Summary:
Monthly annuity payments from a charity don't just include earned interest, but also a return of your investment.

Donate to a charity and receive:

• an immediate tax deduction.
  
• monthly payments for life at rates higher than many investments.
  

Does this description of a charitable gift annuity sound too good to be true? Yes, and it should. This compares apples with oranges. Annuity periodic payments should be higher: They include income and return of principal. By contrast periodic payments from investments include only income; your principal is returned later.

The purchase of a charitable gift annuity covers two things:

• A donation, which you deduct.
  
• A life annuity, which are payments to you for life.
  

To better understand a life annuity compare it with an investment like a certificate of deposit that pays a fixed number of years. For example, assume you buy a 10 year CD and a life annuity. And assume you have a life expectancy of 10 years and live 10 years.

	With a	With a
	CD	Life Annuity
Each year you receive	$400	$1,400
After your death 10 years later your estate receives	$10,000	$00

Comments: Buying a life annuity from a charity may be a good idea--but don't compare what you receive monthly with the rate of return from a CD. If you want a life annuity, look for a financially sound charity and a financially sound insurance company and compare what each will pay you annually. But first make a gift to charity.

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