Choosing to offer gift annuities is a logical place to start a planned giving program for many charities. Gift annuities are straightforward to explain — and thus to market — to donors. To market gift annuities successfully, however, the committed support of the organization's leadership is essential. Without a mandate from the leadership, it's hard to count on getting the necessary resources and inter-departmental cooperation that fosters a successful program.
The first task is to determine if a gift annuity program is right for your organization. While the following are not requirements, they are often key factors for success.
- A track record of annual fundraising.
- Full-time paid development staff.
- A sizable constituency with good planned gift donor potential.
- A willingness to direct development resources to deferred
giving. Gift annuities are not the answer for immediate cash
needs.
- An endowment.
The next step is to create internal support for the program. Your governing body must understand and accept the risks. By law, gift annuities are guaranteed by the assets of your organization. If your gift annuity fund becomes exhausted, payments to annuitants must still be made. Undertaking this liability is a serious commitment by the charity and should not be accepted lightly. That said, fear of risk should not deter an otherwise well-qualified organization from issuing gift annuities. Understanding the factors that affect risk is the best way to dispel fear.
The payout rates offered to gift annuitants are one of these factors. A sound approach is to follow the payout rates recommended by the American Council on Gift Annuities (ACGA). The ACGA rates are designed to produce an average remainder of 50% of the original funding amount. Rates are already adjusted to compensate for the longer life expectancy associated with annuitants. In surveys conducted by the ACGA in 1994, 1999, and 2004, charities reported average remainders of 94%, 97%, 85% respectively—consistently higher than the predicted 50%.
Gift annuities are regulated at the state level and you will need to determine your state's requirements and complete state registration(s) as needed. State requirements vary considerably, ranging from detailed regulations to none at all. For information on your state, contact your state insurance commissioner or visit the ACGA web site.
You will also need to establish policy guidelines, such as:
- What is our minimum age for annuitants?
- What is our minimum gift amount?
- Will we accept deferred annuities?
- Will we accept gifts of real estate to fund annuities? (if
allowed by state regulations)
- What rates will we offer?
These tasks can be accomplished by staff and board members, legal counsel, or
consultants. PG Calc can help you with almost every aspect of starting or operating your gift annuity program.
