by Gene Christian
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Volume IV, Number 3
In the world of planned giving, gifts are not always as neat and tidy as they are in the outright giving business. For instance, when a donor gives you cash or stock from a publicly traded company, it’s hard to imagine how the donor has any other motivation than to support your organization.
However in planned giving, it’s sometimes not so easy to determine what motivates the donor–particularly as they contemplate gifts of real estate or life insurance. Not every proposed planned gift is a good gift!
Sometimes a prospective donor may be looking to “unload” a property he has owned for some time that has no market for resale; or worse, the property has environmental issues associated with it.
Gifts of life insurance can often have issues, too. The two most common areas of concern deal with insurance agents who are selling insurance as a way to build endowments (in a myriad of forms), or donors who are using “gifts” of life insurance as part of a personal tax avoidance technique.
So how can you know when a prospective donor has true charitable intent as it relates to their proposed planned gift arrangement? There are several signs.
First, are you hearing from this prospective donor, or their professional advisor, for the very first time? Has there been a pattern of philanthropic support previously, or is the prospective donor a virtual stranger to you and your organization?
Second, do you feel pressure to accept the gift immediately? Often, real estate gifts are contemplated too close to the end of a calendar year for you and your organization to have sufficient time for due diligence on the property. I’ve turned down more real estate gifts in, the last three weeks of December than I’ve accepted throughout my career.
Finally, is someone going to make money if the gift is made to your organization?
If the proposed gift arrangement is not a traditional gift of cash or publicly traded stock to fund a standard gift annuity or charitable trust, then there is a whole different level of complexity and research that must be done prior to accepting the gift.
In order to help you navigate through proposed gifts beyond cash and publicly traded stock, it’s advisable to have a comprehensive planned-gift acceptance policy to consult. Planned giving policy has come a long way in the last five years, and most organizations that have adopted good policy–and then follow it–will avoid accepting gifts they later regret.
Also, many thoughtful charitable organizations invite professionals from the real estate, insurance, investment, legal, and accounting fields to help them contemplate these more complex gifts. Most charitable organizations have formed their planned giving committees hoping that these professionals will bring planned gift arrangements to them. In my experience, these committees are often more effective in helping you review proposed planned gift arrangements from other sources.
Gifts Requiring Caution
Here is a list of proposed gift arrangements that should cause your caution light to turn on. There are more, but these are most common:
Certain Real Estate Gifts:
- Buildings that were constructed earlier than the 1970s;
- Wetland property or property with significant easement issues;
- Property with debt on it of any kind;
- Property with buried tanks or rusty metal of any kind;
- Property in communities where real estate markets are stagnant; and,
- Time shares.
Life Insurance Gifts That Focus On:
- Wealthy donors only;
- Loans from financial institutions to fund premium payments;
- Groups of people who are willing to have their lives insured;
- The term “split dollar” in any form; and,
- Any start-up life insurance program that promises to help build endowments.
In some cases, a charity can negotiate its way through some of these proposed arrangements toward a good outcome. For instance, gifts of buildings constructed prior to 1972 don’t automatically have asbestos in the ceiling tiles or lead-based paint on the walls. Again, the key is to have good operating policy that will help you discover whether a prospective donor, and his or her advisors, has true and clear charitable intent.
With good policy, proper procedures, and a strong planned giving advisory committee, even charitable organizations that are fairly new to planned giving can avoid the pitfalls that many of us have experienced over the years.
Planned giving is a professional discipline few people imaged as a career option 15-20 years ago. According to their website, there are more than 11,000 people supporting the mission of the National Committee on Planned Giving—an organization that didn't exist 22 years ago. Read More
“The Planned Giving School was invaluable...the course not only increased my knowledge of all the planned giving vehicles available, but I also came away with a plan of action.”
Brennan Wood, Dougy Center
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Tim Abrahamson, Board Chair, Salem Nazarene Foundation