Can I make a gift to a charity of something other than cash?
Yes, New York law permits a charity to receive gifts of “cash and other property” in return for its agreement to make annuity payments to you. You may give gifts of cash, negotiable securities, real estate, etc. However, the charity itself may restrict donations to a certain type. You should contact the charity directly to determine if it has such restrictions.
Can I change my mind after I purchase a Charitable Gift Annuity?
No, a Charitable Gift Annuity is irrevocable. Once you enter into the contract with the charity you can not later cancel it.
Can I outlive the income payments from the Charitable Gift Annuity?
No, income payments from a charitable gift annuity will continue for your entire lifetime, regardless of how long you live.
Will the amount of the income payments from the Charitable Gift Annuity change?
No, the amount of the income payments from a charitable gift annuity will remain the same throughout your lifetime. This can be both an advantage and a disadvantage to purchasing a charitable gift annuity. It is an advantage in that you know exactly how much income you will receive and can plan your expenses and other income streams accordingly. It is a disadvantage in that there is no cost-of-living adjustment. As the cost of things such as housing, food, clothing, utilities, etc. increases, the amount of income you receive to pay for those things does not.
How much income will I receive from a Charitable Gift Annuity?
The amount of income you will receive depends on four factors:
- your age at the time you enter into the annuity agreement,
- the number of annuitants you designate to receive the income payments,
- the amount you donate, and
- the interest rate that the charity is crediting at the time you enter into the annuity agreement.
Can I designate someone other than myself to receive the income payments from a Charitable Gift Annuity?
Yes, you may designate someone other than yourself to receive the income payments. In that event, the payments would continue for the rest of that person’s life. However, you should be aware that if you designate someone other than yourself, the present value of the income payments payable to that other person may, under certain conditions, be considered a gift to that person and be subject to gift tax.
What are the tax advantages associated with a Charitable Gift Annuity?
Some possible tax advantages include: a federal income tax deduction for the donated assets, deferral of federal and state capital gains taxes upon the sale of donated appreciated assets, avoidance of taxes on future capital gains, and exclusion of the entire value of the gifted assets from the value of your estate for federal and state estate tax purposes.
How is the amount of my income tax-deduction determined when I make a donation in exchange for a Charitable Gift Annuity?
The income tax deduction you are entitled to for your charitable donation is less than you would be entitled to for an outright donation because you will be receiving a lifetime income from the gift. The deduction is based on your age and interest rates published by the IRS. The higher this interest rate, the higher your deduction.
Will I have to pay income tax on the income payments from the Charitable Gift Annuity?
Part of your income payment will be tax-free and part will be taxable. A tax advisor can assist you in figuring out how much of the payment will be tax-free.
How do I know that the charitable organization I choose will be financially able to continue making the required income payments to me for as long as I live, or to the person I designate for as long as s/he lives?
All charitable organizations that wish to enter into charitable annuity agreements must first apply to the Department for a special permit. The Department may exempt some of these entities from the permit requirement based on specific criteria. However, by law, all charitable organizations that issue charitable annuities in New York must comply with certain financial requirements which are intended to ensure that they will be able to meet all of their obligations to make income payments under the charitable annuities they issue.
What are the types of credit insurance?
There are several types of credit insurance:
Credit life insurance: Pays off your loan if you die.
Credit disability insurance: Also called accident and health insurance. Pays a monthly benefit directly to the lender equal to the loan’s minimum monthly payment if you become disabled. You must remain disabled for a certain number of days before a benefit is paid. In some cases, the benefit is retroactive to the first day of disability. In other cases, the benefit begins only after the waiting period is satisfied. Common waiting periods are 14 days and 30 days.
Credit unemployment insurance: Also called credit involuntary unemployment insurance. Pays a monthly benefit directly to the lender equal to the loan’s minimum monthly payment if you become involuntarily unemployed such as through a layoff. You must remain unemployed for a certain number of days before a benefit is paid. In some cases, the benefit is retroactive to the first day of unemployment. In other cases, the benefit begins only after the waiting period is satisfied. The common waiting period is 30 days.
Should I buy credit insurance?
Before purchasing credit insurance, you should consider the following:
- Do I have other insurance or other assets, such as savings, that would cover my debts in the event of my death, disability or unemployment?
- How much is the premium for credit insurance? Would it be less expensive and better suit my needs to buy a life insurance policy or a disability insurance policy? Credit insurance may cost more than a traditional life insurance policy or a disability policy.
- If I purchase single premium coverage, will the premium be financed as part of the loan? If so, how much will my loan payment increase due to the cost of the credit insurance?
- Will the credit insurance cover the full term of the loan and the entire balance?
- How long do I have to wait before my monthly benefit is paid if I become disabled or lose my job?
- What conditions are not covered by the policy?
- Can I cancel the insurance?
- Can the insurance company or lender cancel the insurance?
- Can the terms of the policy be changed without my consent? Can the premium rate be increased?
- If you decide to purchase credit insurance, it is important to shop around since the cost of credit insurance may vary notably from company to company. Since you must obtain credit insurance from the institution where you obtain the loan, you must shop for credit insurance at the same time as you shop for a loan.
Where can I purchase credit insurance?
Although you can obtain credit insurance as an individual, in most cases, a group policy is sold to a lender such as a bank, finance company, credit union or a vendor such as an auto dealer or a furniture store. When you borrow from a lender that has a group policy, the lender may offer the credit insurance as an additional service. If your application for insurance is approved, you will be given a certificate of insurance, which describes your coverage and serves as proof of insurance. You should receive a certificate within 30 days after you apply for insurance.
You must purchase credit insurance at the institution where you obtain your loan. Therefore, if you plan to purchase credit insurance, you should shop for insurance at the same time that you shop for a loan.
Am I eligible for credit insurance?
Age: You will probably not be eligible for credit insurance if you are age 65 or above. Age eligibility may take two forms: your age at the beginning of the loan and/or your age as of the scheduled maturity date of the loan. An age less than 65 at the start of the loan may not be used. An age limit less than 66 at the end of the loan may not be used. In addition, some policies terminate coverage when a certain age is reached. However the termination age may not be less than 66 and must be disclosed on the application for insurance.
Medical history: Many applications for credit insurance ask you questions about your medical history. If you have been diagnosed or treated for cancer, heart disease or another serious medical condition in the past you may not be eligible for coverage. The look back time varies but is often no more than 3, 5 or 10 years.
Work hours requirement: Most credit disability and credit unemployment (and some credit life) policies require you to be working a certain number of hours per week. The number of hours required may not exceed 30 hours per week.
Credit unemployment: To qualify for credit unemployment benefits, you must be eligible (with certain limited exceptions) to receive State unemployment benefits.
What types of loans can I obtain credit insurance for?
Credit insurance is available on just about all types of personal loans including both closed-end and open-end loans. A closed-end loan is a loan for a specified amount and for a fixed term. Most closed-end loans in the credit setting are installment loans, which means that the loan is repayable in equal monthly payments. An open-end loan is a loan where you can increase the amount of the loan at any time and the term of the loan is not fixed. The most common example of an open-end loan is a credit card.
Examples of loans that you can obtain credit insurance for include, among other things, loans to cover the purchase of appliances, motor vehicles and farm equipment, as well as educational, credit card, home equity and mortgage loans.
Can the lender require that I purchase credit insurance?
No. The lender cannot require that you purchase credit life or disability insurance as a condition for obtaining a loan. However, the lender can require you to have, or to purchase, other insurance, such as a traditional life or disability policy, which would cover the amount of the loan.
How do I pay for credit insurance?
There are two primary ways to pay for credit insurance:
Single Premium: The premium is generally added to your loan amount and included in the amount financed. This increases the amount borrowed as well as the amount of interest you will pay. Single premium insurance is only available for closed-end loans.
Monthly Premium: For open-end loans, your monthly premium is calculated by multiplying the outstanding balance in your account on the account’s monthly billing date by the premium rate or by multiplying the average of the daily loan balances during the previous month by the premium rate. For closed-end loans, your monthly premium is calculated by multiplying the outstanding balance in your account on the account's monthly billing date by the premium rate.
Will credit insurance cover the full term and amount of my loan?
Some credit insurance policies will not cover the full term and amount of your loan.
Under New York State Law, the maximum allowable amount of coverage for credit life insurance is generally $220,000 for a mortgage loan and $55,000 for all other debts. For credit disability insurance, the maximum amount is generally $75,000 for a mortgage loan and $30,000 for all other debts. For credit unemployment insurance, the maximum amount is generally $110,000 for a mortgage loan and $55,000 for all other debts. The term of a credit policy generally may not extend for more than 35 years after the debt is incurred.
However, some credit insurance policies are offered for amounts and terms much less than the maximum allowable amounts.
What if I want to cancel my coverage?
Many credit policies offer a free look provision which gives you time (usually 30 days) after the insurance becomes effective to cancel your insurance and get your premium back. However, an insurance company is not required to offer a free look provision for credit products. In addition, most credit policies allow you to cancel your insurance after the end of any free look period. If you cancel your single premium coverage, you will be due a refund of a portion of the premium. This refund will often be credited to your loan balance.
Can the insurance company or lender cancel my coverage?
If you pay your insurance premiums monthly, the insurance company or lender may cancel your coverage but generally must give you 31 days advance notice. If you have single premium insurance, the insurance company or lender may not cancel your coverage.