PG Calc Featured Articles

One of the most frequent challenges encountered in the administration of life income gifts is the issue of uncashed checks. The typical response to an uncashed check is to place a stop payment on the check after a specific period of time, and to reissue payment in the form of a replacement check. If the replacement check is cashed within a reasonable period of time, it is assumed that the original uncashed check was just an anomaly and no further action is required. But what happens when the replacement check, and subsequent checks are not cashed?  This article addresses what a charity should do when a beneficiary stops cashing life income payments.

Mutual funds are easy to purchase, simple to understand, and they allow for continual reinvestment of income over the long run. As planned gift donors review their financial assets and determine which ones to use as the funding for charitable gift annuities, mutual funds present an obvious choice. But gift planners should be aware of some particular aspects of mutual funds that can cause significant complications in the process.  Read about the complexities in mutual funds transactions and tax accounting.

Fundraisers consider a well-functioning gift annuity program the cornerstone of a robust planned gift fundraising effort.  Although bequests and beneficiary designations typically produce most of the realized planned gift revenue, offering gift annuities is usually the mark of a mature planned giving program.  Nonetheless, among those charities that have offered gift annuities, many frequently worry about the continued viability of offering them.

Everyone likes to avoid capital gains – or more specifically, we should say, everyone likes to avoid the taxes on realized capital gains. That’s a given. When an investor sells assets that have appreciated over time, typically there is tax on the built-up appreciation in those holdings, at least by the federal government, and frequently by the state government as well. The owner of the stock reports capital gains even if the owner of the stock uses the sale proceeds immediately to make charitable gifts. On the other hand, if the donor uses appreciated assets for outright charitable gifts, there is no taxation on the long-term appreciation in the holdings.

Since its temporary inclusion in the Pension Protection Act of 2006, Congress has extended the IRA charitable rollover provision in two-year increments through 12/31/2014.  Congress did not extend the provision before it expired at the end of 2014.  That all changed at the end of 2015 when the House and Senate passed, and the President signed into law, the Protecting Americans from Tax Hikes (PATH) Act.  The PATH Act made the IRA charitable rollover permanent. Now is a good time to review the impact of permanent adoption of the IRA charitable rollover on its first anniversary. 

The end we are talking about is the end of calendar year 2016.  Are you ready?  Most charities concentrate on year-end giving in the fourth quarter and for good reason.  A study conducted by the Center on Philanthropy at Indiana University focused on high-net worth donors found that 42.7 percent of those surveyed gave more during the holidays than the rest of the year. Nonetheless, in addition to soliciting and encouraging gifts at the end of the calendar year, it is also a time for planned giving departments to prepare and plan. 

Whenever you prepare a carefully crafted email for your donors, do you have a split second of doubt as you click send that anyone will open it?

I still do after almost 20 years of email marketing.

We can’t help it. There are too many times we have racked our brains for the very best content, the best starting sentence, the best subject line, only to find the email stats show opens aren’t as good as hoped. It happens to all of us, but there are ways to improve the odds of a successful open rate.

The persistently low IRS discount rates over the past five years has had a chilling effect on charitable remainder annuity trusts (CRATs). One reason is that these low rates have made 1-life CRATs unavailable for beneficiaries younger than their early 70s. Beneficiaries of 2-life CRATs must be even older. The roadblock has been the 5% probability of exhaustion test.

Many planned giving programs include retained life estate arrangements (RLEs), whereby the donors contribute their home to the charitable organization, but retain the right to live in the residence for the rest of their lives. These can be tremendously effective examples of a split-interest gift – the charity receives a nice gift in the long run, but the donor derives a substantial benefit first, over a period of many years.

Charities that permit gift annuity donors to designate how the residua of their annuities will be used must adopt a method of tracking the values of each of their annuities.  The Uniform Prudent Management of Institutional Funds Act (UPMIFA), which has been adopted in all states except Pennsylvania, imposes a legal requirement to use restricted gifts in accordance with the instructions specified by the donor. So for gift annuities, this means that if donors are allowed to designate or restrict the use of their gift annuity residua, the issuing charity has a legal obligation to track the market value of each gift annuity.

Even if a charity does not permit gift restrictions on its gift annuities, tracking gift annuity market values allows the charity to monitor the health of its gift annuity program on a gift-by-gift basis, as well as on a pool-wide basis. Gift-by-gift tracking of market values enables a charity to identify individual problem annuities and, once identified, to consider possibilities for ameliorating their negative effect on the performance of the gift annuity program overall.