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There are a variety of ways that a donor can make a commitment to your charity of an end-of-life gift that she can modify later or cancel altogether, if necessary. This sort of flexibility can be of great comfort to a donor who is nervous about her financial future, but wants to act on her desire to support a charity.

Gift planners are frequently asked to compute the present value of a planned gift. The calculation of present value can vary widely, however, depending on its purpose. Whenever you are asked to provide the present value of a deferred gift, your immediate response should be, “For what purpose?” This article will explore four common applications of present value in planned giving. Charitable income tax deduction computation Campaign reporting Gift valuation Financial accounting The first three applications represent different ways to determine the present value of the charitable portion of the gift. The last application is a way to determine the present value of the non-charitable portion of the gift.

Gift planning professionals devote much of their time to creating attractive gift arrangements that offer significant benefits, both to the donors who provide the funding, and to the charitable organizations named in the gifts. Life income gifts, in particular, provide the donors with charitable deductions, income for life and / or a period of years, and the satisfaction of knowing they have supported a charitable organization in whose mission they believe. The amount of income resulting from a life income gift arrangement is fairly straightforward and depends on the amount of funding principal, the range of possible payout rates allowed by the IRS, the level of income appropriate for the underlying investments, and (for gift annuities) the ages of the beneficiaries.

“Virtual currencies” have been around for some time but have increasingly been in the news over the past several years. This can be at least partially attributed to the popularity of the virtual currency “Bitcoin,” which has experienced enormous growth in value since its launch in 2009. With the continued growth of Bitcoin, offers of gifts of bitcoins have inevitably followed. While still not common, charities are beginning to consider these gifts and in some cases accept them.

Planned Giving offers donors a variety of gift vehicles to support their favorite charitable organizations in the long run; moreover, it offers donors the chance to obtain significant financial benefit for themselves in the short run. The most popular planned giving vehicles, after bequest-type gifts, are life income gift arrangements: Charitable Gift Annuities (CGAs), Charitable Remainder Trusts (CRTs), and Pooled Income Funds (PIFs). These vehicles are widely used by philanthropic individuals to achieve their charitable objectives while establishing a stream of income for life and / or a period of years. But are all planned gifts – and more specifically, are all life income gifts – truly beneficial for the nonprofit organization? Are some of these gifts better than others? And how does a charity attempt to measure the relative merit of a prospective life income gift arrangement?

For most organizations, the contractual payout rate on a charitable gift annuity is the rate suggested by the American Council on Gift Annuities (ACGA). These rates are based on ages of the annuitants – the older the persons, the higher the rates. They are also based on an assumption that the charitable organization should receive a remainder equaling at least 50% of the initial funding amount. An investment return assumption (based on an assumed asset allocation) also underlies the rates, and so the gift annuity payout rates tend to increase as investment returns in general rise, and they tend to decrease when returns in general fall. 

Through a regulation issued in December 1998, the Internal Revenue Service (IRS) officially gave its blessing to a type of charitable remainder trust (CRT) known as the “flip trust.” As anticipated, this now well-accepted planned giving vehicle has proven to be quite versatile. 

There can be all sorts of reasons a younger person should not make a planned gift. On the other hand, because age is a relative concept, a very elderly donor can establish or modify a planned gift without a problem. Still, a handful of issues become increasingly worthy of close attention for older donors considering a planned gift.

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What should your organization do with a life insurance policy on which premiums are still owed? This is a dilemma encountered by many non-profits from time to time. It arises in two instances: 1) When the non-profit is first offered a gift of a life insurance policy, and 2) When the non-profit is already the owner of a life insurance policy and for some reason finds itself paying the premiums.

These days, the struggling Pooled Income Fund is like the Rodney Dangerfield of life income gifts – it just can’t get any respect!  Prospective donors interested in establishing split-interest charitable gift arrangements that provide income for life typically consider either the Charitable Gift Annuity or the Charitable Remainder Trust.  The former offers low entry points, consistent payment amounts, and simple tax reporting, while the latter offers considerably more options to donors who are prepared to make significantly larger gift amounts.  Pooled Income Funds, on the other hand, pay very little current income to the beneficiaries and involve complicated and lengthy tax reporting.  As a result, they attract few if any new participants.  As the size of the PIFs decrease, the work and expenses associated with these funds push many organizations to question if they should even continue to maintain their PIFs.  But what options do they have?  The gift arrangements mandate income to the beneficiaries for the rest of their lives.  Is closing out a Pooled Income Fund the only logical solution?  Is it the best choice of action for every organization?  Are there other considerations?