Policies & Procedures for Charitable Gift Annuities
Definitions: The charitable gift annuity is a contract between a donor and the Mid-Shore Community Foundation under which the donor transfers cash or securities to the Foundation in exchange for a promise by the Foundation to pay a fixed payment annuity for life to the donor and/or another person. The Board of Directors of the Mid-Shore Community Foundation passed a resolution on September 5, 2002 authorizing the Foundation to proceed with the sponsoring and provision of charitable gift annuities.
Date of Gift – date the annuity contract is signed and the asset(s) turned over to MSCF
Value of Gift - determined according to the Foundation’s Gift Acceptance Policy
Acknowledgement – MSCF acknowledges annuity gifts by providing charitable gift annuity contacts and a disclosure letter
American Council on Gift Annuities – a 25-member organization located in Indianapolis that promulgates gift annuity rates
Policies
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The minimum gift for funding is $10,000. -
The minimum age for immediate life income beneficiaries shall be 55, and for deferred annuities, 45 years. -
No more than two life income beneficiaries will be permitted for any gift annuity, including two lives in succession and joint and survivor annuity agreements. -
Annuity contracts may be created for a specific length of time. -
The ultimate beneficiary of MSCF charitable gift annuities shall be MSCF for the “general purposes” of the Foundation itself (either for operating expenses, or for unrestricted grantmaking) or to establish a permanent fund to benefit a specific charity. -
No charge will be made to annuities by MSCF other than the pass-through of the management and investment fees charged by a third-party manager. -
Cash or securities for which a ready market exists may be used to fund a gift annuity. Gifts of real property will be considered on a case-by-case basis. -
MSCF may allow other nonprofit organizations whose endowments it manages to market charitable gift annuities to benefit those organizations, so long as the proceeds are placed with an endowment to be permanently managed by the Foundation. These may be “named funds, “according to minimums established by the nonprofit organizations. -
Generally, annuity payments must start during the year in which the gift is made. However, deferred annuities may be established, through which annuity payments can commence more than one year from the date when the annuity was funded and the contract signed. These two options are known as “immediate” or “deferred” gift annuities. -
If the charitable annuity is $50,000 or more, the donor may elect to use the proceeds to establish a named fund, for the purpose of supporting the MSCF. -
Should a donor wish his or her annuity remainder amount to be used to create a fund to benefit a specific charity or charitable cause other than the Foundation, 10% of the remainder amount shall be paid to the Foundation for general purposes, and 90% to create a permanent endowment for the specified charity, which shall remain with the Foundation.
Procedures
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MSCF will provide all charitable gift annuity prospects with a proposal showing calculated income and tax benefits based upon information provided and the proposed rate. Prospects are encouraged to consult with their attorneys, accountants or financial advisors regarding the tax consequences of the annuity they are considering. -
The annuity rate will be the maximum rate established by the American Council on Gift Annuities, subject to any variance approved by the MSCF Finance Committee. We may suggest that if the donor is willing to accept a lower rate, a larger charitable deduction would be obtained for the same size gift. If a lower amount is selected, the annuitant will sign a form showing that they were made aware of this. In general, proposed rates will not be less than 50 basis points below the maximum. Rates will be updated as frequently as approved by the ACGA. -
All charitable gift annuity donors must sign an annuity contract, including the birth-date, legal domicile and social security number of each annuitant; value and type of assets; payout requirements: and joint/survivor requirements, if any. Gift annuity donors must also present proof of age. -
All annuity donors will be given a Charitable Gift Annuity Disclosure Statement attached to the above referenced annuity contract. -
For investment purposes, the assets within each annuity account may be commingled with those of other contracts in the investment pool. This pool may not be commingled with other endowment assets of the foundation. For accounting purposes, separate funds will be established for each gift annuity. Funds placed in the annuity pool are “temporarily restricted” and may not be used for any other purpose.
All charitable annuity funds received by the Foundation will be placed in this segregated reserve account with an affiliated investment manager where they are invested in a prudent manner consistent with state regulations. -
Payments may be made to annuitants on an annual, twice-yearly, quarterly or monthly basis, according to minimums established by MSCF. The first payment will be pro-rated to the end of whatever payment cycle is chosen. Payment amounts will be rounded up so that the same amount is paid each cycle. -
When an annuity matures upon the death of the donor, the remaining principal shall be transferred to the Foundation’s administrative or unrestricted fund, or to a permanent fund within MSCF for the benefit of a specific charity, so long as adequate resources are left in the annuity reserve fund to meet other distribution requirements. -
Appropriate accounting will be maintained by the affiliated financial institution, with reports to MSCF on at least a quarterly basis, so that the changing market value of each agreement is kept current throughout the lifetime of the annuity. -
Annuity reserves will be classified by the Foundation as “temporarily restricted,” and will be subject to the same annual audit as all other Foundation assets. -
The Community Foundation may choose, at some future date, to self-administer its charitable gift annuity program, including all current reserved assets, and to charge appropriate investment and management fees for this service. -
The decision whether to re-insure any specific annuity contracts will be made by the MSCF Finance Committee, with final approval by the board. Such re-insurance may be done for individual funds of $100,000 or more where circumstances (expected income vs. the payout) might warrant. The costs of any re-insurance will be paid by the Foundation’s administrative fund, to be reimbursed from the reinsured fund’s remainder amount. -
MSCF will reasonably and consistently promote the availability of charitable gift annuities through advertising, public relations, use of its own publications, use of the MSCF advisory network, and so forth. The cost of any such promotion will be borne by the MSCF administrative fund. -
Each year, as part of its annual audit, an independent evaluation of the liability of the Foundation and its related annuity reserves will be completed.
