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Posted February 19th, 2018

Planning Problem

Now that we know all about pledges (Click to read Part One, Two, Three, Four, Five, Six), a gift planning problem.

Don wants his name on Charity’s new clinic building. Charity’s president, Ron, has told Don it will cost him a big chunk of change, $X, in cash or securities or in a combination of both. Don is just about to sign a pledge agreement to this effect when his lawyer whispers something to him.

Don pauses and then says to Ron, “How about if I set up a $Y charitable remainder unitrust for myself and my wife instead. You all will get the entire trust remainder.” ($Y > $X) Don continues, “My wife and I will take a 7% payout for 10 years. Then you’ll get the money.”

Ron says, “Let me talk to my people. I’ll get back to you.”

Ron, who is clueless about such an arrangement, goes back to his office and calls Julie, Charity’s planned giving director. Ron describes to Julie his conversation with Don and asks Julie to prepare a written briefing on the matter. Julie, by the way, is a knowledgeable and experienced gift planner.

As Ron tells Julie, Don proposes to make a pledge of $Y, get his name on the clinic building and pay the pledge over 10 years using a 7% unitrust.

Questions:

  1. Will the gift arrangement work as Ron describes it to Julie?
  2. Could the gift arrangement work as Don describes it to Ron?
  3. In retrospect, why should Julie have joined the meeting between Don and Ron?

Answers next time.

By: Jon Tidd, Esq

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