Posted September 1st, 2007

Meeting Multiple Goals Through a Charitable Trust

Suppose you have a donor who wants to use an asset to accomplish what at first glance may seem to be conflicting goals—pay off some debts, but also receive a lifetime income, and make gifts in her mother’s name to institutions that were special to her. How would you proceed? For Ron Heath, vice president for advancement at Lindsey Wilson College, a century-old, small liberal arts college in Columbia, Kentucky, assistance was just a phone call away.

The asset

Five lots in Arizona with an appraised value of approximately $1.2 million.

The donor

The late Joyce Cooley, a retired teacher, whose mother was a Lindsey Wilson College alumna, and whose cousin currently sits on the College’s board of trustees.

Evolution of the gift

According to Heath, the development department had been working with Miss Cooley for more than 15 years. During that time she made a few small gifts, but she always talked about wanting to do something more significant. “She told me she had bought desert property in Arizona in the 1960s as a retirement investment,” Heath said. “She never had any idea how valuable that land would become. These lots had appreciated to the point where, if she sold them, she would owe a large amount in capital gains tax. Miss Cooley said she wanted to find a way to use these lots to pay some bills, and also set up a trust that would pay her a lifetime income and ultimately establish endowed scholarships in honor of her mother at Lindsey Wilson College and Western Kentucky University.

After listening to Miss Cooley’s concerns and wishes, Heath set out to determine the gift planning options available to her that could best address her multiple goals. He decided the best place to start was with a call to his consultant, Barlow Mann of The Sharpe Group.

“We have a small shop here at Lindsey Wilson,” Heath explained of his development department. “While bigger organizations may have legal and technical experts on staff, we do not. So I called Barlow and explained Miss Cooley’s situation. He suggested that by careful planning she could accomplish all her goals with this gift.”

Heath then arranged a conference call with Miss Cooley, her attorney, and a cousin whose financial advice she valued. “We described how Miss Cooley could sell one of her Arizona parcels and use the proceeds to pay off her debts. She could then place the other parcels into a trust,” Heath said. “We explained that this trust would not only provide Miss Cooley with the income she desired, but she would also bypass capital gains on the property placed in the trust and create a charitable deduction to offset the tax owed on the sale of the one parcel.”

While the conference call ended on a positive note, neither Miss Cooley nor her attorney made a commitment over the phone, which came as no surprise to Heath. “Miss Cooley was a very deliberate person,” Heath said. “During the two years I worked with her, she was always very methodical, thinking through every possibility before making a decision.” However, soon after the call, Miss Cooley decided to create the trust just as Mann had suggested it.

Unfortunately, Miss Cooley, who had cancer, was admitted to the hospital and died about one month after signing the trust agreement. Although Miss Cooley never received a payment from the trust, Heath believes she was pleased she fulfilled her financial goals and accomplished her dream of honoring her mother. “As a teacher herself, Miss Cooley knew the value of education,” Heath said. “That’s why she felt so strongly about endowing scholarships at two institutions in her mother’s name.”

Message to gift planners

For Heath, this gift brought home two important lessons. “Even though we had been working with Miss Cooley for 15 years and she had previously made only a few small gifts, we kept the relationship going, even through our own internal staff changes,” Heath stated.

“Second, we learned the importance of taking advantage of the expertise of others when it is needed. I don’t feel that I have the time to learn all there is to know about the various gift options,” Heath explained. “My job is to know the basics and be able to spot opportunities for larger gifts through more effective planning. When specific questions come up, as in this case, it is imperative for us to have an expert available to us. I’m not sure we could have helped Miss Cooley make this gift without the assistance Barlow was able to provide.”

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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