Description of Charity

Boston University, chartered in 1869 by the Commonwealth of Massachusetts, is one of the largest independent institutions of higher education in the United States and is composed of some 15 constituent schools, colleges and programs.

Your Gift

A charitable gift annuity is a popular planned giving vehicle that allows you to receive a fixed income stream for your life and to make a significant contribution to Boston University. In return for your gift, Boston University promises to pay you (and/or beneficiaries of your choice) a fixed sum, for life. This promise is a general obligation of Boston University and is not backed by any particular assets of Boston University. Payments to you under your gift annuity contract may begin shortly after you make your gift, or, if the gift annuity is one providing for deferred payment, at a later date specified by you.

The minimum contribution to fund a gift annuity is $10,000. Your gift may be in the form of cash or appreciated securities held by you for more than one year. As a general rule, the annuitant must be at least 65 years old at the time the gift annuity is established.

Federal Tax Consequences

Income Tax. A gift annuity provides you with an immediate income tax deduction equal to the difference between the amount of your contribution and the present value of the annuity (the income stream) to be paid to you or other individual annuitants.

The value of the annuity is based upon the size of the annuity payments, the age of the annuitant(s) and the discount rate (published monthly by the IRS) in effect at the time of the contribution. A higher discount rate increases the amount of your charitable deduction.

If you use cash to fund your gift annuity, you can deduct the value of the charitable portion of your contribution, together with your other cash gifts made during the taxable year, against up to 50 percent of your adjusted gross income. If the value of your total cash gifts to public charities exceeds 50 percent of your adjusted gross income, you can carry over the excess to offset income tax liability for up to five successive years.

If you use appreciated securities (held by you for more than one year) to fund your gift annuity, the value of your contribution and the resulting income tax deduction is based on the full fair market value of the securities on the date of the gift. Your current year deduction for all gifts of appreciated assets may not exceed 30 percent of your adjusted gross income, with a five-year carryover for any excess.

Unlike other life income gift vehicles, a transfer of appreciated assets to Boston University in exchange for a gift annuity will result in the recognition of some taxable gain. If you are the only, or the first, annuitant, and the annuity is nonassignable, you may be able to defer the gain, however, and recognize it proportionately over the course of your lifetime, instead of being taxed on the entire amount at the time of the gift.

The annuity will ordinarily be made in quarterly payments and will be constant over the lifetime of one or more annuitants. A portion of each payment will be taxable as ordinary income. If you fund the annuity with appreciated assets and you are eligible to defer the gain as described above, a portion of each payment will be taxable as capital gain to you. Finally, a portion of each annuity payment may be tax free representing a return of the investment in the contract. If the annuitant outlives his or her life expectancy as projected by the IRS, the entire annuity payment will become taxable as ordinary income.

Gift and Estate Tax. If you name other individuals as either current or future annuitants and you do not reserve the right to revoke their interests, the value of their interests will be a taxable gift at the time the annuity is established. If the only annuitant named is your spouse, his or her interest may qualify for the gift and estate tax marital deduction. If the annuitant is your grandchild, or a person who is treated as being two generations or more removed from you, your gift may be subject to the generation-skipping transfer tax.

Acknowledgment. You will receive a separate acknowledgment from us detailing the value of your gift in compliance with the charitable deduction substantiation rules for purposes of your charitable income tax deduction.

Investment Information

Commingling. Unless otherwise agreed, your gift may be commingled, or pooled, for investment purposes with Boston University's endowment funds, with the assets of charitable trusts in which Boston University has an interest, and/or with other charitable gifts made to Boston University. The purpose of commingling is to permit the collective management of Boston University's investment assets and the collective administration of its investment activities.

Investments. It is expected that the pool will invest in a diversified portfolio of assets which may include both debt and equity securities in such proportions as seem advisable from time to time in light of current market and economic conditions, as well as other real and personal property and cash to the extent deemed advisable.

There are no specific limitations or restrictions on the types of investments that the pool may make, but Boston University, in managing the assets of the pool directly and/or in selecting the pool's professional investment managers, has an obligation to act in good faith and consistent with applicable law.

Investment in securities and other assets necessarily involves risk, which risk can be substantial, and it is expected that the value of the pool's assets will fluctuate over time. If such value were to decrease significantly, and if the value of Boston University's other assets also decreased (or such assets were subject to senior claims), it is possible that Boston University would be unable to make the payments required under your gift annuity. Although such a situation is not expected to arise, it is a risk that you should take into account in deciding whether or not to establish a charitable gift annuity.

Individual Information

The consequences of a charitable gift depend in significant measure on the individual donor's particular circumstances. The general discussion of charitable gift annuities set forth above does not address every issue, nor does it take into consideration the type of assets you are contributing in exchange for your charitable gift annuity, the particular terms of your annuity, your individual tax situation or your estate and gift tax planning objectives. There are other factors, such as state and local taxes, that may be relevant to your gift. With respect to these considerations, as well as for a description of other ways to structure charitable gifts, you should consult with your tax and estate planning advisors.

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