Charitable gift annuities: income for life, a gift at the end

A charitable gift annuity is philanthropy's answer to a question retirees ask constantly: 'I want to give, but what if I need the money?' The CGA's answer: give the money now, and the charity contractually pays you a fixed income for the rest of your life — with a partial tax deduction today and whatever remains going to the charity's mission when you're gone. It's the oldest split-interest gift there is, offered by thousands of universities, hospitals, and large nonprofits, and it occupies a genuinely useful niche between plain donations and complex trusts.

The mechanics

1. You transfer a lump sum — cash or appreciated securities, typically $10,000–25,000 minimum — to a charity that offers gift annuities.
2. The charity signs a contract paying you (or you and a spouse) a fixed annual amount for life, backed by the charity's general assets.
3. Payout rates follow age at the time of the gift, using tables published by the American Council on Gift Annuities that most charities adopt: roughly 5.5% at 65, 7.0% at 75, 8.6% at 85 for a single life (couples' rates run lower since payments last for two lifetimes).
4. You claim an immediate deduction for the gift portion — the actuarial value of what the charity is expected to keep, commonly 25–45% of the amount transferred.
5. Payments arrive partly tax-free for years (return of your own principal), with the rest taxed as ordinary income — and if you funded with appreciated stock, the capital gain is spread over your life expectancy instead of hitting at once.
6. At death, the contract ends and the charity keeps the remainder — historically around half the original amount, on average.

CGA vs. the alternatives

• Vs. a commercial annuity: the insurance product pays more and carries state-guaranty backing; the CGA pays less, adds a deduction, and leaves a legacy. If you have zero charitable intent, a CGA is simply a worse annuity — charitable intent is the point.
• Vs. a charitable remainder trust: CRTs offer flexibility (variable payouts, multiple beneficiaries, investment control) but cost thousands to establish and administer; CGAs are a two-page contract with no setup fee. Rough dividing line: CGAs shine from $10,000 to a few hundred thousand; CRTs earn their complexity above that.
• Vs. just donating: an outright gift gives the charity more, sooner, and you a bigger deduction. The CGA exists for the donor who cannot responsibly part with the income the money produces — it converts 'someday, in my will' into 'now, with a paycheck.'
• Vs. keeping the money invested: a balanced portfolio likely outearns the CGA rate over long periods — but without the guarantee, the longevity insurance, or the gift. Different products for different jobs.

The QCD-to-CGA move: the newest door

Legacy IRA rules now allow a once-per-lifetime election to fund a gift annuity directly from an IRA via qualified charitable distribution — up to $54,000 in 2025. The transfer counts toward your RMD and never lands in your taxable income (no separate deduction, but the exclusion is generally better), and the annuity payments it generates are fully taxable when received. For a retiree past 73 with an oversized RMD, charitable intent, and appetite for guaranteed income, it's a genuinely elegant triple play — RMD satisfied, income secured, gift made — and most eligible retirees have never heard of it.

Who the CGA actually fits

• Donors 70+ (rates below that age are unimpressive) with genuine charitable intent toward a specific, durable institution.
• Retirees holding appreciated stock they're reluctant to sell — the CGA defuses the gain over their lifetime while producing income.
• People who intended a bequest anyway: a CGA accelerates the charity's certainty and adds lifetime income plus a current deduction.
• The safety-first temperament: someone who values a guaranteed check over market returns and sleeps better with both the gift and the income locked.
• Poor fits: anyone who may need the principal, anyone without real charitable intent (buy the commercial annuity), and estates where heirs' expectations haven't been addressed — the remainder goes to the charity, not the kids, and that conversation belongs before the signing.

What the rates look like by age

The bottom line

A charitable gift annuity trades a slice of annuity yield for a deduction, a lifetime guarantee, and a legacy — a good trade only when the giving is the point. Use large, reserve-backed charities, compare the payout against a commercial annuity so you know exactly what the gift costs, consider the once-per-lifetime IRA funding route if you're RMD age, and never annuitize money you might need back. Done right, it's the rare instrument where the last check you'll ever receive and the largest gift you'll ever make are the same document.