"We're responsible to the donor to make that payout and to grow that gift," Dan Chegwidden, M.S.U.'s director of planned giving, says, noting that a 5 to 7 percent payout rate is typical with trusts.  "As the assets of the trust grow, so will his income."

By comparison, putting that $500,000 of stock in a gift annuity at a 6 percent rate (the rate is age-based) will yield $30,000 a year in fixed income. While the assets may grow to $1 million, the return to the individual is fixed.

"High net worth individuals tend to say, ‘I want to make a gift, I like the idea of my assets growing.' But it's all predicated on making the gift," he says, noting that this group tends to favor trusts over annuities.

"There are people who say they don't need the income, and give the securities outright. The child of the 1930s may think twice."

There are several types of charitable gift annuities. Chegwidden cites an investor who sets up an annuity with 500 shares of stock purchased 35 years ago for $5,000 that's now worth $50,000 and provides virtually no income.

With a gift annuity, the donor, now 68, receives $3,150 annually for the rest of her life; part of the income is tax-free until age 86. She takes a charitable deduction of $19,306 (based on the monthly mid-term Fed discount rate--in this case, 5.2 percent--and a quarterly payout) and avoids approximately $6,750 in capital gains tax.

With a deferred annuity, an option chosen by many donors who are not ready for retirement, the date when payments start is deferred at least one year into the future; most donors defer until retirement. The deferral increases the payout rate for the gift annuity and increases the charitable deduction. The longer the deferral period, the greater the deduction.

A deferred gift annuity of $250,000 using a stock with a cost basis of $100,000 made at age 55 will carry a deduction of $96,197 in the year the gift is made. When the donor retires at age 62, the annual annuity payment will be $20,750, and a portion of the income will be tax-free.

"People are a little nervous about irrevocably transferring assets and not getting something in return," Chegwidden says, citing Michigan's tough economy. Many people there own stock that is underperforming, particularly shares in automakers.

"I know people who could give $200,000 outright, who don't need the income," says Chegwidden. "But they think they do."