I have wanted to share these two gift stories for a long time and yesterday, I learned the fate of one that finally got me to write.  Read to the end!

Two donors, both serial gift annuity donors (i.e. do many CGAs with multiple organizations).  Both coming to two separate clients of mine looking to create a new CGA.  One gift gets closed, AND the donor kicks in extra hundreds of thousands of dollar in immediate gifts that would not have happened without the planned gift.  The other donor just let me know that we missed our shot this year, maybe next year.

There are some very interesting lessons in both stories.

Donor 1 – Huge Success – In the spring, he approached the nonprofit about establishing a CGA.  Not having a program at all, I recommended using an independent foundation willing to offer CGAs on behalf of other charities.  But, this ultimately fell through as the donor had two particular requirements that the foundation would not agree to – he wanted annual payments with the first payment coming at the onset of the gift and a higher than ACGA rate – both doable but unusual.

Here are some of the basics of the offer:  joint annuitants, ages 85 and 80, annual payments, $200,000 cash funding, wanted .5% higher than the ACGA on their ages, first payment at beginning of annuity (not a great idea as it hampers the long-term investment of the gift corpus).

Sounds like not such a good offer?

But, I ran numbers, projecting the risk associated with this offer and concluded it was worth it to accept!  So, I created a “gift annuity program” just for this gift!  You see, if you look at CGA risk carefully, you will realize that the most risky gifts are from people in their 60s and younger.  Once the annuitants are in their 80s, you need to find a way to accept the gift, even at .5% higher than the ACGA.

In any case, we priced out reinsurance and guess what – the charity could accept the CGA under his conditions (first payment actually would be in early January 2023) and turn a nice profit!  For approx. $130,000, the charity could purchase a commercial annuity on the lives of the annuitants that would guarantee their payments for life.  Not only that, if both annuitants pass away within 5 years, they actually get refunded part of the purchase price.

In other words, the charity netted $70,000, which could be spent immediately or invested for later use.

This wasn’t quite legal “reinsurance” as the charity was still legally responsible for the annuity payments but the company issuing the commercial annuity was an A+ rated well known company. They will even send the annuity checks directly to the donor.

Donor was very pleased that we accommodated his wishes (I knew we were competing with other charities so I was very generous on giving him a higher rate than the others but I also know that my client was going to benefit either way – so why not close the deal).  So much so, that he committed more than $100,000 in immediate gifts!

And, just this week, the donor got a tour of the institution and is likely to do more CGAs and more immediate gifts!  An around “win win.”

(Note: buying a commercial annuity to cover CGA payments could work under certain circumstances but not ALL circumstances. Key was that both the donor and the charity were based on Florida – could never have worked in New York, for example.  Also, the amount was crucial – $200,000 was big enough. I am not sure how low we could have gone.  For sure a minimum of $100,000.  Also, we had a great financial advisor help us who was able to compare commercial annuity options from among several companies.)

Donor 2 – Failure (for now) – This donor already had existing CGAs with this client as well as several other nonprofits but hadn’t done any for my client in many years.  He reached out to staff for two reasons.  Firstly, he wanted an update on a pre-existing endowment fund and there were issues that needed to be cleared up.  Secondly, assuming the charity could be responsive to his first request, he was ready to do another $50,000 or $100,000 CGA.

He wasn’t looking for anything unusual with the CGA – ACGA rate and regular quarterly payments.  But, HE WAS CLEAR THAT HE NEEDED SATIFACTION REGARDING HIS ENDOWMENT BEFORE MOVING FORWARD.

Unfortunately, the client just wasn’t responsive enough.  By the time, they addressed his endowment issues, he had already made this year’s CGAs with other nonprofits and let me know that this was the reason.  Maybe next year.

Lessons for fundraisers.

CGAs from older donors – 80+ are a very good deal for your institution.  Find a way to accept them and depending on the state your are in, reinsurance can be a great way to avoid risk and free up cash immediately.  Of course, you may have state licensing issues if you go higher than the ACGA – check with counsel!

Most important – be very responsive to planned giving donors like this!  Once you show them that you care, and that your organization is financially sound – based on the quality of your response – you are in a great position to get another gift!

Lastly, I am seeing an uptick on CGAs. I can’t tell you that this is across the board but something tells me that interest is picking up steam.

Thank you for reaching the end of this post!  I will try to keep writing these as gift situations unfold.