Responding to the changing situation caused by the economy, a key nonprofit umbrella group today recommended that charities lower the amount of money that donors receive in exchange for creating charitable gift annuities.
To create an annuity, donors turn over cash, stock, or other assets to a charity; the charity then invests the assets and makes regular, guaranteed payments to the donor or another person named by the donor until their deaths. After the donors die, the charity keeps the remaining assets in the annuity.
The troubled economy — plus historically low federal interest rates — prompted the American Council on Gift Annuities to urge charities to change the amount that assets in gift annuities are expected to net annually, from 4.75 percent to 4.25 percent. The council also voted to encourage organizations to reduce the upper limit of annuity payments to donors 90 and older, from 10.5 percent of the value of their donated assets to 9.5 percent.
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