Charitable gift annuities allow donors to make a tax-deductible contribution and, in exchange, receive regular payments for the rest of their lives. Ideally, about half the initial gift remains with the charity when the donor dies.
For donors 65 or older, gift annuities might seem like a smart option because they can yield between 5.3% and 9.5 – less than they could probably get from a commercial annuity, but appealing at a time when yields on five-year certificates of deposit and 10-year Treasuries are hovering around 3%.
However, the economic downturn could cause some charities, which typically back the annuities themselves, to have trouble meeting their pay-out obligations. For example, if a charity goes bankrupt, creditors ahead of you in line could have a claim on assets intended to fund your payments. Making matters worse, the gift is irrevocable — meaning you can’t get your money back if the charity runs into trouble.