a topic you love to hate: putting your gift policies in order
TRANSCRIPT
Slide 1Brian M. Sagrestano, JD, CFRE
Gift Planning Development, LLC
[email protected]
www.giftplanningdevelopment.com
GIFT PLANNING DEVELOPMENT, LLC
GIFT PLANNING
GIFT PLANNING
economy
– State Regulation on the Rise
39 States and Washington DC
require registration in order to solicit,
unless exempt or excluded
– Resources for Particular States
Do Business (unless exempt or excluded)
– IF you plan to:
Usually requires you to have a bona-fide office or an
agent for service of process
Can be costly
GIFT PLANNING
charitable giving law
states where you issue gift annuities
Questions remain regarding registration in
states where you solicit gift annuities
Many states will require you to register to do
business or register to solicit in order to issue
gift annuities, even if you solicit passively
GIFT PLANNING
White-initial notification/registration (12)
Purple-state statutes are silent on gift annuities (5)
(Map Courtesy of the American Council on Gift Annuities)
GIFT PLANNING
requirements: www.acga-web.org/regsoverview.html
– PG Calc --Planned Giving Resources
– Crescendo
Small and mid-size organizations issuing gift annuities
in just a few states may want to avoid registration by:
– Using a third party charity to issue gift annuities
Community foundations
Administration
– Define gift acceptance and administration
procedures
different aspects of accepting gifts without a
pending gift to cloud judgment
Engage the board and leadership in a
discussion of alternative gift forms and assets
Educate staff, board and volunteer leadership
about critical issues around certain assets
Protect the charity from accepting assets that
would subject it to liability or risk
GIFT PLANNING
– CEO
Policies Board should approve the final policy
Policy should be reviewed annually and have a formal process for amendment
Charity should engage professionals so that when a gift needs to be reviewed, it can be done quickly and according to policy
Policy should provide for exceptions
– Should be rare
– Should be reviewed by gift planning director, CEO, CFO and an authorized board representative as the gift acceptance committee
GIFT PLANNING
Purpose of the Policies and Guidelines
Function of Offices within the Charity
Responsible for Receipt, Recording,
Statement of Adherence to National Reporting
Standards and Ethical Fundraising Principals
Use of Legal Counsel
Acceptance Committee
Types of Gifts
– Life insurance
Naming Opportunities and Requirements
Note – it may take 18 months to 2 years to
complete this process with the stakeholders.
Better to do it right than to simply copy the
policies of another charity.
and the charity
out
future
charitable status
GIFT PLANNING
Gift Agreement?
– Subject to restriction
the future, but for which the donor wants
certainty in how your charity will use the funds
– Estate designations
agreements
Enforceability
commitment to carry out the Donor’s wishes
Ensure that donor’s estate is able to carry out donor’s
wishes
Binding versus Non-
Binding Gift Agreements
If you elect to use binding gift agreements, you should still use a non-binding gift agreement when
Donor intends to pay off commitment from a donor- advised fund (DAF)
Donor may pay commitment from a DAF and personal assets, still unsure
Donor may have commitment paid by others (family members, friends, matching gift company)
GIFT PLANNING
there such a thing?
his/her/their estate, retirement plan or life
insurance policy and wants to document
enforceable terms of the commitment
GIFT PLANNING
Name of Parties
through gift
GIFT PLANNING
– An endowed fund?
– A term/expendable fund?
avoid?
GIFT PLANNING
Donor Restrictions
Your charity can be sued if you don’t comply with donor restrictions
– Who can sue (standing)?
Attorney General
Donor or Donor’s Family-if explicitly reserved the right in the agreement
Rules getting more relaxed—broader standing
Misuse of funds can result in civil and criminal penalties against individuals at the charity
– Those who approve inappropriate expenditures
– Those who supervise the approver
– You can go to jail (Allegheny, Princeton)
GIFT PLANNING
Restrictions
If the fund can no longer be used for its intended purpose
– Contact the donor (if alive) or family to amend the agreement by consent
– Legal Remedies
Equitable deviation-Court approves changes to the administration of the funds
Cy pres petition-Court allows changes to donor restrictions
– Risk that the Court could order the transfer of the funds to another charity which could use the gift according to donor restrictions
GIFT PLANNING
counting and valuation of life-income and
estate gifts
attention on life-income gifts, which only
account for 20% of gift planning revenue
Better to measure activity and relationship-
building activity
GIFT PLANNING
set of generally accepted guidelines and principles,
in order to present a fair, comparable and
understandable picture of an organization’s
financial state at any given time
GIFT PLANNING
results and progress toward goals
– Reporting is the process of conveying to a lay
audience clearly and transparently what has
happened during a specific timeframe
GIFT PLANNING
organization grants recognition to its donors. Such
recognition need not stem from any of the factors
of counting, accounting or valuation, although a
given organization may use any of these
calculations as the basis of its donor recognition
policies.
income tax return, representing the IRS estimate
of what the gift is worth at the moment in time it is
donated (snapshot in time).
DEVELOPMENT
Definitions
Valuation
– An assessment of the actual value of an item to the
person or organization that possesses it
– A reflection of the present value of the ultimate
purchasing power of a gift when it matures
GIFT PLANNING
– Estimate the real value of funds raised through a
gift planning program
for the charitable organization
purchasing power of the gift
GIFT PLANNING
(cont.)?
planning across the charitable community
Costs and benefits of gift planning fundraising
Financial effectiveness of a gift planning program
Assessment of appropriate resource allocation to a gift
planning effort
Purchasing power value to charity of funds raised
through gift planning
DEVELOPMENT
Valuation
Methodology
Step 1: Determine the total future value of life- income gift at its projected termination
– Variables include:
Payout rate
Assumed investment return
Step 2: Discount the total future value back to the present
– Variables include:
GIFT PLANNING
Valuation Example
75 year old donor makes a $10,000 gift to fund a
gift annuity paying 7.1% per annum
Step 1: Determine total future value
– Payout rate: 7.1%
– Assumed investment return (net of expenses) 5%
At the end of 12.4 years, the annuity balance, or total
remaining future value is $6,657
GIFT PLANNING
present
Current purchasing power in today’s dollars -- $5,632
GIFT PLANNING
Gift planning programs raise both revocable and irrevocable commitments
Valuation of revocable commitments requires a third step, application of a probability factor to estimate likelihood of receipt due to the gift’s revocable nature
Revocable commitment values should NEVER be reported together with irrevocable commitment values
GIFT PLANNING
Campaigns are for a finite time
GIFT PLANNING
– may be included in campaign totals at face value, but
both face and discounted present values should be reported.
Revocable deferred gifts
– may be included in campaign totals at face value if
they are pledged during the campaign
documented, and
as long as they are reported separately from outright gifts and irrevocable deferred gifts
GIFT PLANNING
Set and report at face value three separate goals:
– An outright goal for gifts usable or that become usable for institutional purposes during the reporting period (whether one or more years)
– Irrevocable gift goals, for gifts committed during the reporting period but usable by the organization at some point after the end of the period
– Revocable gift goals for gifts solicited and committed during the reporting period but in which the donor retains the right to change the commitment and/or beneficiary
GIFT PLANNING
Realized Bequests
Current Lead Trust Distributions
CGA, CRAT, CRUT, PIF Maturations Previously Reported in Category B
GIFT PLANNING
value in Category A)
CRT’s in Which Donor Retains the Right to Change
the Charitable Beneficiary
Ownership
Revocable or Conditional Pledges
numbers to these gifts
Valuation Standards for Charitable Planned Gifts,
probability of receipt formulas)
rather than dollar amounts
2006 with input from a coalition of major
universities, charities, and consultants.
Reporting Standards
GIFT PLANNING
Gift Planning Development, LLC
[email protected]
www.giftplanningdevelopment.com
GIFT PLANNING DEVELOPMENT, LLC
GIFT PLANNING
GIFT PLANNING
economy
– State Regulation on the Rise
39 States and Washington DC
require registration in order to solicit,
unless exempt or excluded
– Resources for Particular States
Do Business (unless exempt or excluded)
– IF you plan to:
Usually requires you to have a bona-fide office or an
agent for service of process
Can be costly
GIFT PLANNING
charitable giving law
states where you issue gift annuities
Questions remain regarding registration in
states where you solicit gift annuities
Many states will require you to register to do
business or register to solicit in order to issue
gift annuities, even if you solicit passively
GIFT PLANNING
White-initial notification/registration (12)
Purple-state statutes are silent on gift annuities (5)
(Map Courtesy of the American Council on Gift Annuities)
GIFT PLANNING
requirements: www.acga-web.org/regsoverview.html
– PG Calc --Planned Giving Resources
– Crescendo
Small and mid-size organizations issuing gift annuities
in just a few states may want to avoid registration by:
– Using a third party charity to issue gift annuities
Community foundations
Administration
– Define gift acceptance and administration
procedures
different aspects of accepting gifts without a
pending gift to cloud judgment
Engage the board and leadership in a
discussion of alternative gift forms and assets
Educate staff, board and volunteer leadership
about critical issues around certain assets
Protect the charity from accepting assets that
would subject it to liability or risk
GIFT PLANNING
– CEO
Policies Board should approve the final policy
Policy should be reviewed annually and have a formal process for amendment
Charity should engage professionals so that when a gift needs to be reviewed, it can be done quickly and according to policy
Policy should provide for exceptions
– Should be rare
– Should be reviewed by gift planning director, CEO, CFO and an authorized board representative as the gift acceptance committee
GIFT PLANNING
Purpose of the Policies and Guidelines
Function of Offices within the Charity
Responsible for Receipt, Recording,
Statement of Adherence to National Reporting
Standards and Ethical Fundraising Principals
Use of Legal Counsel
Acceptance Committee
Types of Gifts
– Life insurance
Naming Opportunities and Requirements
Note – it may take 18 months to 2 years to
complete this process with the stakeholders.
Better to do it right than to simply copy the
policies of another charity.
and the charity
out
future
charitable status
GIFT PLANNING
Gift Agreement?
– Subject to restriction
the future, but for which the donor wants
certainty in how your charity will use the funds
– Estate designations
agreements
Enforceability
commitment to carry out the Donor’s wishes
Ensure that donor’s estate is able to carry out donor’s
wishes
Binding versus Non-
Binding Gift Agreements
If you elect to use binding gift agreements, you should still use a non-binding gift agreement when
Donor intends to pay off commitment from a donor- advised fund (DAF)
Donor may pay commitment from a DAF and personal assets, still unsure
Donor may have commitment paid by others (family members, friends, matching gift company)
GIFT PLANNING
there such a thing?
his/her/their estate, retirement plan or life
insurance policy and wants to document
enforceable terms of the commitment
GIFT PLANNING
Name of Parties
through gift
GIFT PLANNING
– An endowed fund?
– A term/expendable fund?
avoid?
GIFT PLANNING
Donor Restrictions
Your charity can be sued if you don’t comply with donor restrictions
– Who can sue (standing)?
Attorney General
Donor or Donor’s Family-if explicitly reserved the right in the agreement
Rules getting more relaxed—broader standing
Misuse of funds can result in civil and criminal penalties against individuals at the charity
– Those who approve inappropriate expenditures
– Those who supervise the approver
– You can go to jail (Allegheny, Princeton)
GIFT PLANNING
Restrictions
If the fund can no longer be used for its intended purpose
– Contact the donor (if alive) or family to amend the agreement by consent
– Legal Remedies
Equitable deviation-Court approves changes to the administration of the funds
Cy pres petition-Court allows changes to donor restrictions
– Risk that the Court could order the transfer of the funds to another charity which could use the gift according to donor restrictions
GIFT PLANNING
counting and valuation of life-income and
estate gifts
attention on life-income gifts, which only
account for 20% of gift planning revenue
Better to measure activity and relationship-
building activity
GIFT PLANNING
set of generally accepted guidelines and principles,
in order to present a fair, comparable and
understandable picture of an organization’s
financial state at any given time
GIFT PLANNING
results and progress toward goals
– Reporting is the process of conveying to a lay
audience clearly and transparently what has
happened during a specific timeframe
GIFT PLANNING
organization grants recognition to its donors. Such
recognition need not stem from any of the factors
of counting, accounting or valuation, although a
given organization may use any of these
calculations as the basis of its donor recognition
policies.
income tax return, representing the IRS estimate
of what the gift is worth at the moment in time it is
donated (snapshot in time).
DEVELOPMENT
Definitions
Valuation
– An assessment of the actual value of an item to the
person or organization that possesses it
– A reflection of the present value of the ultimate
purchasing power of a gift when it matures
GIFT PLANNING
– Estimate the real value of funds raised through a
gift planning program
for the charitable organization
purchasing power of the gift
GIFT PLANNING
(cont.)?
planning across the charitable community
Costs and benefits of gift planning fundraising
Financial effectiveness of a gift planning program
Assessment of appropriate resource allocation to a gift
planning effort
Purchasing power value to charity of funds raised
through gift planning
DEVELOPMENT
Valuation
Methodology
Step 1: Determine the total future value of life- income gift at its projected termination
– Variables include:
Payout rate
Assumed investment return
Step 2: Discount the total future value back to the present
– Variables include:
GIFT PLANNING
Valuation Example
75 year old donor makes a $10,000 gift to fund a
gift annuity paying 7.1% per annum
Step 1: Determine total future value
– Payout rate: 7.1%
– Assumed investment return (net of expenses) 5%
At the end of 12.4 years, the annuity balance, or total
remaining future value is $6,657
GIFT PLANNING
present
Current purchasing power in today’s dollars -- $5,632
GIFT PLANNING
Gift planning programs raise both revocable and irrevocable commitments
Valuation of revocable commitments requires a third step, application of a probability factor to estimate likelihood of receipt due to the gift’s revocable nature
Revocable commitment values should NEVER be reported together with irrevocable commitment values
GIFT PLANNING
Campaigns are for a finite time
GIFT PLANNING
– may be included in campaign totals at face value, but
both face and discounted present values should be reported.
Revocable deferred gifts
– may be included in campaign totals at face value if
they are pledged during the campaign
documented, and
as long as they are reported separately from outright gifts and irrevocable deferred gifts
GIFT PLANNING
Set and report at face value three separate goals:
– An outright goal for gifts usable or that become usable for institutional purposes during the reporting period (whether one or more years)
– Irrevocable gift goals, for gifts committed during the reporting period but usable by the organization at some point after the end of the period
– Revocable gift goals for gifts solicited and committed during the reporting period but in which the donor retains the right to change the commitment and/or beneficiary
GIFT PLANNING
Realized Bequests
Current Lead Trust Distributions
CGA, CRAT, CRUT, PIF Maturations Previously Reported in Category B
GIFT PLANNING
value in Category A)
CRT’s in Which Donor Retains the Right to Change
the Charitable Beneficiary
Ownership
Revocable or Conditional Pledges
numbers to these gifts
Valuation Standards for Charitable Planned Gifts,
probability of receipt formulas)
rather than dollar amounts
2006 with input from a coalition of major
universities, charities, and consultants.
Reporting Standards
GIFT PLANNING