Rethinking
Charitable Giving
The Benefits of Charitable Gift Annuities when
used in Conjunction with Universal Life
Insurance with a Long Term Care Rider
Important disclosures
This presentation is designed to provide accurate and authoritative information regarding
the subject matter covered. You should understand that Wells Fargo Advisors is not
engaged in rendering legal, accounting or tax-preparation services. If tax or legal advice is
required, you should seek the services of an appropriate, competent professional.
Wells Fargo Advisors’ view is that investment decisions should be based on investment
merit, not solely on tax considerations. However, the effects of taxes are a critical factor in
achieving a desired after-tax return on your investment. The information provided is based
on internal and external sources that are considered reliable; however, the accuracy of the
information is not guaranteed. You should direct specific questions on taxes, as they relate
to your situation, to your tax advisor.
How it Works – A Hypothetical Example 1
Charitable
Gift
Annuity 1
Tax Deduction of $52,347
$7050 in Income for Life -- $3,271 of which is tax-free
($1,635 is subject to capital gains tax and $2,143 is subject to ordinary income tax)
$200,000
Universal Life
Long Term
Care 2
II. From CGA
Income,
Client Purchases
UL UTC Insurance
While Living: Monthly LTC Benefit if needed
Upon Passing: Heirs receive Death Benefit Tax-Free
No capital gains on appreciated stock
Client Age 65
$5800
1. All Gift Annuity Figures are from the American Council on Gift Annuity (ACGA) and the IRS.
2. Insurance Premium Rate and Policy are for a $200k Universal Life Insurance Policy with LTC Rider from Nationwide Insurance Company. The hypothetical rate is for a 65 YO Male in the Preferred Risk Class. Actual rates and coverage will vary based on underwriting.
Who might Benefit from a Gift Annuity?
Immediate Gift Annuity
Clients who are fiscally conservative
Clients seeking additional income
Clients who wish to give cash or
appreciated stock
Clients with stock who are seeking
ongoing income for long-term care or
wealth replacement insurance
premiums.
Deferred Gift Annuity
Clients who want a charitable tax-
deduction now but have no need for
additional income until retirement
People who want to establish a
supplemental retirement plan
Clients who wish to give cash or
appreciated stock
Clients who have maxed out qualified
retirement plan contributions, but still
need additional retirement income
Tax and Financial Benefits of a Gift Annuity
Client’s Benefits
Income
The annuitant receives fixed payments for life (backed by the Issuer).
A portion of each gift annuity payment is usually tax-free
Deductions
The donor receives a charitable income tax deduction in the year of the gift.
For gifts of cash, the annual deduction limit is 50% of the donor’s AGI.
For gifts of long-term appreciated securities, the annual deduction limit is 30% of
the donor’s AGI.
Unused charitable deductions may be carried over an additional 5 years.
The donor bypasses a portion of capital gains on gifts of appreciated securities;
any capital gain is recognized over the lifetime of the annuitant.
Sample Gift Annuity Rates for Single Life
T HE RATES BELOW ARE INDICATIVE OF LTC I NSURANCE WITH : 1
The annuity payment is based on the annuitant's age the day the gift is made
and the amount of your gift. The annuity is paid annually, semi-annually,
quarterly, or monthly, as you choose.
Your Age 65 70 75 80 85 90+
% Rate of
Annual Income 4.7 5.1 5.8 6.8 7.8 9.0
E XAMPLE OF A G IFT A NNUITY
As a donor, age 80 you give $150,000 for a charitable gift annuity.
The annuity rated based on your age is 6.8%. You will receive $10,200
annually, $8,595 of which will be tax-free for 9.4 years.
In addition, you potentially can claim a charitable deduction of $69,090
for your gift.
1. Gift Annuity Rates tax deduction and income tax rates are set by the IRS and modified by IRS guidelines. The American Council on Gift Annuities (ACGA) provides guidance on the rates of return for Charitable Gift Annuities.
Example of Long Term Care Insurance Rates
Male
Ages Standard Preferred
55 $4014 $3410
60 $5197 $4424
65 $6931 $5882
70 $9522 $8235
75 $13381 $11284
Female
Ages Standard Preferred
55 $3286 $2968
60 $4248 $3987
65 $5483 $5186
70 $7520 $6846
75 $10595 $9594
The rates below are indicative of UL LTC Insurance 1 with:
$200,000 LTC – No Lapse Guaranteed Universal Life with Long Term Care
Life Pay and Guarantees
1. $200,000 Universal Life Insurance with Long Term Care Rider, no lapse guaranteed, life pay and guarantees from Nationwide Insurance Company. Rates are hypothetical in nature for individuals who have not yet gone underwriting. Actual rates may vary.
How it Works – A Hypothetical Example 1
Charitable
Gift
Annuity 1
Tax Deduction of $52,347
$7050 in Income for Life -- $3,271 of which is tax-free
($1,635 is subject to capital gains tax and $2,143 is subject to ordinary income tax)
$200,000
Universal Life
Long Term
Care 2
II. From CGA
Income,
Client Purchases
UL UTC Insurance
While Living: Monthly LTC Benefit if needed
Upon Passing: Heirs receive Death Benefit Tax-Free
No capital gains on appreciated stock
Client Age 65
$5800
1. All Gift Annuity Figures are from the American Council on Gift Annuity (ACGA) and the IRS.
2. Insurance Premium Rate and Policy are for a $200k Universal Life Insurance Policy with LTC Rider from Nationwide Insurance Company. The hypothetical rate is for a 65 YO Male in the Preferred Risk Class. Actual rates and coverage will vary based on underwriting.
