Sample Gift Annuity Disclosure Statement/Letter
The Philanthropy Protection Act of 1995 requires the charity to notify all existing donors to a Gift Annuity Fund and then (after 3/6/96), to notify all prospective donors to the Fund at the time of the solicitation, using a letter or pamphlet format that provides information similar to the following:
Thank you for your recent contribution to (name of charity) for a charitable gift annuity. Per the gift annuity agreement, fixed payments in the amount of (state amount and frequency of payments) will be paid to (state name(s) of annuitants) for life. (Note: If you want to provide a generic statement for the distribution to all gift annuity donors instead of a letter to each individually, the second sentence of this paragraph could read as follows: Per the gift annuity agreement, fixed payments of the amount indicated will be made to named annuitants for life.)
These payments are a general obligation of our organization, and they are backed by all of our assets. At (indicate date) our total invested funds exceeded $ _______ (indicate book or market value), and they are invested (describe the general types of investments held by the organization, such as stocks, bonds money market funds, and federal obligations, but do not list assets by name.) (Note: If you offer gift annuities in states that require maintenance of a segregated reserve fund, you should add the following sentence to this paragraph: We also maintain a gift annuity reserve fund valued at more than $ _______ that is invested in accordance with the laws of the states in which offer gift annuities.)
The (name of charity) was established in (indicate date). Responsibility for governing the organization is vested in a Board of comprised of persons, who are (describe manner of selection).
Common investment funds managed by our organization are exempt from registration requirements of the federal securities laws, pursuant to the exemption for collective investment funds and similar funds maintained by charitable organizations under the Philanthropy Protection Act of 1995 (P.L. 104-62). Information in this letter is provided to you in accordance with the requirements of that Act.
We would be pleased to provide any additional information at your request.
Note: The above Disclosure Letter assumes that the gift annuity has already been created. In the financial illustration or proposal letter given to the donor prior to making the gift, we recommend language such as the following be included:
"With a gift annuity, you simultaneously make a charitable gift and provide fixed payments for life to yourself and/or another person. The fact that you are making a charitable gift may entitle you to income, gift and estate tax deductions.
"However, because a charitable gift is involved, the annuity rates offered by (name of charity) are lower than those available through commercial annuities offered by insurance companies and other financial institutions."
The Philanthropy Protection Act of 1995 (Public Law 104-62) requires that ALL participants in a charity's Gift Annuity Fund be notified (once) after 12-8-1995 and by 3/7/1996 with a Disclosure Statement similar to the above draft letter.
Also, once prior to the making of their FIRST annuity gift, at the time of the gift solicitation. The charity's prospective donor file (the charity's paper trail) should document the sending of this federally mandated Disclosure Statement. There is no federal requirement that the prospective donor sign it. Each charity should look to its own professional advisors to determine the applicability to their needs of this suggested draft.
Different state mandated disclosure statements are to be signed by the donor and maintained in the files of the charity during the lifetimes of the annuitants named in the agreement. Each state law (at least 24 states and the number is growing), separately mandates the wording or subjects to be covered in such a state mandated Disclosure Statement. This MAY be (and sometimes in some states MUST be) handled by making each state specific disclosure statement, required by the situs of the charity AND the residence state(s) of the annuitant(s) at the time of the gift, a part of the gift annuity agreement, as a separate paragraph of the gift annuity agreement, in type no smaller than that used in the body of the agreement generally.