PG Calc’s Planned Giving Manager and PGM Anywhere include a question that sometimes causes confusion for the gift planning professional. When running the calculations for a charitable remainder unitrust, the following question appears in the Gift Options section: “Whole Months from Annual Valuation Date to First Payment Date.” We have received a number of calls over the years about that question, and we thought this was a good chance to cover it.
Charitable Gift Types
The Record Death function in GiftWrap is designed to make adjustments to the payment and tax information for gift annuities. When an annuitant is deceased, the function can move future payment and tax information to a successor beneficiary, if any, or remove future payment and tax information for terminated gifts and change the gift status to Finished.
However, GiftWrap can make these adjustments automatically only for deaths in the current or immediately prior Organization Year. If the death occurs two or more years earlier than the current Organization Year, the Record Death function will mark the annuitant as deceased, but all adjustments to the payments and tax schedule must be done manually.
On April 26, 2018, at the American Council on Gift Annuities’ biannual conference, David Ely, chairman of the ACGA’s Rates Committee, announced an increase in its suggested maximum gift annuity rates. David explained that after reviewing the model portfolio the ACGA uses for determining the interest rate assumption used in setting rates – 40% equities, 55% bonds, 5% cash – the committee determined that this interest rate assumption should increase from 4.25% to 4.75%.
Annuity reserves are the assets a charity needs in order to finance its gift annuity payment obligations. The amount of reserves needed to finance each gift annuity depends on the size of the annuity payments, the ages of the annuitants, and the mortality table and interest rate used.
Many charities compute annuity reserves for their own internal purposes to make sure that they have ample funds on hand to make annuity payments now and in the future.
Under Republican leadership, Congress is working feverishly to complete the details of sprawling tax reform legislation, the Tax Cuts and Jobs Act, and have it on President Trump’s desk for his signature by the end of this year. The House bill was voted on and approved on November 16. On the same day, the Senate Finance Committee approved their version of the package.
There is one important – and often overlooked – question to ask spouses who are funding a charitable gift annuity (CGA) with appreciated securities: “Who owns the securities?” Not knowing the answer to this question can result in a triggering of capital gains taxes never anticipated by the donors - and a donor relations nightmare for the gift officer.
Including revocation language serves two purposes. First, it may enable the donor to avoid making a taxable gift to the annuitant. Second, it preserves flexibility in the event of a change in circumstances, such as the dissolution of a marriage. The decision on whether to include the revocation language is ultimately the donor’s, but it is helpful if the charity understands the issues to help inform that decision.
Mutual funds are easy to purchase, simple to understand, and they allow for continual reinvestment of income over the long run. As planned gift donors review their financial assets and determine which ones to use as the funding for charitable gift annuities, mutual funds present an obvious choice. But gift planners should be aware of some particular aspects of mutual funds that can cause significant complications in the process. Read about the complexities in mutual funds transactions and tax accounting.
Have you ever hoped that a donor would walk away from a gift? Why would any gift officer want that, unless perhaps the charity was at some risk of liability as a result of accepting the gift? Your goal is to close gifts – to cultivate and engage the donor with the hope of a (big) gift. Read about various scenarios in which walking away from a gift makes sense for both parties.