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PG Calc Feature Articles

Undeserved Neglect: The Installment Bargain Sale

A donor approaches your organization to gauge its interest in purchasing a building he owns next door. Your organization is interested, but cannot afford to pay market price for it. The donor is willing to consider making part of the transfer a charitable gift, but wants to receive some immediate financial benefit, too. What should you suggest?

Do CRATs Have 9 Lives?

To the extent it is thought of at all, the charitable remainder annuity trust (CRAT) is generally regarded as the “other” type of charitable remainder trust (CRT). True, a charitable remainder unitrust (CRUT) will be appropriate in far more situations than will a CRAT. Still, a CRAT can prove to be just the right vehicle in certain circumstances, now that somewhat higher IRS discount rates have – at least for the time being – brought newly-established CRATs back from the brink of extinction.

Don’t Overlook State Taxes Applicable upon Death

As a result of the American Taxpayer Relief Act of 2012, an estimated 99.87% of Americans will die without their estates being subject to federal estate tax. At the state level, however, the situation can be quite a bit different. Accordingly, in appropriate circumstances gift planners should alert donors to the possibility that a state estate tax or inheritance tax – or both – may apply, while pointing out as well ways to reduce or eliminate such taxes by making charitable gifts.

Don’t Forget Gifts of Tangible Personal Property

Except for museums that are accustomed to receiving gifts of art and artifacts, charities tend to
focus on gifts of cash, securities, and real estate. In the process, they may be missing
opportunities to attract valuable gifts of tangible assets.

Any physical object of value could make a great gift to your organization. The list includes, but
certainly isn’t limited to, artwork; antiques; stamp, coin, and other collections; gold and silver;
cars and other vehicles; and boats.

The person making the gift executes a deed of gift conveying ownership and delivers the object
to the charity. The gift is complete when both of these events have occurred.

There are a number of issues to keep in mind when working with a supporter who is considering
a gift of tangible personal property.

Gift Annuity Risk Analysis Options

It should come as no surprise that charitable gift annuities feature a measure of risk. Nevertheless, a charity can take steps to maximize the likelihood its gift annuity program will be successful in spite of the potential downsides. The secret lies in understanding the inherent challenges and then assessing how well the program is responding to them.

Choosing Wisely: How the IRS Discount Rate Affects Gift Annuity Calculations

A donor establishing a charitable gift annuity has the option of using the IRS discount for the month in which the contribution is made or for either of the two preceding months. Should the donor always select the discount rate that will produce the largest charitable deduction? Not necessarily. Making the right choice entails understanding a few details about the role played by the discount rate.

Don’t Forget About Charitable Remainder Trusts!

Charitable remainder trusts, as we know them today, are a creation of the Tax Reform Act of 1969. Their popularity grew steadily for the first 20 years or so of their existence, and then exploded in the 1990s. According to IRS statistics, from 1999 to 2002 the number of charitable remainder annuity trusts (CRATs) grew 14% and the number of charitable remainder unitrusts (CRUTs) grew 38%. Since then, however, interest in CRTs has cooled: the number of charitable remainder unitrusts in force in 2010 was just 4.4% greater than it was in 2002, and the number of active charitable remainder annuity trusts declined 26.2% over the same period.

Although the popularity of CRTs today is not what it once was, they remain an excellent solution in a variety of donor situations. Also, there may be changes afoot that will restore some of their former luster.

Why the Ebb and Flow in CRT Popularity?

Step Lead Trusts and Shark Fin Lead Trusts Can Perform Well for Family

In 2011 we wrote a feature article about the step lead trust. A year before that, we wrote an article about the “shark fin” or “balloon” lead trust. In both cases, we suggested that economic conditions were ideal for setting up these types of trusts in part because of the very low IRS discount rate. When we originally published the article, the IRS discount rate was about 3% . Fast forward to 2015, the rate is still very low, currently at 1.8%. With the IRS discount rate continuing at record lows, it seems worthwhile to revisit these gift plans.

Liabilities for Planned Gifts – Your Role

Many of our clients end their fiscal years on June 30. If you're one of them, you may have been requested to provide a report showing the liabilities associated with your organization's active planned gifts. If not, you may be, because Financial Accounting Standards Board (FASB) guidelines require all charities to include these liabilities in their annual financial statements.

Best Practices in Terminating Life Income Arrangements

When a donor establishes a life income gift such as a charitable remainder trust, a gift annuity, or a contribution to a pooled income fund, the arrangement usually remains in effect throughout the period set forth in the gift instrument. Sometimes, however, the donor or other beneficiary of the gift’s income interest decides to end the arrangement ahead of schedule. Doing so should be acceptable from a legal standpoint, provided certain steps are taken.

Charities generally welcome such terminations. Typically terminations will result from a life income beneficiary making a charitable gift of his or her interest in the remaining payments. Nevertheless, if a life income beneficiary instead wants to “cash out” his or her interest, the charity will often accommodate the beneficiary’s wish in order to receive its share of the arrangement now, rather than wait to receive what could be a smaller benefit in the future. It is even possible for an existing life income gift to be transformed or “converted” into a new life income gift.

Learn from the missteps of others.