Funding Tuition Through Planned Giving

Last month we recommended doing a favor for your donors and members who live on fixed incomes.  Imagine now how you can assist parents and/or grandparents who are concerned about tuition payments for the next generation.  Today you can offer a planned giving vehicle that can provide attractive benefits and tax savings as well as greatly assist in offsetting the expense of tuition.

One of the more attractive ways to provide a stream of income to offset the cost of tuition is through a deferred gift annuity.  A deferred gift annuity is a simple contract between a donor and a nonprofit.  The donor makes a gift to a nonprofit and, in return, receives a fixed income for life beginning at a predetermined age, usually as a child or grandchild approaches the college years.  The income continues throughout the donor’s life.  The payment rate is determined both by the age of the donor at the time the gift is made and the age at which the donor wishes to begin receiving the income. The donor also receives a charitable income tax deduction in the year the gift is made.

    For example, assume Mr. Jones, age 68, has a new grandchild.  In approximately 18 years this grandchild will reach college age.  To help his children with the outrageous costs of college, Mr. Jones makes a gift of $100,000 to fund a deferred gift annuity.

   Through the deferred gift annuity, Mr. Jones will receive an income beginning when his grandchild enters college.  The income yield is 16.9% which provides an income of $16,900 of which $3,768.70 is tax free.  He also receives an immediate charitable income tax deduction of $$75,898.   A $250,000 gift would pay for most colleges (at current costs) for each of the four years. 

By suggesting this type of giving vehicle to one of your donors, you may enable the donor to alleviate some of the anxiety around tuition payments and help plan how to strengthen your organization for the future.  Contact David A. Mersky if you want to explore other ways in which through your planned giving program you can help your donors.

*** Needless to say, all gifts to the nonprofit are irrevocable, and the donor should be advised to consult with his lawyer, accountant, or financial advisor to ensure that the deferred gift annuity is structured to meet his particular tax needs.