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Posted February 8th, 2019

Let’s Talk About Worthless Gifts

For example, a charitable remainder unitrust set up to run for the life of an individual aged 50.

Some charities have gift acceptance policies that are questionable when it comes to minimum ages for certain “life income” gift plans. Age 50 is way too young for a CRUT other than a term-of-years CRUT. Age 60, in my opinion, is way too young for a gift annuity.

The 50-year-old’s unitrust is worth less to the remainder beneficiary because the present value of the right to receive assets upon the death of an individual currently aged 50 is negligible.

But we’ve got to be careful. There might be extenuating circumstances. For example, the payment recipient may be an individual of special needs, whose projected future life span is truncated. Or the donor — let’s say the recipient’s elderly parent — may have included the charitable donee for a generous bequest under his or her will. In this second situation, it may be important to accommodate the elderly donor.

Worthless (or at best, speculative) gifts often crop up in the context of a capital campaign. For example, CHARITY is doing everything it can to reach its campaign goal; the campaign has two years to run. DONOR approaches CHARITY with this proposition: Donor and others plan to construct an income-producing building. After 12 years, Donor says, Donor will “give the building” to CHARITY.

Perhaps this is a pretty tempting offer from a campaign-counting standpoint (it’s a great opportunity to fudge some numbers). But what’s the real worth today of a building that may, or may not, wind up in CHARITY’s hands 12 years from now? Your guess is as good as mine.

Keep in mind here that it appears the building will be held by a partnership (or some other entity), of which various investors will be owners. Donor only can give what he owns, which well may be a small slice of the pie.

If you’re dealing with a potentially worthless gift, your SHARPE newkirk consultant can help you consider the pros and cons of a particular gift situation.

by Jon Tidd, Esq

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