Editor’s Note: CPA Jim Sturgill always gives sound advice to antiques-and-collectibles dealers and collectors. Here he suggests a win-win way for anyone to make charitable contributions in this down economy.
There seems to be no end to the bad economic times we are in now. Many of us are tightening our belts and looking for ways to cut expenses. Maybe you used to leave 18 percent for your favorite attentive waitress. Now it’s 15. The hairdresser? You trim some of that tip, as well. And if you’re still taking cabs, you cut corners there.
Maybe entertainment has become renting a movie instead of going to one. And that 52-inch TV with a Blu-ray DVD player that costs $3,200 you’ve been eyeing? The 32-inch sitting in your family room will do just fine.
Charitable giving drops in hard times
Unfortunately, people are also reducing church and other charity donations at a time when these groups and organizations need more, not less, help.
It is a human instinct to keep wealth and not desire to give away cash in hard times. But, what if you could make a donation and receive a return over your lifetime? Actually, there’s no “what if” involved. You can do exactly that with something called a gift annuity. With a gift annuity, you give and you receive.
What is a gift annuity?
Here is how a gift annuity works. You contract with the charity to give it a one-time payment and receive periodic payments back for your lifetime. The charity uses the balance above the payments for its purposes. Many charities have fundraisers who will guide you through the process.
Most charities assume that 50 percent of the gift annuity will remain with them. In light of the hard times, this is a substantial amount. You receive an income-tax deduction for the estimated amount the charity receives. Plus you receive cash monthly or quarterly that will be substantially greater than CD rates. (For more details, you might take a look at what the American Council on Gift Annuities has to say.)
Note of caution: Carefully research the chosen charity. Charitable gift annuities are not insured. If the charity becomes insolvent, you will no longer receive your payments.
Don’t let hard times keep you from doing good. Gift annuities are a way to help a fine cause while helping yourself.
– Jim Sturgill is a director of WorthPoint and founding partner of Sturgill & Associates LLP, a DC and Baltimore area CPA firm.
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