Similar to a charitable remainder annuity trust, in a charitable gift annuity the donor contributes assets to a not-for-profit organization in exchange for a promise by the organization to pay a fixed amount over a specified period of time to the donor or to other third parties. It is important to note that the third parties are designated by the donor.
The agreements are similar to charitable remainder annuity trusts except that no trust exists, the assets received are held as general assets of the not-for-profit organization, and the annuity liability is a general obligation of the organization. (NFP Audit Guide)
An example of a charitable gift annuity would be as follows: A donor transfers assets to a not-for-profit organization in exchange for a promise by the organization to pay a specific dollar amount annually to the donor’s wife until the wife dies.
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