PG Calc Featured Articles

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.

How Safe is Your Data?

Just a decade ago, most data lived in spreadsheets and databases close to home, sometimes right on our desk. IT departments guarded access. The greatest risk to our data was loss through system failure, so full data backups were the rule. Occasionally we would hear of someone’s computers being “hacked,” but it was not a common occurrence.

What happened? Offsite solutions, born in part by the disaster recovery push after 9/11 and the technology that sprang up around it. Hosted or cloud storage became cheap and offered freedom from fears of data loss due to hard drive crashes or mysterious server malfunctions – and also meant greater access to data. Where memory and notes scribbled in tattered files once guided donor cultivation efforts, a few taps on our phones or tablets now reveals up-to-the-minute information and analysis. However, with great (technological) power comes the great responsibility of data security – your data and personal data your donors have entrusted to you.

Substantiation and Appraisal Rules Not Set in Concrete

A recent Tax Court case illustrates the importance of following the substantiation and appraisal requirements for charitable gifts. Or at least, the importance of making a good try. The Internal Revenue Service (IRS) disqualified a $1,400,000 charitable deduction because the donor failed to follow the rules. Despite that, the donor’s lawyers managed to save the charitable deduction in the Tax Court.

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 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.

For a Designer CRT, Think Outside the “Qualified” Box

A charitable remainder trust (CRT) is nothing more than a trust with one or more charities as its remainder beneficiary(ies). When a donor establishes such a trust, it will typically be a qualified CRT, meaning it meets a number of different requirements that result in various federal tax benefits for both the donor and the trust itself. If those benefits are of little or no value, however, then a host of planning opportunities becomes available to donors who want to customize their CRTs.

Tracking Bequests Through Probate

By including the non-profit in her will or living trust, a donor has elevated your organization to the same status as family members, friends, and other loved ones. Through proper stewardship you can ensure that this decision is a life-affirming one for the donor and remains in place, perhaps even growing in the process.

With diligent gift administration, you come full circle by ensuring that the donor’s desire to make a difference is realized to the fullest extent possible. You do this by seeing to it that your organization receives all that it is entitled to, as quickly as possible.  Diligent oversight is particularly important in the case of residual gifts (percent of the estate), where costs and fees all affect the bottom line and there is often delay in making distributions.