There are several life income giving methods, each with particular advantages, but many share the same basic concept:

A gift--money, securities, or real estate--is irrevocably given to Davidson, which agrees to make income payments for life to the donor and spouse or to other named beneficiaries. The college will ultimately receive the principal and use it for purposes specified by the donor.

For all life income plan gifts, the donor (legally, the "grantor" or "settlor") is entitled to an immediate charitable income tax deduction. This deduction equals the total value of the sum transferred to the college, minus the value of the income interest retained by the donor or a third party. The exact amount of the deduction is calculated on the basis of official IRS tables and depends upon the size of the gift, the expected time income will be paid out, the amount of income to be paid, and the federally-mandated discount rate applicable at the time of the gift.

A life income gift carries additional benefits to the donor besides the income tax benefits. Probate costs are reduced or avoided in most states.  The value of the donated capital is removed from the donor's estate for Federal estate tax purposes. The College, or the other fiduciary in charge of the plan, takes on the obligations of asset management. If low-yielding assets are given, the return on the assets usually improves, so additional cash flow may be available.

Characteristics which differ from vehicle to vehicle: 

• What they can be funded with
• How long they will pay income 
• How many income beneficiaries they can have 
• How many charitable beneficiaries they can have
• How much income they can (or have to) pay 
• How the amount of annual income from them is determined
• How often the income is (or can be) paid
• When they have to begin paying income
• How the income from them is taxed
• Formalities and documents required to create them
• How the assets in them are administered and invested.
• How often the income is (or can be) paid 
• When they have to begin paying income 
• How the income from them is taxed 
• Formalities and documents required to create them