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Deferred Gift Annuity: The Details

Is this gift right for you?

A deferred gift annuity is for you if…

  • You are in high-earnings years, looking for both income tax savings now and an additional source of revenue when you retire.
  • You want to make a significant gift to us and receive payments in return.
  • You want to maximize the payments you receive from your planned gift — and you want to lower your income tax on those payments.
  • You want the security of payments that won't fluctuate during your lifetime.
  • You also appreciate the safety of your payments being a general financial obligation of Middlebury.

Note: You may also want to consider a charitable gift annuity.

This version of the charitable gift annuity is especially designed for younger donors. Called the deferred gift annuity, it makes fixed annual payments to you and/or another beneficiary for life, with payments commencing at a future date. Because of the deferral of payments:

  • Middlebury College can offer a higher guaranteed payments rate for these annuities than for annuities with payments that start immediately, and
  • You may receive a larger charitable income tax deduction than you could get from any other life-income gift plan.

These two features make the deferred gift annuity quite attractive to donors in high-earnings years who are concerned about securing both current tax deductions and additional sources of retirement cash flow.

Use a deferred gift annuity to help plan for retirement

Many donors establish a series of deferred gift annuities over several years, using funds they had already set aside for retirement saving. They set the commencement date for payments from these annuities to coincide with their or their spouse's retirement.

You can wait to choose when your payments begin with a flexible gift annuity

Not sure when you'll be retiring, or when you'll want an additional source of income? Many of our friends are facing similar uncertainties. Now, you can set a number of years as a target range to begin receiving payments from your gift annuity and, when you are more certain of your needs and circumstances, tell us to commence the payments at any anniversary date within your predetermined range. This deferred gift annuity with a flexible deferral period is known as a flexible gift annuity.

Your income tax charitable deduction is determined at the time you fund your deferred gift annuity, based upon the first year you are eligible to start receiving your income payments. Because your annuity rate will be determined by your age and the number of years you wait to receive the first payment, your lifelong income payment rate will increase each year you decide to delay your first payment. We will give you the exact annuity rates for each year within your selected range of years before you make your decision about funding your gift annuity.

Employment uncertainties, combined with opportunities to start creative second careers, mean that many of us don't really know just when we'll retire. The income from a flexible gift annuity (or a series of them) will be there when you're ready for it.

Most Common Uses

  • Supplement Income in Retirement — If you have not yet retired and are already putting the maximum amount in tax-deferred retirement accounts, you can make a gift that pays you income in retirement.
  • Paying for College — It is possible to set up a deferred gift annuity now to help pay for your grandchildrens education.

Planning points

The deferred gift annuity offers the same benefits of simplicity, security, and attractive income deductions that the regular gift annuity provides our donors:

  • Your deferred annuity is a contract between Middlebury College and you, and your annuity payments are an obligation backed by our corporate assets;
  • You secure a charitable income tax deduction based on the market value of the assets you contributed, minus the payments you retained;
  • You avoid all up-front capital gains taxes. If you fund your deferred gift annuity with appreciated securities, only a portion of your gain is recognized, with the tax spread over your annuity payments;
  • Part of each annuity payment to you is tax-free;
  • The difference between our costs for maintaining your annuity payments and the size of your gift provides a generous gift to Middlebury for the purpose you designated when you created the gift annuity.
  • A deferred gift annuity at Middlebury can be made with a gift of $10,000 or more.
  • Do you want to control the start date of payments? Consider a flexible gift annuity.

Note: You may also want to consider a charitable gift annuity.

Please contact us so that we can assist you through every step of the process.

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The material presented on this Planned Giving website is not offered as legal or tax advice.
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