Posted August 1st, 1999

In The News…

IRS announces crack down on split-dollar insurance

As reported in the April issue of Give & Take this year, the giving technique known as “charitable split-dollar insurance” has been the center of controversy. Legislation has been introduced that would effectively end these plans that many in Congress and the Internal Revenue Service consider to be thinly veiled tax-avoidance schemes.

Now the IRS is also condemning split-dollar insurance transactions and warning nonprofit organizations to stop the practice. The IRS has threatened to challenge the tax-exempt status of charities that continue to engage in these arrangements. Furthermore, nonprofits participating in split-dollar insurance plans may find themselves penalized by the IRS through numerous penalty taxes. Charitable organizations that are considering such plans should seek expert counsel before proceeding and advise their donors to do likewise.

Source: EOTR Weekly, June 21, 1999

Planned gifts see significant growth in value

According to data from the Internal Revenue Service, planned gift assets in America totaled $72.6 billion in 1997. The statistics focused on four main planned giving vehicles: charitable lead trusts, charitable remainder annuity trusts, charitable remainder unitrusts, and pooled income funds.

Significant increases were noted in all four areas. The value of charitable remainder unitrusts more than doubled from approximately $25 billion in 1994 to $52 billion in 1997. Over the same time period charitable remainder annuity trusts rose in value from $4.5 billion to approximately $8.4 billion.

In 1994 charitable lead trust values were approximately $7.1 billion. In 1997 lead trusts had increased to almost $10.6 billion. Pooled income funds experienced growth in assets as well—from just over $1 billion in 1994 to $1.5 billion in 1997.

Source: The Chronicle of Philanthropy, July 15, 1999

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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