I learned recently of a donor who left money to charity in a manner that made it seem like she wanted to establish a so-called “college annuity” for her seven-year-old granddaughter. The applicable bequest language indicated that the annuity would begin “on or about July 30 of the year the beneficiary attains the age 19 years, and the payment shall continue for a term of 5 years.” If perhaps you’re not familiar with the college annuity, it’s a deferred charitable gift annuity established for the life of a young child, with the deferral period ending – and payments beginning – when the child is age 18 or 19. Shortly after the annuity is established, the child’s guardian (usually a parent) exercises a right explicitly reserved in the gift annuity agreement to commute the lifetime payments into a stream of payments made over the course of only four or five years. Because the present value of the lifetime payments must equal the present value of the commuted payments at the time the commutation provision is exercised, each commuted payment is quite a bit larger than each lifetime payment would have been.
Despite skillful cultivation and nurturing, there are times when a qualified planned gift prospect will decline your request for a gift. You have a number of objectives at that point: 1.) determine the true objection, 2.) identify the source of the objection, and 3.) determine if the prospect is refusing to make any gift at all or if it is just a matter of timing. Explore different gift funding amounts and vehicles or a similar gift vehicle at a different time. Some common objections to a planned gift include: • The proposal presents too many choices and the prospect is paralyzed by its complexity In your efforts to be thorough, you may overwhelm a prospect with too much information. The proposal should communicate the features of a gift, but too many choices can create indecision. Don’t offer variations the donor hasn’t specifically requested to see. Planned gifts can help achieve multiple objectives; however, the illustration should focus on the objectives the donor has articulated as most important. You’ll have the opportunity to refine your proposal in subsequent discussions. • Family members might express concern about the planned gift Whether motivated by a concern about a parent’s capacity or concern regarding their own portion of an estate, children are probably the family members most likely to object to a parent making a planned gift. If the donor’s estate will be subject to transfer tax, point out that the cost of a charitable gift is pennies on the dollar after factoring in estate and gift taxes. Also, explore creative ways to use wealth replacement insurance in conjunction with a life income plan that can potentially increase the children’s inheritance and make a charitable gift at the same time. • Advisors might articulate objections to a planned gift. Advisors are protectors of their clients’ wealth and helping them give it away is counter-intuitive. It is common for advisors to neglect their clients' philanthropic objectives. Financial advisors are often paid a percentage of assets under management. If their client makes a gift, there are fewer assets to manage and the advisor makes less money. Sometimes, the solution is for the prospect to communicate the importance of making a gift to the advisors. A charitable trust managed by the donor’s advisor may be a more palatable option.