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ACGA Response to Media Reports of Charitable Gift Annuities as "Investment Scams"

In August the North American Securities Administrators Association (NASAA) released a list of the "Top 10" scams that they are fighting. Unfortunately, charitable gift annuities were included on the list. Their inclusion was apparently prompted by the recent default on gift annuities by the Mid-America Foundation and the Baptist Foundation of Arizona.

The American Council on Gift Annuities and the National Committee on Planned Giving have written a letter to the editors of the publications that reported on the NASAA statement, and have also jointly issued the following statement for posting on their respective websites.

In both the letter and the statement, Bradley W. Skolnik, past-president of NASAA and current chair of its enforcement section was quoted in support of the legitimacy of charitable gift annuities.


ACGA Response to Media Reports of Charitable Gift Annuities as "Investment Scams"

Each year thousands of Americans make generous charitable gifts by creating charitable gift annuities. In so doing, these donors are able to support churches, schools, and other charitable organizations of their choice while enjoying the financial advantages of a charitable gift annuity.

Charitable gift annuities are among the oldest and most respected methods of charitable giving, with the first annuity having been issued by the American Bible Society in 1843. They currently play a prominent role in the planned giving programs of numerous reputable charitable organizations in the nation.

Recent media coverage has highlighted the inclusion of the abuse of charitable gift annuities on a list of "investment scams" by the North American Securities Administrators' Association (NASAA). Unfortunately, this coverage has mis-characterized the charitable gift annuity. Although a few persons have abused this charitable gift vehicle by commercializing it and misusing funds, it is this abuse of the charitable gift annuity - not the charitable gift annuity itself - that is the problem. Thousands of charities issue gift annuities, and default on payments to beneficiaries is exceedingly rare.

"It would be a shame to allow the misuse of charitable gift annuities by a few unscrupulous organizations to taint a legitimate charitable giving plan," said Bradley W. Skolnik, who is past-president of NASAA and current chair of its Enforcement Section which is charged with coordinating the efforts of state securities administrators to prevent fraud.

A charitable gift annuity is created when a donor makes a contribution of cash or other property to a charitable organization in exchange for a contractual promise by the organization to pay a fixed dollar amount per year for the lifetime of one or two beneficiaries named by the donor. The donor receives an income tax deduction for the value of the charitable portion of the contribution. Payments to the beneficiaries are an obligation of the charitable organization. The regulation of charitable gift annuities varies from state to state, and some states have disclosure and reserve requirements.

"A responsibly managed gift annuity program can be a tremendous benefit to donors and the charitable organization. We are united in our opposition to the abuses of gift annuities and must not allow the actions of a few to condemn this venerable gift plan," said Clinton A. Schroeder, president of the American Council on Gift Annuities (ACGA) which, along with the National Committee on Planned Giving (NCPG) has adopted standards of practice regarding such gifts.

"Charitable gift annuities are not a 'scam,' and donors should feel confident that reputable charitable organizations will take steps to assure payments to beneficiaries and use funds for legitimate purposes. Donors should also be mindful of the fact that, though a charitable gift annuity offers considerable financial benefits, its central purpose is to facilitate a gift to charity," said Jonathan Ackerman, president of the National Committee on Planned Giving.

Both NCPG and ACGA recommend that donors set up charitable gift annuities only with charitable organizations that they know personally and wish to support with their charitable gifts. Donors should also ask charities to disclose information about their financial situation and governance as required by the Philanthropy Protection Act of 1995.

Click here for original ACGA Statement on Commissions for CGAs