Planned Giving Insights and Information

The Donor Must Be the Owner

We frequently work to assist our clients in situations involving married couples. In some cases, the spouses are looking to establish a 2-life charitable gift annuity (CGA), whereby they will both be donors and they will both be beneficiaries (annuitants). There is no issue with potential gift tax consequences in cases where the couple’s marriage is recognized by federal law – such spouses may transfer unlimited amounts of wealth to each other without any possible gift tax. And if the CGA is funded with cash, there also is no issue with possible income tax, because there are no capital gains involved in the transfer of cash. If the gift annuity is funded with appreciated securities, however, there can be significant tax issues tied to the long-term capital gains inherent in the appreciated securities.

Hey, How’s That PIF Doing Lately?

We write about pooled income funds (PIFs) from time to time. Pretty much the same old story – no one is creating new PIFs, and if you’ve got a PIF, it’s probably languishing. The income distributed each year is just a fraction of what was distributed in the heyday of PIFs – the glory days of the 70s, 80s, and 90s. Since PIFs can only distribute net income, and since interest rates have been relatively low for decades, there seems to be no appeal anymore. There have been no new gifts in years, and the participants are slowly dying off. Death by a thousand cuts, as they say. But there is still something to say about pooled income funds. For organizations that have large and robust PIFs, the benefits are significant, and they are still coming in. We took a random look at some actual PIFs and found that the charitable remainder amounts distributed to their sponsoring charities are astounding. Remainders ranged anywhere from 110% to 250% of the original gift amount. How can that be? How is...

Charitable Lead Trusts: Not Just for the Super-Rich

Sometimes, in the world of charitable gift planning, we focus too closely on the tax consequences of potential gift plans. With charitable remainder trusts (CRTs) and charitable gift annuities (CGAs), it is not enough to know how much the income tax deductions will be – donors also want to know how much the vehicles will pay to themselves and/or other beneficiaries over time. And not just how much the payments will be, but also, how those payments likely will be treated for income tax purposes. Occasionally a donor comes along and says that the amount of the charitable deduction, or even the amount of the payments, is not important, but that type of donor tends to be the exception to the rule. Charitable lead trusts (CLTs) are at times described as “upside-down” or “reverse” CRTs. While it is true that the charitable interest leads with a CLT (a stream of payments is made over time to one or more charitable organizations), and the remainder of the corpus at the end goes to one or more...

Surely No One Dies on Schedule: Split-Interest Gifts and Mortality Tables

Much of our work in planned giving – in particular, with split-interest gift arrangements – involves the use of mortality tables and the related estimates of life expectancy. When calculating the charitable income tax deduction for a split-interest gift, for example, we are required to use specific mortality tables dictated by the IRS. If we wish to estimate the remaining liability for a life-income gift, we must use some type of mortality data. And should we attempt to estimate the ultimate charitable remainder value for a life-income gift, the use of mortality data is critical. But what are the different mortality tables, and when do we choose to use a specific one?