The financial crisis has begun to have an impact on something known as a charitable gift annuity or simply gift annuity.
Tax deductible gifts to charitable organizations can be made in exchange for the promise of guaranteed, annuity-like payments from the charity to the donor.
Some charities purchase insurance policies to fund the promised annuity payments while others simply rely on existing assets and the overall financial health of the organization.
Not surprisingly, financial market turmoil has impaired the ability of certain charities to fulfill promised payments.
Owners of gift annuities and would be donors need to understand that their annuity income is subject to credit risk associated with the charitable organization.
Source: Wall Street Journal (subscription required)
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