Charitable Gift Annuity Questionnaire

Test your knowledge!

The Trust Counselors Network, Inc. has developed a review of it's annuity program. We believe that by successfully completing this questionnaire, Foundations and Development Advisors will have demonstrated the knowledge necessary to present the Charitable Gift Annuity to their donors.

The Charitable Gift Annuity is an effective fund-raising tool that benefits both the foundation and the donor. Once you have completed the test, please enter the necessary information into the form, and we will send you your framed certificate.

Good luck and thanks for taking the time to become familiar with The Trust Counselors Network, Inc. and the Charitable Gift Annuity.

1. Why do Charities offer Charitable Gift Annuities?

  1. To attract gifts from donors during their lifetimes.
  2. To compete against banks and insurance companies.
  3. To increase the standard of living of their donors.
  4. To raise funds so they can pay their development officers.

2. A Charitable Gift Annuity is:

  1. A split-interest gift to charity.
  2. Described in section 501(m)(5) of the Internal Revenue Code.
  3. A security.
  4. All of the above.

3. Why is a Charitable Gift Annuity considered to be a security?

  1. The lifetime of payments are dependent upon the charity's ability to survive.
  2. The payments may fluctuate like dividends.
  3. The value of the gift annuity is subject to market conditions.

4. What does it mean that Charitable Gift Annuities are "Exempt Securities"?

  1. The offering charity is exempt from having to register as a broker/dealer.
  2. The offering charity is exempt from having to register as a registered investment advisor.
  3. The offer itself does not have to register as a mutual fund.
  4. The offering charity does not have to register as an investment company.

5. What law describes how and why a charity and it's Charitable Gift Annuity is exempt as described above?

  1. The Investment Company Act.
  2. The Securities and Exchange Act.
  3. The Internal Revenue Act.
  4. The Philanthropy Protection Act of 1995.

6. Who can offer a Charitable Gift Annuity to a donor?

  1. Any qualified employee of the charity trained in the rules governing Gift Annuities.
  2. Any stock broker.
  3. Any insurance sales person.
  4. Any attorney or CPA.

7. What is a "Split-Interest Gift"?

  1. A portion of the donation makes a gift to charity.
  2. A portion of the donation purchases a lifetime of payments.
  3. Neither of the above.
  4. Both of the above.

8. What portion of the split-interest gift must go to the Charity?

  1. The charity decides this for each gift annuity.
  2. At least 10% of the donation.
  3. At least 50% of the donation.
  4. The donor decides how much it should be.

9. What portion of the gift can be used for the Annuity Purchase Payments?

  1. No more than 90% of the donation.
  2. The portion that actually funds the lifetime payment stream.
  3. An amount that will leave the charity with at least 50% of the original gift.
  4. All of the above.

10. What asset cannot be exchanged for a Charitable Gift Annuity?

  1. Real Estate.
  2. Securities.
  3. Another Charitable Gift Annuity.
  4. Cash.

11. The charitable contribution deduction associated with the Charitable Gift Annuity is equal to the:

  1. The fair market value of the donated assets minus the present value of the payments.
  2. The fair market value of the assets contributed for the annuity.
  3. Present value of the annuity.
  4. Fifty-five percent of the present value of the assets contributed for the annuity.

12. The present value of the annuity obligation is calculated by considering which of the following factors:

  1. Life expectancy of the annuitant(s).
  2. Annuity payout rate.
  3. One or two annuitants.
  4. All of the above.

13. The charitable contribution deduction associated with the Charitable Gift Annuity:

  1. Is not available when appreciated assets are used.
  2. Is applied to the year of the gift, and if not usable, carry forward up to 5 years.
  3. Can be applied to reduce taxable income only in the year of the contribution.
  4. Is not available unless the donor is an annuitant.

14. When an appreciated asset with capital gains is exchanged for a Charitable Gift Annuity, the charitable contribution deduction may be used in an amount up to ___ of the contributor's AGI:

  1. 25%
  2. 30%
  3. 50%
  4. 80%

15. When exchanging assets other than capital gains assets, the charitable contribution deduction associated with the Charitable Gift Annuity may be used in an amount up to ___ of the donor's Adjusted Gross Income (AGI):

  1. 25%
  2. 30%
  3. 50%
  4. 80%

16. When capital gains assets are exchanged for a Charitable Gift Annuity, the capital gains tax is partially eliminated and, provided the donor is the sole or first annuitant, any remaining tax is paid:

  1. In a lump sum at the beginning of the annuity contract.
  2. In small increments each year of the projected life expectancy of the donor-annuitant.
  3. At the death of the last of the annuitants to die.
  4. None of the above.

17. The primary difference between a Charitable Gift Annuity and a commercial annuity is:

  1. Commercial annuity payments are usually higher than those from a Gift Annuity.
  2. Commercial annuity transactions do not provide income tax deductions.
  3. Commercial annuity transactions do not provide capital gains tax reductions.
  4. All of the above.

18. Compared to a Charitable Remainder Trust (CRT), the Charitable Gift Annuity transaction:

  1. Uses a simple agreement form.
  2. Involves no set up costs or ongoing trustee fees.
  3. Provides a fixed, guaranteed rate of return.
  4. All of the above.

19. In cases involving the exchanging of capital gain property where the donor and first annuitant are the same, which of the following applies to the payments made during life expectancy to the annuitants of a Charitable Gift Annuity?

  1. Part of the payment is taxed as ordinary income at the annuitant's rate.
  2. Part of the payment is taxed as a capital gain at the annuitant's rate.
  3. Part of the payment may be tax free return of the contributor's basis in the contract.
  4. All of the above.

20. An asset is removed from the estate when it is contributed for a single life Charitable Gift Annuity.

  1. True
  2. False

21. In the case of a 2-life annuity, when is the value of the payment stream to the second annuitant considered as part of the estate for estate tax consideration?

  1. Upon the death of the first annuitant, if the 2nd annuitant is a surviving non-spouse.
  2. Upon the death of the second annuitant, if 2nd annuitant is a surviving spouse.
  3. It is never recaptured.
  4. After all of the annuitants reach life expectancy.

22. Qualified retirement assets can be subject to estate tax, and distributions to a designated beneficiary (IRD) are further taxed as ordinary income to the recipient.

  1. True
  2. False

23. What are qualified retirement assets?

  1. IRA accounts.
  2. Pension accounts.
  3. 401K plans.
  4. 403b plans.
  5. All of the above.

24. Qualified plan assets can be transferred directly to a charity in exchange for a Charitable Gift Annuity with no tax consequence.

  1. True
  2. False

25. Which of the following is not a characteristic of a Charitable Gift Annuity?

  1. Fixed income for one or two lives.
  2. Creates a substantial income tax deduction.
  3. Stock market fluctuations affect income.
  4. A charitable organization is benefited by the transaction.

26. TCN requires that a development officer possess which of the following licenses or qualifications in order to effect a Charitable Gift Annuity transaction?

  1. Life Insurance or Real Estate.
  2. Registered Representative or CFP.
  3. CPA or Attorney at Law.
  4. None of the Above.

27. Charitable Gift Annuity rates are based upon the suggested rates of the:

  1. IRS
  2. 1980 CSO Tables
  3. ACGA (American Council on Gift Annuities)
  4. SEC

28. The effective payout rate of the Charitable Gift Annuity is higher than the actual payout rate because:

  1. TCN is allowed to use a special rate.
  2. The effective rate reflects what an investment without the same tax advantages would need to earn in order to match the Charitable Gift Annuity's tax favored payout rate.
  3. Stock market fluctuations may increase the rate to such levels.
  4. None of the above.

29. TCN charges ___ of the annuity rate for setup fees and legal costs.

  1. .05%
  2. 1.5%
  3. There are no setup charges or legal fees.

30. A deferred Charitable Gift Annuity provides an immediate income tax deduction and payments begin at a date in the future.

  1. True
  2. False

31. Payments from a Charitable Gift Annuity can be used to fund life insurance and long term care insurance.

  1. True
  2. False

32. Charities have offered Charitable Gift Annuities for ___ years:

  1. 50
  2. 100
  3. 150
  4. 200

33. The Flexible Deferred Charitable Gift Annuity allows the client the versatility of starting annuity income in any year within a specified are range, i.e. age 50 to 80, etc.

  1. True
  2. False

34. The income stream from any Charitable Gift Annuity can be payable on what periodic basis?

  1. Monthly
  2. Quarterly
  3. Annually
  4. Any of the above.

35. Clients who can benefit significantly from a Charitable Gift Annuity include:

  1. Those with low yielding or volatile assets.
  2. Those needing a deduction for income tax and/or capital gains tax reduction.
  3. Those who are tired of market instability.
  4. Those seeking a guaranteed fixed income.
  5. All of the above.

36. All of TCN's annuity payment obligations are secured by:

  1. A special annuity reserve fund in which 100% of the actually-calculated annuity obligation is invested in a conservative income portfolio.
  2. All of the general assets of the Trust Counselors Network, Inc.
  3. Both of the above.
  4. None of the above.

37. The assets comprising TCN's Annuity Reserve Fund are predominantly invested in:

  1. Money Markets.
  2. A balanced, diversified portfolio of high quality equities and fixed income investments, including U.S. Treasuries.
  3. Real Estate.
  4. Stocks in companies based in developing countries.

38. TCN does not provide which of the following services to Charitable Advisors in their efforts to educate associates and clients regarding the benefits of Charitable Gift Annuities:

  1. Promotional and workshop materials.
  2. Case design and complete back office support.
  3. Free T.V. advertising.
  4. Seminar opportunities.

39. Charitable Advisors should perform which of the following functions in connection with clients who can benefit from a Charitable Gift Annuity?

  1. Represent TCN in a professional capacity.
  2. Collect all pertinent information.
  3. Offer the Charitable Gift Annuity as a viable solution.
  4. All of the above.

40. The staff of The Trust Counselors Network, Inc. desires to assist Charitable Advisors in their efforts to help clients to:

  1. Accumulate and preserve wealth.
  2. Shelter estates from paying more taxes than necessary.
  3. Never outlive their income.
  4. All of the above.

41. The Trust Counselors Network, Inc. has been a 501(c)(3) since 1993 and has an asset base in project accounts, trusts and cash of over $708,000.

  1. True
  2. False

42. The Charitable Gift Annuity does not conform to the requirements of sections 501(m)(5) and 514(c)(5) of the Internal Revenue Code.

  1. True
  2. False

43. Several types of real estate, including farms, underdeveloped land, commercial buildings, rental properties, and homes can be exchanged for a Charitable Gift Annuity.

  1. True
  2. False

44. Which document is not required by TCN to initiate the real estate exchange process?

  1. Listing agreement.
  2. Option agreement.
  3. Copy of the deed.
  4. Appraisal.

45. An IRS form 8283 does not have to be filed with a tax return in the year the real estate was exchanged in order for the contributor to receive a tax deduction in connection with the transaction.

  1. True
  2. False

46. TCN accepts the donation of real property for a Charitable Gift Annuity when:

  1. The owner signs the option agreement.
  2. The appraisal is completed.
  3. Immediately prior to TCN's sale of the property in a simultaneous closing.
  4. When the signed application is returned to TCN.

47 In a transaction involving real property, the Charitable Gift Annuity rate is applied to the fair market value of the property, minus any encumbrances.

  1. True
  2. False

48. In a transaction involving real property, the grants made to the fund-raising foundation are based on:

  1. TCN's asking price.
  2. The net amount received by TCN following liquidation of the property, and come from the Gift portion of the split interest gift.
  3. The selling price.
  4. The original listing price.

49. The ideal real estate to exchange for a Charitable Gift Annuity is property with little or no encumbrances that has appreciated significantly in value.

  1. True
  2. False

50. Which form is not required to initiate a cash exchange for a Charitable Gift Annuity transaction?

  1. Application and Agreement.
  2. General Information and Disclosure Notice.
  3. Real Estate Option Agreement.

51. Which form(s) are needed in connection with a Charitable Gift Annuity transaction involving mutual fund shares?

  1. Application and Agreement.
  2. General Information and Disclosure Notice.
  3. Letter of Instruction.
  4. All of the above.

52. The TCN General Information and Disclosure Notice Indicates that the Charitable Gift Annuity transaction results in an income tax deduction as specified in IRS Section501(m)(5):

  1. Explains that TCN annuities are not an insurance product.
  2. Must be signed by the persons(s) entering into the transaction, acknowledging receipt of the notice.
  3. All of the above.

53. What information is not needed to produce a Charitable Gift Annuity illustration?

  1. Address of the annuitant(s).
  2. Age of the annuitant(s).
  3. Cost basis of an appreciated asset.
  4. Tax bracket of the contributor.

54. A Charitable Gift Annuity illustration provides information regarding the face amount of the annuity, the asset cost basis, capital gains tax reduction, income tax deduction, and the annuity payout amount.

  1. True
  2. False

55. The summary fact sheet of the illustration shows the exclusion ratio, the effective rate of return and:

  1. Type of asset used.
  2. Mortality cost.
  3. The tax breakdown of the income stream.
  4. None of the above.

56. On the TCN Development website, www.trustcounselors.org, which of the following items of information are provided?

  1. Charitable Gift Annuity transaction forms
  2. TCN's Annual report and marketing information.
  3. All of the above.

57. The Administrators of the TCN Charitable Gift Annuities supply a CD-Rom that provides visual and an audio presentation about TCN and the Charitable Gift Annuity along with a wide variety of case studies.

  1. True
  2. False