A donor may provide for a planned gift investment in Illinois Wesleyan, guarantee a life income for him or herself and/or someone else he or she may designate, and qualify for both income and estate tax benefits through a charitable gift annuity. The donor provides for a guaranteed life income, which is determined at a rate calculated from actuarial tables based on the life expectancy of the life income beneficiaries. Gift annuities often offer a higher rate of return than many other forms of investment (higher rates of return for more advanced ages).
The total assets of the university are pledged to guarantee the life income. The donor provides for an ultimate gift to Illinois Wesleyan. He qualifies for the income tax charitable contribution deduction for the computed value of the future gift on his tax return in the year in which the annuity is established. A large portion of the annual income is excludable, tax exempt income.
John and Mary Wesleyan, Ages 72 and 64
Summary of Gift Annuity Benefits
(Example with Gift Date on 09/15/2002)
Estimated Cost Basis of Securities: $50,000
Fair Market Value on Gift Date: $200,000
Annual Annuity Rate: 6.4%
Fixed Annual Annuity Amount: $12,800
Payment Frequency: Monthly
Total Annuity Amount per Month: $1,066.67 per Month
Contribution Deduction 1: $35,167
Tax Free & Capital Gain Portion of Annual Amount: 55.7% (until 2026)
Effective Equivalent Taxable Return Rate 2: 8.34%
Fixed Income Before Taxes 23.1 Years 3: $295,681
Notes:
1. This calculation for the contribution deduction is based on the federal rate of
4.6% from the month of September, 2002.
2. This assumes a federal income tax rate of 38.6% and a capital gains rate of 20%.
3. This income flow is locked in and not dependent upon future market conditions.
Steve Seibring - Vice President for External Relationships
Department - Advancement Office