PG Calc Blog

Testamentary gifts (gifts made at death) are the most common type of planned gift, estimated to be 80% or more of planned gifts received by charities. Donors typically have to confront complicated family and financial issues in the estate planning process.  Ask any gift officer who has been involved in planned gift fundraising. They can tell of donors sharing compelling stories of family addictions, marriage instability, costly medical conditions, and financial mismanagement. Donors anguish over leaving a potentially large inheritance to a family member who may lack the skills to prudently manage the inheritance. To complicate matters further, the donor is conflicted about making a final gift to a favorite charity from their estate that will divert assets away from a family member in need of financial support. A testamentary life income gift that will pay steady income to their family member for life, with the remainder going to charity when the life income gift terminates, may be the answer for such a donor. The role of the gift officer is to educate the donor about the possibilities, and if the donor has interest, to encourage a collaborative discussion with the donor’s financial and estate planning advisors.

We may be at the break of a new dawn for charitable remainder unitrusts (CRUTs). CRUTs exploded in popularity in the 1990s, driven in part by financial advisors who recommended CRUTs as a way to shelter donors from significant capital gains tax while enhancing cash flow and supporting their favorite charity. Then capital gains tax rates dropped, the stock market went south, and CRUT activity soon slowed. Now, stronger incentives for high income donors to contribute appreciated assets to fund a CRUT are back.