Local psychiatrist John R. Sealy, M.D., Distinguished Life Fellow of the American Psychiatric Association, (D.L.F.A.P.A.), is no stranger to the concept of giving back. He has been a long-time supporter of and is currently chairman of the board of the Switzer Learning Center, a non-profit special learning school with a clinical treatment program for students who have learning disabilities, emotional problems, attention problems and behavioral disorders.
He recently connected with Joe Ward, director of Gift Planning for the Torrance Memorial Health Care Foundation, to learn more about setting up a planned giving program to benefit the Switzer Center. However, after learning more about the tax advantages, he set up a planned gift to provide a source of income for himself and Torrance Memorial.
There are many types of planned gifts. Sealy elected to set up a deferred charitable gift annuity. Similar to a charitable gift annuity, this type of annuity may be a better choice for younger donors planning for supplemental income in retirement. “It provides immediate tax benefits and a guaranteed source of income (a portion of which is tax free) for the rest of your life. The longer you wait to withdraw money, the more it pays you. In the meantime, the hospital uses it as a source of funding for their purposes,” Sealy said. “It is clearly a win-win-win for everyone.”
With his financial future secure, Sealy, a history buff, can spend less time worrying, and more time enjoying pursuits he loves, such as reading and gardening at his Palos Verdes home. He also feels a sense of pride in his contribution to help build an even stronger health resource in the community.
Gift Annuities Defined
A gift annuity is a contractual agreement between a donor and a charitable organization in which the donor transfers assets to the organization in exchange for its promise to pay him/her an annuity. With a gift annuity, you can accomplish the following:
- Contract for fixed payments for yourself, or yourself and another individual if you choose, and
- Make a gift to a charitable organization of your choosing and receive an immediate charitable deduction.
For a period of years, based on a government table of life expectancies, a portion of each payment received is considered a nontaxable return of your contribution. This further increases your after-tax dollars available for spending or investing. In addition to the annuity payments you receive, an annuity funded with appreciated property results in these advantages:
- The gain allocated to the gift portion completely avoids the capital gains tax and
- The portion of gain to be recognized can be spread over the expected term of the contract.
A special type of annuity is the deferred payment gift annuity., The start of payments is delayed until a specific date, initially determined by the donor. Deferral of payments increases the initial income tax charitable deduction, tax savings and the annuity rate, but is appealing to younger donors who wish to improve future financial security further down the road.