Wrong Attitude on Charitable Annuities

The approach that John M. Rau suggests (“For Some, It’s Better to Give and to Receive,” Feb. 26) is more opportunism than philanthropy.

Although charitable gift annuities can be wonderful vehicles for both the donor and the charity, Mr. Rau is asking those same charities to put common and fiduciary sense aside by “shopping” for the best rate, providing him with the most benefit at the expense of the charity.

Unlike charitable remainder trusts, which are guaranteed only by the trust proceeds themselves, charitable gift annuities are guaranteed by the assets of the charity.

That is why not every charity is licensed by the state insurance commissioner to market charitable gift annuities.

Those that do, however, possess the fiscal strength to support this program, and are reasonably assured that there will be a remainder upon maturity of the annuity to support the important programs or projects at the charity, in concert with the wishes of the donor.

Those charities that deal with “shoppers” like Mr. Rau may be foolishly deviating from the actuarially sound rates suggested by the American Council on Gift Annuities. The rates are designed to provide safety for the donor and the charity issuing the annuity.

If a charity is willing to be aggressive with the rates and desperate enough to “buy” Mr. Rau’s gift, one can only hope that the board of the charity has thoroughly examined the fiduciary responsibility of this action.

If a bank was advertising certificate-of-deposit rates two to three points higher than market, the prudent person would ask why.

Most charities do not stray from the council’s monthly recommendation. These rates create a “level playing field” for all. The donor is then allowed to choose the charity that is closest to his heart -- not his pocketbook.

Mr. Rau is doing a disservice to charities by asking them to compete in this arena.

Michael L. Halpern

Irvine