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.
See Section 8.1.4 of the Handbook on our educational website, CharitablePlanning.com, for a more technical explanation of the Commuted Gift Annuity.
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