by Ted Hackney

You Don't Have to be Rich to Make a Difference

If you are reading this newsletter, you probably already have a love for missions, or you love the DeLoach family or Operation Guyana---probably all three! The sticky problem for almost all missionaries and their work is money, or rather the lack of money.

If you read the newsletters of universities and hospitals and other large charitable organizations, you might get the idea that charitable works are supported entirely by rich people. In fact, the great majority of all giving, whether it be to churches, schools, hospitals, medical research, political campaigns and other causes is done by regular people -- people who clip coupons before going to the grocery store, people who have to scrimp and save for retirement and people who can't afford to spend their hard earned money frivolously; in other words, average folks like most of the people reading this newsletter. If you are like most "givers," you would love to give more, but you just can't figure out how to stretch your budget any further than it is already stretched.

Steve has asked me to provide information on how some of you might be able to help Operation Guyana more without damaging your own financial situations. Here is a little bit of background information on me. I am a licensed attorney and I work for one of the largest financial and insurance organizations in the world. I grew up on the mission field and have a great love for missionaries and their work; and, I have a thorough understanding of the financial struggles many missionaries face. I have been working with individuals and businesses on their estate, retirement, tax and other financial matters for over 20 years. [See résumé.]

The rest of this article will describe a giving idea that can help Operation Guyana right now and also increase your income for the rest of your life. It is called a Charitable Gift Annuity.

A Charitable Gift Annuity (CGA) is a contractual arrangement between you and Operation Guyana. You make an irrevocable gift of cash or securities in exchange for guaranteed payments, with the remaining value benefiting Operation Guyana. Operation Guyana issues the CGA agreement, sells, if necessary, the assets gifted and places the assets into a separate gift annuity account. Operation Guyana then either "self-insures" or "reinsures" its payout obligation and makes the stipulated payments to you and/or another annuitant, whom you select, for life.

Why is this program unique?
It allows Operation Guyana the opportunity to "reinsure" the payout obligation made to you with any large insurance company, so that the "remainder" of your gift, net of the reinsurance premium, can be used by Operation Guyana immediately, as opposed to investing the gifted amount until your death.

Your financial advisor
Your financial advisor and Operation Guyana can coordinate to determine how a CGA might fit into your tax, estate and charitable planning objectives. You complete Operation Guyana's CGA application. The application informs Operation Guyana of the age of the annuitant(s) and the frequency of payments. The specific assets can then be donated to Operation Guyana with the payout obligation "reinsured" by a large insurance company.

Gift annuity benefits
You will receive guaranteed payments for life, which will not change regardless of future interest rate fluctuations. Operation Guyana "reinsures" your payout guarantee with a large insurance company.

High Payout Rate
The CGA payments may be considerably more than the income you are presently receiving from certificates of deposit or other investments.

Tax Advantages
You will receive an income tax deduction in the year of your gift. Part of your annual payout may be tax-free. A gift of appreciated property will avoid capital gains taxation on the gift portion of the contribution, with the potential to have the remaining capital gains tax spread over the life expectancy of the annuitant(s)(5).

Age   Payout Rate(1)   Tax-Free Portion   Effective Payout Rate(2)
65         6.0%            57.98%                 6.61%
70         6.5%            62.62%                 7.35%
75         7.1%            67.55%                 8.25%
80         8.0%            72.54%                 9.55%
Partially Tax-Free Payments         Current Income Tax Savings
No Legal Costs       No Market Risk       Fixed Payments for Life

Can Provide For Others
A CGA can be designed to make payments to either one or two individuals for life. You may wish to include your spouse, a child with special needs, a parent or a friend. Most of the tax benefits belong to the donor even if someone else is named to receive the lifetime payments(4).


Retirement payments
Ruth, age 75, is frustrated by the renewal rates of her bank certificates of deposit. Ruth uses $100,000 of her maturing certificates of deposit to establish an immediate CGA with Operation Guyana. In doing so, Ruth will generate an annual lifetime payout of $7,100 (over $4,700 will be tax-free)(2) as well as an income tax deduction of over $40,000(3). Operation Guyana can "reinsure" her payout guarantee allowing a portion of the "remainder" to be forwarded to beneficial charities Ruth wants to help.

Supplemental retirement income

Gifting appreciated assets
Bill, age 75, purchased $20,000 worth of publicly traded stock in 1989. Over time its value increased to $100,000 but generates only 3% of annual dividends. Bill is frustrated but feels trapped by the $12,000(5) of capital gains taxes owed if he liquidates. However, Bill can gift his stock to Operation Guyana in exchange for a CGA. In doing so, Bill will reduce his capital gains tax liability to $6,912(5) spreading that amount over the next 12 years(5) ($576/year), and generating an income tax deduction of over $40,000 and an annual lifetime payout of $7,100(1).

Contributing appreciated assets

(1) Based on a single annuitant charitable gift annuity and ACGA rates effective 7/1/2003. Rates are subject to change.
(2) Assumes a 27% tax bracket and the applicable annuity exclusion ratio. Once the donor's basis has been recovered, further annuity payments are fully taxable.
(3) Based on 4.2% Federal Mid-Term Rate (subject to change monthly) and annual payments. Donor's income tax deduction is limited to a percentage of AGI per year. Any unused deduction may be carried forward for 5 years.
(4) Payout may be subject to gift tax but will qualify for annual gift tax exclusion as a gift of a present interest at time of distribution.
(5) Assumes 15% capital gains rate. Capital gain may be spread over the time period the annuity is expected to be received, based on life expectancy of annuitant age 75 (12.5 years). If donor is not an annuitant, the capital gain tax cannot be spread out over the donor's life expectancy.

Operation Guyana cannot provide legal or tax advice, and nothing herein should be construed to be legal or tax advice. A charitable gift annuity is not guaranteed by any government agency. A charitable gift annuity is subject to limited regulation in most states, and is not issued by an insurance company. The content of this Web page is for educational purposes only.

This is just one way you might want to help Operation Guyana. Also, you may know someone who is not interested in Operation Guyana, but they are interested in getting a much higher, guaranteed income for life.

If you or someone you know is interested in this type of arrangement, you may contact Steve DeLoach or fax him the information below.

Remember, this is just one idea. There are many other ideas we will discuss in the weeks to come.

Immediate Gift Annuity Data Collection

Required for Proposal

Donor Name (if other than annuitant)_____________________________

State of Residence_______________________________________________

Date of Birth ______/______/______

Annuitant Name___________________________________________________

State of Residence_______________________________________________

Date of Birth______/______/______

Second Annuitant Name (If Applicable)____________________________

State of Residence_______________________________________________

Date of Birth_____/_____/______

Frequency of Payment:  Semi-Annual________Quarterly_______Annually________

Gift Amount________________Securities___________Cash_________Other________

Donor Tax Bracket___________%

If other than cash: Time Asset Owned_______________Asset Cost Basis____________

  Read Using Qualified Plans and IRAs to Help Operation Guyana and Yourself

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