Your organization may have seen success with fundraising around immediate opportunities — such as enhancing annual gift programs with qualified charitable distributions, highlighting non-cash gifts like marketable securities and asking loyal donors for major gifts from their donor-advised funds — but it may be time to look for the next element to add to your fundraising toolbox. Offering life income gifts through a charitable gift annuity (CGA) program can be a valuable resource. But how does an organization know if a CGA program is the right fit?

CGA programs require extensive development work and ongoing resources. A long-term commitment of support from an organization’s executive leadership, a team of dedicated personnel and deep knowledge of CGAs and their benefits serve as foundational elements for the launch of a successful program.

Most critical to a CGA program’s success is a dedicated donor base with qualifying characteristics at various stages of their philanthropic journey. This will create diversification in the CGA pool as well as an active pipeline of potential new donors.

 Consider your donor base

A strong donor base for a CGA program should start with active donors over the age of 60. Once focused on that segment, consider which donors are candidates for making a gift of at least $10,000 to the organization. Organizations can educate donors on the benefits of CGAs to build their pipeline, but it is important to have a solid group of donors that are ready to give prior to establishing a program. To help gauge the knowledge and interest of a donor base, survey a select group of highly-qualified donors by asking about their level of understanding and support (refer to the sample survey in the Appendix).

The donor base for a successful CGA program will have:

  • A strong desire to support the mission of your organization with a life income gift
  • A significant pool of donors over the age of 60
  • Some knowledge of CGAs or other life income gifts

Consider your team’s capacity for ongoing program management

Successful CGA programs are not a “set it and forget it” fundraising tool. They require ongoing management to maintain a robust pipeline of potential new donors. A knowledgeable, client-centric development team that can identify and connect with eligible and willing donors is critical to a successful program. A CGA is one of the most powerful stewardship tools for an experienced and well-resourced development team. Organizations will also need a robust marketing strategy with regular communication to keep the program in front of potential donors at opportune times, such as Internal Revenue Service (IRS) deadlines and key holidays. Some organizations find success working with outside consultants and vendors to fulfill these duties (learn more about vendors in the Appendix).

Organizations with successful ongoing management:

  • Have a dedicated team with deep experience working with planned gifts
  • Understand and can identify the characteristics of CGA donors
  • Can support a robust marketing plan internally or by working with an external vendor

Consider technology needs

CGA programs require software to prepare calculations, illustrations and donor proposals, in addition to the contracts and disclosures all parties review and sign as part of gift onboarding and ongoing management. The most successful programs use a software provider such as Crescendo Interactive or PG Calc. Within the organization, dedicated development professionals become familiar with the easy-to-use software to craft gift scenarios based on the unique needs of each donor. However, consultants can be hired to create the required materials for each donor proposal.

Manage a small program

Many organizations find that they are not quite ready to develop and manage a CGA program or that their gift pool does not meet the outsourcing thresholds, which is typically around 20 donors with at least $3 million of investable assets. These organizations still have options.

Manage CGA gifts internally

There are a few basic functions that are required to manage a small number of CGAs. These can often be carried out by the organization’s finance and development teams.

Gift payments: The amount and frequency of CGA payments remain the same for the life of the annuitant after the first prorated payment. Organizations can set up a simple bill-pay with a banking partner to fulfill the obligation.

Tax reporting: A 1099-R tax form is required each year. Annual tax reporting for each gift is determined at the inception of the gift. The calculations will detail how the fixed payments will be taxed (ordinary income, tax-fee and capital gain—if funded with appreciated assets). After the first prorated payment year, the tax form remains the same for the life of the gift until conversion year. After the conversion year, all income becomes ordinary income and is indicated as so onthe 1099-R. The IRS also requires an annual form to be submitted. Typically, the organization’s finance staff or auditing firm can complete these tax forms.

Gift reporting and recordkeeping: An organization’s finance department can also likely calculate the liability for Financial Accounting Standards Board (FASB) gift reporting. With a limited number of gift contracts, individual gift values can be tracked with a basic spreadsheet.

An alternative to in-house management of these administrative functions is to hire a vendor, such as Crescendo Interactive or PG Calc. Some consultants may also provide these services.

Investment of gift assets: It is best practice to maintain a dedicated and separate investment account exclusively for CGA program reserve assets. Many states make this a requirement to operate a registered program. The American Council on Gift Annuities (ACGA) maintains a list of specific state-by-state requirements. The investment advisor should be aware of the unique characteristics of a CGA program, such as the high fixed payout rates and the assumptions used by the ACGA to set the rates. A key assumption is that 50% of the original gift value is anticipated if all assumptions and variables are realized. Some states, such as California, Florida, Washington and New York, are highly regulated with specific controls that require attention.

Consider established CGA program hosts

If an organization has donors interested in life income gifts but cannot yet support a CGA program, it may consider partnering with:

  • Another charitable host, such as a community foundation
  • A parent organization, such as education, religious or health organizations
  • A nationally-sponsored CGA program, such as the National Gift Annuity Foundation

Organizations should consider the many options available to understand the structure, costs and responsibilities before undertaking a CGA program. Offering life income gifts through a CGA program can be a valuable fundraising tool for your organization. However, it is not appropriate for every nonprofit.

We encourage you to thoughtfully research the requirements of managing a CGA program and determine the best path for your organization.

APPENDIX: additional resources 
Sample survey
1.  Are you aware of gifting options that pay donors an income for their lifetime?
2. Do you have CGAs with other organizations?
3. Are you interested in supporting our organization through this vehicle?
4. At what level would you consider funding a CGA?

Resources to explore

Both local and national organizations can provide a wealth of information for building a CGA program. Consider connecting with these organizations for the most current information on charitable gifts for gift planners and networking with peers.

American Council on Gift Annuities

National Association of Charitable Gift Planners (NACGP)

Find your local gift planning council here: Charitable Gift Planners Council Directory

Outsourcing elements of your CGA program

Several providers, including those listed below, offer education and marketing services for organizations sponsoring CGA programs.

  • Crescendo Interactive
  • MarketSmart
  • Pentera, Inc.
  • PG Calc
  • PlannedGiving.com
  • The Sharpe Group
  • The Stelter Company

Providers vary in terms of the services and fees. Consider reviewing the listed sponsors of the National Association of Charitable Gift Planners’ National Conference and check with local planned giving councils.