Deferred Gift Annuity

Let us first understand what gift annuity is. A gift annuity is a sort of contract where decided types of financial assets are paid as a fixed amount of money for the decided tenure. The gift annuity payments are fixed and remain unaltered during the validity of the contract.

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The beneficiary, the one who receives the payments, gets partially tax-free payments and is paid in equated payments. These payouts spread over life-span of the beneficiary or over the decided time span.

The former calls for first annuity payment at least one year later from current gift annuity date. This comes with an added advantage of a liberal deduction over income tax in the year when the gifting has been done.

Deferred Gift Annuity is a superb option for young donors to present a gift and start receiving income tax deduction simultaneously with inflow of income for the future.

The flexible deferring of gift annuity is a welcome option for those individuals who at present are in their optimum earnings years and want to supplement their retirement income in the later years, when their incomes are going to be leaner.

They transfer their cash assets or financially-viable securities into gift annuity that would guarantee regular income to them at whatever time they choose or, more appropriately, when they anticipate retiring. The tax benefits of Deferred Gift Annuity are immediate in nature.

The annuity payments that the beneficiary receives in the future are also given a favorable tax treatment. The portions of each payment are tax-free in return of the principal amount over the life-probability of the beneficiary.

There might be circumstances when the beneficiary has some source of earnings for a couple of extended years and thus defer the annuity payment to later time. Some insurance companies keep a provision of permitting the deferring of gift annuity as early as the age of 65 years and upto the age of 75 years.

Let us review some of the broad benefits of Deferred Gift Annuity:

• An excellent way to generate reliable post-retirement income

• Larger tax deduction for deferring the date of annuity payments

• The future financial security becomes accessible

• Parents can plan specific monetary benefit for their siblings or children and secure their future incomes.

• Children can also make their parents’ old age secure by making Gift Annuity. This would ensure the regular income.

• An attractive giving-alternative with the option of gifting now and deferring payments for later

• Advantage of receiving payments at the time of retirement when income falls substantially

• Immunity towards financial fluctuations in interest-rates

The flexible deferring of gift annuity is very useful in the situations when the annuity buyer is not very much sure about date when he or she would like to start receiving the income of gift annuities.

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