With the high cost of college education growing even higher, Dora and Ed want to ensure that their 7 year-old grandson Steven will have the opportunity to go college. Ed is a retired financial planner, and knows about a number of charitable and estate planning vehicles like the Charitable Gift Annuity. The Charitable Gift Annuity would be ideal because Dora and Ed could give money now, benefit charity, receive a charitable tax deduction and provide for Steven in the future. However, the Charitable Gift Annuity does not allow Ed to specify a term of years and Ed wants the payments to take place over a four year period, while Steven is in college.
During a round of golf, Ed talks to his friend and tax attorney Emil about his dilemna. Emil tells him about a Commuted Gift Annuity. The Commuted Gift Annuity would allow Dora and Ed to defer payments for a number of years, at which point the annuity would be commuted down to a installment payout or sold in a lump sum. Dora and Ed will buy an annuity for Steven, with payouts scheduled to begin on Steven's 18th birthday. The payouts will run for four years, and then end.