Case Study
Patricia ’71 has worked hard and is doing well as a partner in a big city law firm. She attended Smith College on scholarship. Now that she has a steady income, she’d like to give back in two ways: provide income for her aging mother and donate scholarship funds to Smith.

The solution: a charitable gift annuity funded by Patricia, with income directed to her mother. The annuity rate is determined by the mother’s age (in this case 7.4 percent for age 77). Patricia can claim a charitable tax deduction in the year she funds the gift, which is helpful as she is in a high income tax bracket. (Note: only a portion of the gift is deductible, since it is only partially charitable.)

Because Patricia has made a gift to her mother of the life income stream, there may be gift tax considerations. Smith helped Patricia determine what size gift would keep her gift tax obligation within her $11,000 annual gift tax exclusion. Patricia plans to make another similar gift to Smith next year, so her mother will receive income from two annuities.