Have Gift Annuity Benefits Peaked for Donors?
-It is no secret that the American Council on Gift Annuities (ACGA) recently increased its suggested maximum annuity rates. The new rates, which went into effect on January 1 of this year, marked the third increase in the ACGA rates in the last 18 months. At typical annuitant ages, the current rates are roughly 1.5% higher than they were in June 2022. For example, the ACGA rate for a 75-year-old annuitant was 5.4% in June 2022 and is 7.0% today.
The larger story is that today’s ACGA rates are the highest they’ve been in 15 years. What does all this mean for gift annuities?
Rapid Ascent of IRS Discount Rate Creates Opportunities
-In February, the IRS discount rate was 1.6%. In December, it is up to 5.2%, more than triple what it was just ten months ago. This dramatic change coincides with a similar escalation of interest rates in the U.S. generally, as well as increased nervousness over whether the rapid rise in interest rates might soon tip the economy into a recession.
Don’t freak out over the swift shift in economic conditions. View it as an opportunity. This is a great time to renew contact with your donors and educate them about gift plans they might want to consider in this new economic reality.
This Could be the Year of the Charitable Lead Trust
-The combination of extremely low monthly IRS discount rates, a stock market at or near record highs, and the possibility of increased estate taxation before the year is over creates ideal conditions for turning lead trust prospects into lead trust donors. Take advantage of the moment! Completing even a handful of lead trusts could make a big difference to the finances of your organization.
Non-grantor lead trusts offer wealthy individuals the opportunity to pass assets to their heirs at substantial tax savings while providing immediate benefits to one or more charities they care about. Grantor lead trusts offer a wider range of donors a tax-efficient way to fulfill multi-year pledges or to offset an income windfall while fulfilling their charitable wishes.