A Few Year-End Thoughts
As I turn the corner and enter into the second year of my two-year term (2021-2022) as president of Chesapeake Planned Giving Council (CPGC), I am excited for the things to come.
2021 has been challenging - fraught with pandemic related issues, work from home scenarios and numerous occasions to join events and meetings virtually. We all have had at some point or another – fatigue in meeting over yet another virtual platform. So far, we have made it through. I am looking forward to 2022 with bright plans and goals to move CPGC forward - with full steam ahead.
Our wonderful board and Programs Committee have been working to get educational programs to you that are informative and helpful. When will we get to meet and network in person at CPGC events? That is the question that we hear most often nowadays. The answer is not one that is taken lightly. We are working on confirming the details of our May event - that we hope to have in person. Stay tuned for event information and updates – visit https://www.chesapeakeplannedgiving.org/events.
As you work on content for client meetings, conversations with donors and planned giving ideas for your office or organization, are you sharing information about these year-end charitable giving strategies (some unique to 2021):
What year-end charitable giving strategies are you sharing with your donors or clients? We’d love to hear from you if you have ideas or an interest in a particular topic for an educational program. Hearing from our supporters is valuable as we plan events that will be helpful to you and your organization. Contact us at info@ChesapeakePlannedGiving.org.
The last CPGC event of the year which was in collaboration with the Baltimore Estate Planning Council was held on December 2nd. A virtual event - "Baby Boomers and Planned Giving: A Very Special Generation or Just Typical Old People?", presented by Russell James, J.D., Ph.D., CFP®.
In this irreverent and entertaining session, Dr. Russell James reviewed nationally representative data on Baby Boomers and their charitable estate planning and planned giving. Beyond simple statistics, this session demonstrated how these demographic realities, and age-related psychological factors, should change how and when you communicate planned giving information to Boomers.
Thank you to our sponsors for your support, especially in a challenging year such as 2021. Also, to CPGC members, thank you for your commitment over the last year.
To visitors, please consider joining CPGC and taking advantage of all it has to offer! Our Membership Committee would be glad to answer any questions that you have. Send us an email at info@ChesapeakePlannedGiving.org. If you are interested in sponsoring an event or other sponsorship opportunity, we have several options available.
I look forward to working to the best of my ability in 2022 to make the organization even stronger.
Enjoy the holiday festivities and time with family and friends. Season’s greetings to you all.
By: National Association of Charitable Gift Planners
Valuation is the process of determining, in today’s dollars, what a planned gift will accomplish when received and used for its intended charitable purpose. Valuation does not seek to provide a comparison between an outright gift and a deferred gift. All things being equal, the outright gift is always more valuable to the charity. But if an equivalent outright gift isn't an option for the donor, then it is helpful to both the donor and the charity to consider the relative value (i.e., purchasing power) of the planned gift. Valuation is an essential component in helping donors and charities understand how to maximize the impact of charitable planned gifts.
Charitable organizations have had varying levels of guidance in accounting for planned gifts (Financial Accounting Standards Board procedures), determining the charitable tax deduction for planned gifts (US Treasury regulations) and counting planned gifts in annual and campaign reporting (PPP's Guidelines for Reporting and Counting Charitable Gifts).
Jeff Comfort, chair of the task force for valuing planned gifts, noted, “These methodologies are valid and useful for their intended purposes. However, none are intended to estimate the ultimate value of a planned gift to the charity that will receive it. In many cases, the accepted methods for accounting, counting, and determining the charitable deduction substantially underestimate the value of planned gifts. The valuation standards help charitable organizations and donors understand the value of a planned gift in terms of its present purchasing power. That present value is reached by considering real-world data, including the standards of the Prudent Investor Rule and historical indices of investment performance and inflation."
Evaluate costs and benefits of planned gift fundraising.
Determine financial effectiveness of an organization’s current investment in gift planning.
Allocate appropriate resources to a gift planning program.
Set planned gift fundraising expectations within a comprehensive fundraising program or campaign.
Assess the effect of certain variables (e.g., term of the gift, investment strategy) on the ultimate value of the gift to the organization.
Because valuation is based upon information that may be unique to each charity, the valuation standards are not generally intended to be used for comparing one organization’s fundraising performance to that of another organization. (Comparison might be possible if a group of organizations agree to use the same default values for that purpose.)
The Valuation Standards for Charitable Planned Gifts use mathematical formulas to arrive at the present value of a planned gift—its purchasing power in current dollars. The process involves two steps:
Payout rates, donor life expectancy or term of the gift and assumed investment returns are used to determine the value of the gift at its projected termination.
The total future value is discounted backward to the present using a discount rate that is based on expected cost rise rates.
There are four variables that must be factored into the valuation process: term of the gift (often related to the donor’s life expectancy), investment return, expenses, payout and cost-rise rate. For organizations that have not maintained their own data on investment performance and expenses, the Partnership provides default values based on historical indices.
Existing standards for counting or accounting for planned gifts may not include revocable gifts. However, these gifts—bequest intentions, charitable remainder trusts with revocable remainder interests, retirement account designations, etc.—are a significant component of most gift planning programs. Excluding these commitments from program evaluation significantly understates the contribution of the program to the charitable organization. At the same time, the Partnership urges that any report of these gift values include a full disclosure of the revocable nature of such commitments.
In general, revocable gifts are valued in light of the probability of receipt. The present value of the gift is further discounted by a probability factor, which is based on what is known about the gift and donor. If the donor has a close relationship to the organization, the amount of the gift is specific, there is a legally enforceable pledge and the estimated value of the estate is 20 times or more than the intended gift amount, then the probability of receiving the gift might be set at 95%. If the donor has no gift history or documented relationship with the organization, a life expectancy of more than 30 years and it is impossible to estimate the value of the estate, then the probability of receiving the gift might be as little as 5%.
Organizations with well-established planned giving programs may elect to calculate their own probability factors through careful analysis of the facts of each gift where larger commitments are involved. Organization-specific probability factors might also be based on a review of past experience, comparing previously known expectancies to actual receipts of specific bequests over time. Organizations with less planned giving history may choose to base probability factors on a model provided by the Partnership.
A task force of twenty gift planners from all types of charitable organizations and the various financial and legal advisor professions developed the standards over a three-year period. The standards have been extensively reviewed and approved by the Partnership Board of Directors. Comments were solicited from Partnership members and the development community at large, and key areas of the standards were clarified in response to these comments.
We invite you to submit an article appropriate for planned giving professionals. The article must be white paper in nature and may not exceed a word count of 750. If you, or someone you know, would like to submit an article, send it in original format [web link or Word] via email to info@ChesapeakePlannedGiving.org. Please include a headshot and a short bio for the author.