What are the risks of investing in charitable gift annuities?
A charitable gift annuity (CGA) is, in simple terms, a swap. You give money or property to a nonprofit organization—a college, museum, health organization, for example—which in turn promises to pay you a certain amount of money over your lifetime, and upon your death, up to one other person’s lifetime. Income payments can begin immediately or be deferred to a later date. The agreement is similar to a charitable remainder annuity trust, except that no trust exists. Instead, the nonprofit holds the donation as general assets and the annuity liability becomes a general obligation of the nonprofit. Laws regulating charitable gift annuities differ from state to state. As of August 2004, Arizona requires that a charity, before it can issue a CGA: · Have at least $300,000 in unrestricted assets, · Be in continuous operation for at least three years, · Have conducted an annual audit by a CPA for the last two years, and · Provide in writing to anyone considering a CGA, certain information about
