We are asked regularly by clients for help estimating the value of a known bequest intention that will occur at some unknown time in the future, when the donor dies. There are two common approaches to making this determination, the life expectancy approach and the mortality approach.
Charitable Gift Types
A charitable lead annuity trust is a way for a wealthy donor to pass assets on to heirs at little or no gift or estate tax cost while providing a generous gift to one or more charities at the same time. During its term, the lead trust makes payments each year to the charity(ies). Whatever assets remain in the lead trust when it terminates are distributed to individuals named by the donor, typically family members. Unlike a charitable remainder trust, which is tax-exempt, a charitable lead trust is a taxable entity, so trust investments need to be managed with this in mind.
PG Calc presents an excerpt from its white paper, State Gift Annuity Registration: A Primer on What It Means to Your Organization. If you have thoughts on this paper or recommendations for a white paper topic, please send them to firstname.lastname@example.org.
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For gift planning offices at most not-for-profit organizations (NFPs), FASB accounting is the last thing on the list. Activities are geared towards bringing in new planned gifts, ongoing administration, and donor stewardship. The financial office asks for a FASB liability report once a year (at a few NFPs, once a quarter). Someone in the gift planning office runs off a new report using similar assumptions to the previous year. If there is an outside gift administrator, they can be asked to produce the report.
When it comes to state regulation of gift annuities, the specific requirements of the most regulated states garner the most attention. But there are only 10 of those states. A charity can satisfy the regulatory requirements of the 40 other states with relative ease and speed. Working from the least regulated to the most regulated, the states can be broken down as follows: