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Deferred Payment Charitable Gift Annuity (DPCGA)
In terms of how they function, the one and only difference between a DPCGA and a CGA is the time at which payments will begin being paid to the annuitant(s). That is to say, payments from a Deferred Payment Gift Annuity must be deferred by at least one year.
However, a DPCGA offers potentially significant tax benefits to the donor, so the smart move is to make sure the donor's aware of it. When presenting a proposal for a CGA, it's in everybody's interest to consider a comparable proposal of a 1-year DPCGA. Simply by waiting one year for payments to begin, both the annuity rate and the charitable deduction available to the donor will be significantly higher than an immediate-payment annuity.
But it's even better if you present a proposal for a flexible DPCGA, which offers the benefactor a range of dates as to when payments may begin. See, for all types of CGA, there's a requirement at the initiation of the contract to set a date at which the payments can begin. This is the date at which the charitable deduction is made, which only happens one time. The advantage of a flexible DPCGA is that the annuitant can decide when, after that initial date, payments will begin. And any deferral beyond the original date will increase the annuity rate and consequently will increase the payments and affect the portion of the payments which is tax free.
The DPCGA and the flexible DPCGA may be particularly attractive to younger benefactors (between the ages of 40 and 70), because the desire to make a gift is present and the need for income is not immediate. If the benefactor is maximizing other retirement funds, a DPCGA can supplement those funds.
Alternatively, a DPCGA can also be a smart strategy for a benefactor who wants to provide a retirement supplement for an annuitant younger than the benefactor.
When you present a benefactor with the different CGA options, don't forget to provide the prospect with a Gift Annuity Disclosure statement.