How to Donate an Annuity

A deferred annuity is an insurance investment used to give the annuitant, or person with the annuity, a supplemental retirement income source. It is possible to donate an annuity to a charity. Doing so requires adjusting either the owner or the beneficiary of the annuity; these are two of the four parties in an annuity contract. The insurance company issues the contract. The annuitant receives payments during his/her lifetime. The owner takes the tax liabilities. The beneficiaries receive the cash value upon the death of the annuitant. Donating the annuity may be attractive for tax or estate planning purposes.

Pick your primary reason for donating an annuity to a charity. If you want immediate tax relief (or asset reduction) while still getting lifetime income, you need to change the owner. To give the annuity to a charity after you die, you need to change your beneficiary designations.

Call your annuity company and ask for the appropriate paperwork: a "change of owner form" or a "beneficiary change form."

Obtain the charity's legal name, tax identification number (TIN), phone number and legal address. This is needed for a proper change and used for identification purposes when claiming death benefits. The Internal Revenue Service (IRS) also needs this information for tax purposes.

Complete and submit the required form. An ownership change maintains the same annuitant and beneficiary, with the charity listed in the "New Owner Section" section listing the charity's TIN, address and phone number. A beneficiary change maintains the same owner and annuitant, listing the charity as the new beneficiary with its address and phone number.

Provide the charity with a copy of the annuity policy and the changes made. Obtain a receipt for an ownership change.

Tips

  • Donating an annuity during your lifetime reduces total assets considered for Medicare and other assistance programs. Income continues but total assets are reduced.

    Some charities offer an annuity program called a "charitable gift annuity." This is an annuity program funded by the charity. An annuity owner would need to find a list of charities offering the program at the American Council on Gift Annuities. Then he/she would liquidate existing annuities and donate the sum under the gift annuity contract terms with the charity. These annuities may not be backed by an insurance company and should be closely evaluated.

Warnings

  • Speak with a tax adviser regarding any tax implications of transferring, donating or gifting an annuity to a charity.

References

About the Author

With more than 15 years of professional writing experience, Kimberlee finds it fun to take technical mumbo-jumbo and make it fun! Her first career was in financial services and insurance.