Gift Annuity FAQ
The MUM Charitable Gift Annuity Program
Simply stated, a charitable gift annuity is a contractual agreement between a donor and a nonprofit entity in which the donor gives cash — or readily marketable securities — and the nonprofit commits to make fixed payments to the donor for life.
You can support MUM and simultaneously receive an income stream during your lifetime.
The annuity rate paid to you is significantly higher than what’s available from other secure investments such as long-term CDs and Treasury bonds.
Most donors receive a substantial income tax deduction.
A large portion of the donor’s annuity income is tax-free in most cases.
Gift annuities enable donors to support MUM at a level they otherwise could not afford.
A gift annuity is very easy to understand and complete. For a quick estimate of your benefits, see our online annuity calculator.
For a quick estimate of your benefits, see our online annuity calculator.
MUM uses the charitable gift annuity rates recommended by the American Council on Gift Annuities (ACGA)
MUM’s annuity rates are much higher than the average yields for most secure investments.
For example, the average yield for a 5-year jumbo CD is 0.89% (Bankrate, 1/27/2016), and for a 10-year Treasury bond is 1.47% (Bankrate, 1/27/2016). MUM’s rates are more than double those rates.
And MUM’s annuities come with substantial tax benefits not available with long-term CDs and T-bonds.
Most donors receive a substantial income tax deduction. Also, a large portion of the donor’s annuity income is tax-free in most cases. See our online annuity calculator for a specific estimate of your tax benefits.
Yes. A gift annuity can be set up for either one or two people. This is typically a husband and wife, but it could be two siblings or two friends, etc.
Yes. And through reinsurance MUM’s long-term obligation to make annuity payments is fully backed by a major highly-rated insurance company.
Income beneficiaries must be at least 50 years old when payments begin. The minimum amount to create a gift annuity is $10,000.
Quarterly is most common, with payments made at the end of each calendar quarter.
MUM uses reinsurance, in which a portion of the donor’s gift is used to purchase a matching annuity from an insurance company. The income generated by this annuity is set up to match MUM’s obligation to the annuity recipients.
To provide the highest security to the annuity recipients, MUM only reinsures with insurance companies that have an A.M. Best financial strength rating of A++ or A+. These are A.M. Best’s two highest ratings as shown in the chart below.
Since the insurance company provides income that matches MUM’s gift annuity obligations, the remaining funds (those not used to purchase the commercial annuity) are freed up and available for the University’s programs.
Individual cases can vary widely, but collectively about 30% of the gift amount is immediately available to the University.
Case studies of gift annuity pools have found that the net present value (if self-insured) and the funds immediately available (if reinsured) will both be about 30% of the total charitable gift amount under normal circumstances.
However, if the donors collectively live longer than actuarial tables predict, then reinsurance is likely to be more advantageous to the University than self-insurance.
Reinsurance of gift annuities is normally appealing to donors because:
The gift portion can be used right away, which means donors can see their money doing good for the university while they’re still around.
It can be reassuring for donors to know the long-term obligation for annuity payments is fully backed by a major highly-rated insurance company.