Accepting unusually large gifts, offering higher payout rates than the American Council on Gift Annuities (ACGA) recommends, withholding some of the charitable portion of the gift for current spending or marketing immediate annuities to young donors may ultimately hurt the program.
The ACGA addresses this longevity risk by implementing a rate-setting methodology that assumes all annuitants are female and one year younger than their actual age. Additional measures, such as setting a minimum age requirement, can also mitigate longevity risk.
This situation is most problematic for new gifts or gifts with long remaining lives. Prudent investment management and diversification through asset allocation can reduce, but not eliminate, market risk for any single annuity.
Obtaining assets that cannot be sold in a timely manner or that are insolvent is risky. When accepting gifts of any asset other than cash, a charity should seek expert advice, such as a qualified appraisal.
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