Posted July 1st, 2010

Drawing on Experience

Ron Brown is Director of Gift Planning at Princeton University. In addition to his work at Princeton, Ron is Research Chair for the American Council on Gift Annuities and recently completed writing a history of gift annuities. Here he shares with Give & Take some of the insights he has gained about the field of gift planning, both through his own extensive fund-raising experience and through his research into the history of planned giving.

Give & Take: How did you become involved in charitable gift planning?

Brown: I started working with United Way in 1979 and eventually became the Director of Planned Giving for United Way of America from 1987 to 1992. After 13 years at United Way, I transitioned to National Wildlife Federation to serve as Director of Planned Giving. In 1996 I returned to my alma mater to become Director of Gift Planning at Princeton.

G&T: How does your work at Princeton compare with your experience at other institutions?

Brown: At Princeton, I work with people who began their relationship with the university many years ago with a wonderful campus experience. We work hard to maintain the bonds they developed as students through reunions, on-campus activities, publications, and various other methods of interaction. As a result, our alumni feel very close to Princeton.

Our graduates are often very successful in their careers and generous in their support of the university, so it’s really a delight to work here. For example, nearly 60% of our alumni make annual gifts each year. Additionally, over the course of our seven-year campaign, we anticipate that more than 90% will make a gift to the university in one form or another.

Because of the long history we have with our alumni, the amount of information we have about donors is much more extensive than what I experienced at other institutions. The number of donors is much smaller by comparison, but the quality of interaction and average gift sizes are substantially greater.

G&T: How has the uncertainty with the estate tax affected the types of gifts you’ve received?

Brown: It’s hard to know how many people have chosen not to complete a planned gift until the estate tax issue is settled. It’s also hard to measure how much Princeton might have received through bequests that have been diminished to some extent because of the recent drop in real estate and stock market values. We don’t know if and when the estate tax will be reenacted or what levels Congress will ultimately decide are appropriate. It’s also unclear how income tax rates may change or how broadly they may be expanded in coming years to cover things like carried interest. Uncertainty surrounding both the estate tax and income tax and, of course, the volatile investment markets have made it quite a challenging environment for gift planners.

G&T: I understand you’ve just completed writing a history of charitable gift annuities. What inspired you to write your book?

Brown: I began by asking very basic questions: When and how did gift annuities originate? What is the history of charitable remainder trusts? When did bequests become commonplace in the U.S.? For the last seven years or so I’ve been looking at hundreds of books and articles on the history of charitable giving, and I’ve also explored related subjects like the first reliable mortality tables, the history of life insurance, the development and marketing of commercial annuities, and the progress of actuarial science. I eventually decided to focus my research on the history of gift annuities.

Although the first gift annuity in this country was established almost a century before, it was not until the first Committee on Gift Annuities convened in 1927 that our modern system of gift annuities was invented.

The first reported charitable gift annuity in America was arranged in 1831 between John Trumbull, the famous painter, and Yale College, now Yale University. At the time, Trumbull was near the end of his career. Though his works were already some of the most well-known depictions of the revolutionary period, in the 1830s Trumbull was quite poor. One evening, he made a proposition to his niece’s husband, a professor at Yale, offering to donate all of his best paintings to Yale if they would provide him with a reasonable annuity for life. It took 18 months to work out the arrangement, given Trumbull’s stipulation that his paintings not be sold and Yale’s lack of available funds. When Yale finally completed the contract for the annuity, Trumbull was 76. His life expectancy at the time was 6 years, but he lived for another 12. America’s first gift annuitant was also the first to outlive his life expectancy!

In 1848, the American Bible Society launched the country’s first gift annuity program, which was very successful and became a model for many other charities. Gift annuities became increasingly popular, to the point that by the mid-1920s some ill-advised practices were putting charities at risk of a very visible default. It became common for nonprofits to compete with each other by offering higher rates or to write annuities to benefit as many as four or five people. In addition, many charities neglected to retain sufficient reserve funds. The entire system suffered from inconsistent state and federal legislation, inadequate regulation, and incomplete understanding of the risks involved.

In 1927, representatives of leading charities and businessmen convened a conference to create an “ideal plan” that nonprofits nationwide could follow to reduce the risks for all charities. They developed a suggested annuity rate table, marketing ethics, the modern system of limiting annuities to one or two people, and many of the other “best practices” now commonplace with gift annuities. The American Council on Gift Annuities is a resounding success story for self-regulation by charities, which choose to intentionally limit the rates they can offer and the ways they may advertise in order to manage their risks more successfully, protect their annuitants, and ensure the annuity program is financially rewarding for the charity.

My history of gift annuities has been a lot of work, but I feel that it’s quite important. We can’t understand where we are today without knowing where we came from. In the area of gift annuities especially, almost all of the questions we’re struggling with today go back to the 1920s. Some of them even go back to the Middle Ages, when people were making gifts that provided a fixed payment in return.

You can be a much more effective gift planner once you understand the fundamental reasons why our professional activities take the shape they do. Life is too short to learn only from our own mistakes. History enables us to learn from many other people’s mistakes—and to benefit from their insights.

The publisher of Give & Take is not engaged in rendering legal or tax advisory service. For advice and assistance in specific cases, the services of your own counsel should be obtained. Articles in Give & Take may generally be reprinted for distribution to board members and staff of nonprofit institutions and other non-donor groups. Proper credit must be given. Call for details.

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