Canadian Charitable Annuity Association
Rates shall be calculated by qualified actuaries either under contract to the Association itself or to one or more of its members. Investment yield assumptions will be conservative but shall reflect both medium and long term interest rates which can be earned on minimal risk investments in Canada.
No load for administrative expenses shall be included in the recommended rates.
The Association's recommended rates shall be computed to produce an average "gift" remainder or residue of approximately 50% of the amount originally donated under the agreement. (Consequently the rates are lower than and are not in competition with rates being offered by commercial annuity issuers.)
Mortality tables used in calculating the rates shall be conservative in nature, reflecting at a minimum the tables being currently used by commercial issuers for single (non-group) annuitants.
The rates published by the Association and recommended to its members are in no manner binding upon the charitable organizations represented by members of the Association. However, members should be aware that offering gift annuities at rates higher than the recommended rates may jeopardize the gift that is available to the issuing charity.
If an organization chooses not to use the recommended rates, its own rates must comply with the criteria of Sections A, B and C above.
As a donative intent (the desire of the donor to make a charitable gift and thereby support the work of the issuing organization) is an inherent concept in the Gift Annuity, all promotional advertising, whether verbal or in print, should clearly state that a gift element is included in the proposed agreement.
The Income Tax Act has indicated that Gift Annuity agreements are "prescribed annuities" having beneficial tax treatment. Care must be taken not to imply that "prescribed annuities " are solely available from or through charities. The emphasis on philanthropic motivation mentioned above does not minimize the appropriateness of explaining the beneficial tax implications.
Promotion of gift annuities as "planned giving" instruments shall be done with integrity, fairness, openness and honesty. Where rates are quoted, they shall be described as "current rates", "rates in use" or "rates subject to change". However, when describing the level of income established at the time of the gift, the fact can be mentioned that the rate paid remains the same for the lifetime of the annuitant (or last surviving annuitant).
Promotion of gift annuities should not discount or disparage other types of gifting or investing. Promotion should suggest that the donor discuss the proposed gift with competent legal or tax advisors of the donor's choice. .
Full disclosure of any administrative charges shall be made before or during the application process.
The use of an application form is required.
Issuers of gift annuities should require proof of age and the Social Insurance number of all annuitants.
Any agreement described as either a "Gift Annuity" or "Life Income Agreement" shall not be issued by organizations that are members of the CCAA unless and until the said organization has sought and received approval from its own solicitor to assure the proper wording of same.
The agreement shall clearly indicate that the arrangement is irrevocable and also indicate that any residue will be retained by the issuer upon the completion of the terms of the agreement (i.e. after the death of the last surviving annuitant thereunder) to be used for charitable purposes.
The agreement shall specifically include the monetary value of the principal sum, and the amount of the payments to the annuitant expressed in both annual and periodic (e.g. quarterly, semi-annual or monthly) figures. It shall also clearly state when these payments shall cease (e.g. with the last payment preceding the death of the annuitant [or last surviving annuitant in the case of a joint annuity]).
The agreement shall clearly indicate the effective date and provide places for signatures of the annuitant(s), witness, and the proper signing authority of the issuer.
Charities must provide a minimum ten day grace period from the date of completion of the agreement during which an annuitant may withdraw and receive a full refund of capital.
Charities shall clearly indicate on the quotation that the rate will remain valid for a specific time period but the receipt and taxable portion are subject to change at the date of issue.
The CCAA recommends the use of terminology such as "donor(s)", "annuitant(s)", "issuer", and "gift" rather than "purchaser(s)", and investor(s)", "vendor", and "investment".
A report on the size of the actuarial liabilities signed by a qualified Actuary (FCIA) should be required of each issuing organization at least every three years. The issuing organization's assets held in trust must be sufficient to meet all future contractual payments as determined by these periodic assessments of the present value of future benefits payable under the Gift Annuity agreements.
Assets being held in trust to meet future obligations under gift annuity agreements shall be segregated from both the assets of the charity itself and the organization's operating income. This shall be done in the best possible manner as to protect them from other creditors of the issuing organization.
The trustees of the assets being held to meet future obligations under gift annuity agreements shall make appropriateness and prudence of the investment their major concern both as to principal and interest. In no manner shall investments be made other than those permitted under the terms of the trust as set up by the organization and by terms of the law.
Revised October 6, 2003