Deferred Planning Strategies
Basic Strategy
Mary, age 55, has a 401(k) plan but would like to save more for her retirement and support CPMC, where her two children were born. She creates an irrevocable $10,000 deferred charitable gift annuity (DCGA). At age 65, the Foundation will begin paying Mary a fixed annual annuity ($650 at 6.5%) for the rest of her life. A portion of her annuity will be tax-free. And Mary will qualify for a federal income tax deduction in the year she sets up the annuity.
Strategies Compared
You may create DCGAs at your own pace and in varying amounts. Besides supporting the Medical Center’s vital programs, you can reap financial advantages with strategic planning.
Consider These Scenarios
- Make a single contribution to offset additional income tax triggered by a bonus
- Make annual contributions to preserve cash flow
- Use appreciated securities to reduce capital gains tax
- Name parents as beneficiaries to provide extra support
Examples
Single Contribution
- Contribute a $50,000 DCGA
- Defer income for five years
- Claim an income-tax deduction the year of gift
- Receive a portion of income tax-free over expected lifetime
- Receive a total of $56,975 in income over expected lifetime
| Age | Gift | Annual Income | Income-Tax Deduction | Tax-Free Portion | Rate |
|---|---|---|---|---|---|
| 58 | $50,000 | – | $12,749 | – | 5.3% |
| 63 | $2,650 | $1,733 |
Five-Year Plan
- Contribute $50,000 in installments, starting at age 58
- Defer income from each DCGA until age 63
- Claim an income-tax deduction the year of each gift
- Receive a portion of income tax-free over expected lifetime
- Receive a total of $53,320 in income over expected lifetime
| Year | Gift | Annual Income | Income-Tax Deduction | Tax-Free Portion | Rate |
|---|---|---|---|---|---|
| 1 | $10,000 | – | $2,550 | $347 | 5.3% |
| 2 | $10,000 | – | $2,432 | $352 | 5.1% |
| 3 | $10,000 | – | $2,404 | $354 | 5.0% |
| 4 | $10,000 | – | $2,528 | $348 | 4.8% |
| 5 | $10,000 | – | $2,655 | $342 | 4.6% |
| At age 63 | $2,480 | $1,743 |
Note: We present the above examples for illustration purposes only: amounts will vary in the future, depending upon the annuity rates recommended by the American Council on Gift Annuities at the time of each gift and the IRS discount rate in effect.
Personal Assistance
W. Gary Ogburn, J.D., Director of Gift Planning
415-600-2410
ogburnwg@sutterhealth.org
Request an annuity brochure or personalized no-obligation illustration.