Some of the Good in Very Low Interest Rates

by Roger Ellison, CFP

[Beware the CGA rates quoted in this article may be out-of-date.]

Low and declining interest rates may have hurt renewal rates on CDs, as well as returns on many other investments, but this has made the high and stable rates of charitable gift annuities offered by the Rehab’s Foundation all the more attractive. A charitable gift annuity is a simple contract between the donor and the Rehab. In exchange for an irrevocable gift of cash, securities, or other assets, the Rehab agrees to pay one or two annuitants a fixed sum each year for life. The older the annuitants are at the time of the gift, the greater the fixed income the Rehab can agree to pay. As an example, the payout for a 75 year old would be 7.9% for life, 80 year old, 8.9%, 90 year old, 12%; a couple 75 and 75, 7.0%, 85 and 80, 8.1%. In most cases, part of each payment is tax-free, increasing each payment's after-tax value. Minimum gift is $5,000.

Deferred payment and flexible payment gift annuities are very attractive for younger donors who might wish to make a gift now, yet not receive payments until a period of years has passed. They are excellent options for complimenting retirement plans. Payments can be particularly high due to the deferral period.

For those with considerable wealth, a strong desire to benefit the Rehab and perhaps other charities, and heirs to whom they would like to transfer wealth in a highly tax-advantaged manner, the opportunities through a charitable lead trust are unprecedented. Simply stated, a charitable lead trust manages assets for a number of years, makes defined payments to charity each year, and then usually passes those assets on to heirs. They are sophisticated, require good management, but can offer great opportunities to reduce or completely avoid estate and gift taxes. Periods of low interest rates create the best opportunities for “making the numbers work” on these gifts; current low rates have made lead trusts very attractive.

Whatever your interest, now is an excellent time to consider how the Rehab might help find the good in these times of very low interest rates.

Contact Roger Ellison, CFP in San Angelo (325-223-6309) or roger@rogerellison.com or Pretend Name in Abilene (xxx-123-4567) for more information. We work as a team to provide gift and estate planning services on a no cost, no obligation basis.