Dear Planned Giving Professionals,
It’s my pleasure to introduce the first issue of the Chesapeake Planned Giving Council e-newsletter. On behalf of the Council’s Board of Directors, we hope you find this inaugural issue to be timely and informative. We welcome your submissions for future issues – in white paper format, with information relevant to gift planning professionals, and with a maximum word count of 900 – to info@ChesapeakePlannedGiving.org.
This e-newsletter is part of our continuing effort to expand our Council’s offerings to you. In addition to our six annual formal educational events, held in odd-numbered months, we hope you’ve enjoyed the online social and networking events that we recently unveiled in even-numbered months. These informal events will continue in 2021 as we eagerly await the opportunity to gather safely in person. We greatly expanded our social media offerings in 2020 as well, and we encourage you to follow the Council on your preferred platform(s):
As the ongoing coronavirus pandemic continues to alter the ways we work, learn, meet, network, and socialize, we would welcome any suggestions you might have to continue to make our Council as welcoming and relevant as possible.
I’m pleased to share some recent updates from the Board of Directors. My two-year tenure as Council President will conclude December 31, 2020. Thank you for your support of me personally, and our Board of Directors more broadly, as I assumed the role of President in 2019 and as we pivoted to a virtual environment in the course of 2020.
At our Board of Directors meeting in November, we took a moment to thank Ashley Mancinelli for her distinguished service to the Council. Ashley, the Director of Individual Giving and Major Gifts for the Walters Art Museum and my predecessor as Council President, will see her term on the Board conclude December 31, 2020. She assumed the Presidency under challenging circumstances and consistently has provided incredible energy, leadership, and enthusiasm to the Board during her tenure. Ashley, thank you for your service!
In November, we also welcomed two new members to the Board, Steve Wantz and Stephanie Brizee. Steve, Executive Director of Institutional Advancement and College Foundation for Carroll Community College, and Stephanie, Director of Planned Giving for Loyola University Maryland, bring diverse backgrounds and skill sets to the Board. We are thrilled to welcome them.
I couldn’t be more delighted that Aquanetta Betts will serve as the next President of the Chesapeake Planned Giving Council. Aquanetta joined the Council and the Board when she was in private practice as an attorney. She has since taken on her current role as Senior Executive Director for Planned Giving and Transformational Engagement for World Vision. The breadth of Aquanetta’s work experience has made her a tremendous asset to the Board. I am proud that she accepted an invitation earlier this year to join the Diversity, Equity and Inclusion Task Force of our national organization, the National Association of Charitable Gift Planners. She also was a panelist on two sessions at the recent NACGP virtual national conference, on the topics “The Impact of Diversity on High Performing Teams” and “Should I Get Certified?” I hope you will join me in congratulating Aquanetta and supporting her efforts as your next Council President.
As we enter the holiday season, I offer my thanks to:
Best wishes for the holidays, and enjoy this e-newsletter!
CPGC President, 2019-20
Johns Hopkins University
The National Association of Charitable Gift Planners [NACGP] manages the membership process for new and existing members. Please click here to join or renew your membership with CPGC, NACGP or both associations.
THE VALUE OF MEMBERSHIP
National Standards for Gift Planning Success - A New Tool for Measuring Progress and Competency in Your Gift Planning Office
By: Bruce Bigelow and Carol Kolmerten, Charitable Development Consulting
Three years ago, the National Association of Charitable Gift Planners (CGP) embarked on an ambitious task of trying to define reasonable metrics for measuring gift planning success. A national task force of more than a dozen experts began a spirited discussion of the issue. Quickly, however, we discovered that trying to designate specific numerical metrics for all gift planning offices was a daunting task that might never provide the kind of guidance that we were seeking. Accordingly, after a year of frustrating discussion and several dead end tries, we refocused our efforts away from specific metrics to a set of best practices or national standards that could apply to all gift planning programs, large and small, experienced and brand-new, sophisticated and simple.
CGP has just released these standards to the public and is now looking to publicize the standards and draw attention to the impact these standards can have on the success of gift planning programs.
CGP has divided the standards into three broad categories: support from the top, the ability and capacity to reach donors, and a donor-centered approach to gift planning. As the details of the sixteen standards below indicate, CGP is working on the principle that each of these standards is critical to all gift planning programs. Support from the top—from staff leadership and from board members—both verbal and financial, is critical to success. Ability to execute—through solid donor data and through access to the broad range of gift planning techniques—likewise provides an important key to success. And a successful program must have a at its core a donor-centered philosophy, measured in timely and regular communication with donors. Following are the standards themselves:
Support from the top: Does the non-profit
The ability to reach donors: Does the non-profit
A donor-centered approach: Does the non-profit
We are now in the process of undertaking four parallel continuing initiatives:
These standards are meant to be a useful and practical tool for planned giving programs and a guide for addressing the most important issues that define a successful program. We welcome your feedback and look forward to talking more about the standards in the months to follow.
About the Authors
Drs. Bruce Bigelow and Carol Kolmerten are founding partners of Charitable Development Consulting, a firm that specializes in helping nonprofits increase gifts through non-cash assets.
Thank You to Our Sponsors For Your Continued Support
By: Russ Willis
As most gift planners are aware, a split-interest trust is subject to the private foundation excise tax regime, per Code section 4947(a)(2), to the extent it is holding amounts for which an income or transfer tax charitable deduction has been allowed. In the case of a charitable lead annuity trust, there is an exception at section 4947(b)(3)(A) to the prohibition on excess business holdings, where the present value of the unexpired annuity stream is not more than 60 pct. of the value of the trust corpus. If we are trying to leverage the present value of the remainder gift, we are unlikely to meet that exception, at least at the front end.
But what if we were to simply not claim the gift tax charitable deduction? or what if we structured the payout as something other than a fixed annuity or unitrust amount, so that it would not qualify? We could still discount the remainder gift by the present value of the "income" stream. And by reserving a power to direct the payout among charities we could render the non-qualifying "income" gift incomplete without it being treated as "retained" for purposes of section 2702.
The object is to try to replicate some of the income and transfer tax benefits of a qualified non-grantor lead trust without triggering an excise tax on excess business holdings. To achieve a discount on the value of the remainder gift, in other words, while avoiding application of section 4947(a)(2) by not holding amounts for which an income or gift tax charitable deduction has been allowed.
IRS has ruled privately at least twice that if the charitable deduction is not claimed, we need not concern ourselves with excess business holdings or with the prohibition on self-dealing. PLRs 201713002 and 201713003, identical verbatim, concerned a charitable remainder unitrust which otherwise qualified. PLR 200714025 concerned an ordinary "complex" trust in which the trustee had discretion to make deductible distributions to charity. In both instances, IRS agreed section 4947(a)(2) did not apply.
Code section 2522(c)(2) disallows a gift tax charitable deduction for a contribution to a lead trust unless the payout is in the form of a fixed annuity or a unitrust amount. If we set up a lead trust paying net fiduciary accounting income, the lead interest would not qualify.
The remainder gift would still be discounted, albeit not by nearly as much. In a low interest rate environment, a fixed annuity provides very strong leverage, a net income payout almost worse than none. Remainder values after a term unitrust are not affected by fluctuations in the 7520 rate.
But while we are forgoing the gift tax charitable deduction, we do not want to "waste" lifetime exclusion -- or worse, pay gift tax out of pocket -- on amounts that are in fact going to charity. So we would want to render the gift of the income interest incomplete, per reg. section 25.2511-2(c), until distributions are actually made, by reserving to the settlor a power to allocate among charitable distributees.
Per section 674(b)(4), this would not trigger "grantor" trust treatment. IRS confirmed this analysis in PLR 9742006, though in the particular case the settlor had also retained a testamentary power to alter the disposition among the remainder beneficiaries, rendering the entire gift incomplete.
More formally, in Rev. Rul. 77-275, IRS ruled that a settlor's reserved power to allocate income among charitable distributees would render the gift incomplete. The ruling supposed a pre-1988 "Clifford" trust, with a term of ten years and one month, implicitly confirming that the reserved power would not itself trigger "grantor" trust status.
However, the reserved power would cause inclusion in the settlor's estate per section 2038(a), with no offset for the unexpired, non-qualified term. As in the case of a grantor retained annuity trust, we would want to set the term well within the settlor's life expectancy, and to be prepared to accept the consequences of an early death. Or we might convert the net income payout at the settlor's death to a fixed annuity or straight unitrust, which would qualify under section 2055(e)(2).
As with any non-grantor lead trust, the non-qualified trust would be taxed as a "complex" trust, with an income tax deduction per section 642(c)(1) offsetting current net fiduciary accounting income. Although reg. section 1.642(c)-3(b)(2) requires that the charitable deduction be pro rated across various classes of income, thereby defeating any "ordering rule" that might otherwise purport to distribute items subject to higher rates first, reg. section 1.642(c)-3(c) does allow a deduction for distribution of realized gains, if the trust instrument expressly includes these in the mix.
If we are funding the trust with interests in a pass-through entity, the income tax charitable deduction will be limited to the extent we are funding distributions with unrelated business taxable income. The consequence may be that we are paying some amount of income tax at the trust level.
About the Author
Russ is a tax lawyer, a freelance writer, and a consultant to other lawyers -- an advisor to the advisor -- on issues arising in connection with wealth transfers. Among his other engagements, Russ is a manager of noncash research for Charitable Solutions, LLC, a planned gift risk management consulting firm headed by Bryan Clontz.