Gift Annuities are similar to charitable remainder annuity trusts, since the donor receives an income stream for a specified period. However, unlike the annuity trust, the contribution is not held in trust through the income period but belongs to the charity making a promise to pay the annuity amount from its general assets.
Donors should be aware that the guarantees are based on the claims paying ability of the charity and in the event the charity fails, payments can be terminated. Donors would be well advised to examine the financial health of the charity before entering into this type of arrangement.
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