A Commitment that Survives Death:The Charitable Gift Annuity

Charitable gift annuities (CGAs) are simple to implement and design. Most of the recognized nonprofit organizations offer them. A charitable gift annuity is a contract between an individual donor and a religious, charitable, or educational institution. The organization takes an initial investment of money or property (stocks, bonds, or real estate) from a donor and is responsible for managing the investment from that point on. The nonprofit agrees to make fixed payments from this principal (and the earnings on it) every month for life to a beneficiary (or annuitant, usually the donor himself). The annuity payments can begin immediately, or they can be deferred until later—when needed for retirement, for example. In return, the charity keeps whatever remains of the originally invested property upon his death.

Alternatively, with a two-life (joint) annuity, payments are made to one person for the duration of his life; after his death, the payments continue for the life of a second (survivor) beneficiary, such as a spouse. Note however, that the CGA is irrevocable—the donor cannot just "cash out" and put his money elsewhere.

From "AARP Crash Course in Estate Planning," by Michael T. Palermo, JD, CFP, 2005, p. 190.