Doing Good and Doing Well

* Both have regulatory oversight. More than 90 percent of RMs are government-insured. GAs are governed by the American Council on Gift Annuities.

* Both can benefit others beside the client/donor. The income stream from a GA could support a local church or synagogue, or pay for a grandchild’s day care. A GA can be deferred to benefit another annuitant at a later date. Without a RM, this might not have been possible.

* They can enjoy some creditor protection. With the refinancing of a conventional mortgage to a RM, there is no mortgage-related debt. No mortgage, no creditor. GAs are contracts between your organization and your donor, and the contract “belongs” to an entity other than your donor. It would be prudent to have a legal adviser review this.

* Both offer a variety of payout options. RMs can disburse a lump sum or periodic payments. GAs can be contracted as immediate or deferred, one life or two, and in monthly, quarterly or annual payments.

* Both enjoy tax-favored status. RMs are mortgages; they are loans. Loan proceeds are not taxed as income. GAs have a built-in charitable component that drives some tax benefits.

* All parties enjoy the legal protections inherent in contract law. Mortgagors and mortgagees have legal rights under a RM agreement. Your organization and your donor each will have protections and obligations with a GA.

* Both products enjoy a good reputation with industry professionals. There are no learned, credentialed financial professionals who disdain the use of these two products when their use has been qualified.

* They aren’t gimmicks. Like CRTs and ILITs, they exist independent of each other as legal financial strategies but with complementary features and benefits. The tax code doesn’t have to be tweaked or twisted to make them fit. They weren’t created to be an income-hiding or tax-evasion device. Marrying them won’t obfuscate anything.