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Married Couples and Gift Annuities

Q: When a husband and wife fund a gift annuity, is it always joint and survivor? 

A: Not always. When a husband and wife fund a gift annuity with jointly held or community property assets, it should be a joint and survivor gift annuity. But if the assets (such as
appreciated stock) are held in the name of just the husband or just the wife, the gift annuity is issued to the person owning the assets. In that case, the spouse would be the successor beneficiary, meaning he or she takes payments only after the person owning the assets has passed away. This can become a point of contention when spouses divorce during the term of the annuity.

I’ve heard it’s possible in some states to use charitable gifts to completely avoid probate. True?

Yes. If the donor holds all of his or her assets in a form that can be passed by beneficiary designation, there are no assets left to be included in the probate estate. For example, let’s imagine a donor has a checking account, a brokerage account, an IRA, and real estate. It is possible to name charities as the payable on death (P.O.D.) beneficiary of the checking and brokerage accounts, as the beneficiary of the IRA, and (in states that allow for this designation) as the transfer on death (T.O.D.) beneficiary on the real estate.

The converse is also true, however. If your charity is named as the residuary beneficiary of the estate (meaning you get what is left), and the donor passes all of these same assets to family members outside of the probate process, your organization will get nothing. With more and more assets able to be passed outside of probate, being named as the beneficiary on these assets directly is more important than ever.

Besides writing this column and consulting for PlannedGiving.com, Brian Sagrestano is President and CEO of Gift Planning Development, LLC, and a principal in Constellation Advancement, LLC. He co-authored The Philanthropic Planning Companion, which has everything a gift planning officer needs to know. Here you’ve got a direct pipeline to the author. Ask Brian your questions at PlannedGiving.com/Brian.

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