal they want to support these organizations that they're near and dear to their heart, but they also want that part to fit into their overall retirement plan.

00:31:18 David Torre

Their overall income plan for during their retirement and  a it's a bit of a.

00:31:24 David Torre

A best of both worlds in a certain sense, where you're irrevocably supporting this organization you love, but you're also irrevocably setting up a stream of payments that you can support yourself on for the rest of.

00:31:37 Nicole Donelson

Your life, OK and if?

00:31:41 Nicole Donelson

someone has listened to all of this and still said, my gosh, I'd love to learn more or wow, I didn't understand anything you said. I really still have a lot more questions. We'd love to point to some additional resources which will link to. I'm going to say, selfishly,

00:32:02 Nicole Donelson

The Central Florida Foundation and your local community foundation is a great resource. Our team’s here and happy to help talk to advisors and their clients to kind of consider these different questions. We can help run some calculations. Some scenarios provide information.

00:32:22 Nicole Donelson

And if we're not the perfect fit to help establish that CGA, we can help connect you to the resources that you need and take a look at the landscape and better understand what those goals are and talk that through with you and your clients. So.

00:32:39 Nicole Donelson

David, this has been, as always, such a pleasure. Who knew CGAs could be so much fun?

00:32:46 David Torre

They are very fun and I will tell you in a tip to the advisors out there that CGA giving for the folks that really get into it. They really get into it. So, once they've done the first one and they see how it all works and they get comfortable with it, don't be surprised if they want to do it again and again.

00:33:06 David Torre

Depending on what's going on with their finances, kind of giving with stock that we've mentioned in the past, it's one of these kind of savvier investor that's looking at different ways to give.

00:33:10 Nicole Donelson

Yes.

00:33:15 David Torre

And it and it could be a really satisfying strategy for the right, right, donor and right client.

00:33:20 Nicole Donelson

And that's perfect. Good. Well, I look forward to more alphabet soup in the future.

00:33:21

Yeah.

00:33:24 David Torre

There's plenty more. Well, stay tuned folks. Till next time.