What is a Gift Annuity?
A gift annuity is an irrevocable contract in which Harvard promises to pay you a certain sum annually in exchange for your gift. This sum can be designated to up to two beneficiaries.
At the end of your lifetime – and that of the second beneficiary if there is one – the remainder of your gift will go to Harvard Law School. You can designate your gift to a particular priority at Harvard Law School, such as unrestricted funds, scholarship funds, clinical chairs and professorships, or special-purpose funds.
How is a Gift Annuity Created?
The minimum amount necessary to create a gift annuity at Harvard is $25,000. Gift annuities can be funded by a variety of assets: cash, appreciated securities, mutual funds, real estate, art work, and other collectibles.
ADVANTAGES OF GIFT ANNUITIES
– Create a regular income stream for both yourself and a beneficiary.
– Obtain an income tax deduction for a portion of what you contribute.
– Designate the remainder of your gift to support an area of interest to you at HLS.
How Much are Annual Payments?
The annual percentage you receive as part of the gift annuity agreement is determined by your age, and by that of your second beneficiary, if there is one, and remains the same for life. Payments to you from the annuity are made at the end of each calendar quarter following your gift.
The tax treatment of your annual payments will vary based on whether you use cash or an appreciated asset for your gift. If you give cash, a significant portion of your payments will be tax-free, with the remaining portion taxed as ordinary income. If you give an appreciated asset, some of your tax-free income will be characterized and taxed as capital gain income.
Deferred Gift Annuities
The payments from gift annuities can be deferred if you would like to establish an annuity and create an income stream for yourself in the future. As with an immediate payment gift annuity, the deferred annuity can pay to one or two beneficiaries for life. Deferring payments and obtaining a current income tax deduction can be a useful way to plan for augmented retirement income and to plan for additional income for someone you would like to benefit. The minimum for a deferred gift annuity is $25,000, and the minimum age at which payments can commence is 40.