Planned Giving | The Time to Act is Now

And then another thought that is important is to balance this with other strategies of the organization. This may be a long-term strategy as compared to something that's going to give you cash in the short term. And so think about what you need today to have liquidity and execute on your mission versus what you want to do to secure the long-term future of the nonprofit.

And so why does this matter now? So obviously there has been, and this has been well discussed, a shifting in donor demographics. You've heard the term great wealth transfer. And so there's been many articles written about the fact that we are obviously seeing the greatest transfer of wealth in our history right now, and that those that have a planned giving strategy may benefit disproportionately to those nonprofits that do not. And the reason being that there are some tax advantages. There are things about planned giving that may be attractive to a particular type of donor versus a straight contribution in a given year. And so having this as an option might mean that you will be able to capture some of this wealth transfer as compared to those nonprofits that do not. As I mentioned, this is definitely a long-term sustainability strategy. And then this may have some interplay with the new tax legislation.

There were some changes to individual giving. They did set a floor for individuals, although it's a pretty easy hurdle to overcome for the individuals. And then they also changed the deductibility for high net worth individuals. So those in the 37% tax bracket can now only get 35% deductibility for their gifts. So those things may come into play when thinking about whether to implement this strategy. One of the things I do want to note to you is that there are some misconceptions, right? So there's a feeling that planned giving is only for large organizations, and that's certainly not true. Also, there's a concern that plan giving is too complicated or too expensive to manage. And I think if it's done right, you can set it up where your donors will be able to easily understand it, and you can structure it so that the cost will not be prohibited.

And so what are the benefits? So for the donors, it's an opportunity to have a long-term legacy and significant impact. This may align with their values. And certainly, of course, there are tax and financial considerations, and this might be more enticing as compared to other types of donations. For the nonprofit, this is certainly a strategic type of plan to implement, and it will help with long-term asset growth. This may be the tool you need to build your endowment. Certainly sustainability amiss a declining grant funding environment, unfortunately, and perhaps this is a way to recruit new donors. So adding this to the mix of different types of giving strategies might entice a donor that previously had not given to your organization.

What are some other considerations? So there are fees that may go along with these types of donations, the first of which is actuarial fees. So forgive us if we at times seem a little morbid in this presentation, but a lot of these types of donations have to be aligned with mortality tables. And so in order to know what the value of the donation is at the time it is being given, you may have to do actuarial calculations and therefore have to hire an actuary. There may be legal fees involved in terms of negotiation of the gift instrument. If you are planning to do a charitable gift annuity program and you don't want to house the assets directly, you may be paying a third party to administer those gifts. If you do decide to administer the charitable gift annuity program directly, depending on your particular state law, there may be additional insurance or filing requirements.

So you'll want to look into that. Again, that might cause you to incur some legal fees as you set up the program. Certainly, there is a risk on what the ultimate final proceeds will be. So at the time that you're recording the asset, you're doing that based on the information available at the time of the donation, but some of these are absolutely subject to market fluctuation. And so the ultimate proceeds that the nonprofit will receive is not necessarily known or guaranteed. There might be other carrying costs. We'll talk a little bit later about property subject to a life interest, and so certainly there may be some carrying costs related to that. And then you may have to spend a little bit of additional time at month end or at your year-end financial close process to make sure that all of these gift instruments are properly recorded and reflected in your financial statements appropriately.

And so we are now at the second poll. Polling question #2.And so we'll give everyone a moment to respond here. I know that I've served on the boards of many nonprofits and a lot of them did not have a planned giving program for the reasons that we described earlier. But as I mentioned, I think now is a critical time to reevaluate that decision and decide whether it would make sense to implement one. And also, we're going to talk about a whole menu of options under this category. You don't have to offer all of them. So I think as we talk about the strategy, what will be important is for the nonprofit to decide which particular vehicles make the most sense for the nonprofit and then focus on those.

Jennifer Mistretta:And Candice, I think that brings up a good point as we're seeing a lot of funding changes from various public sources. We're seeing a lot of nonprofits go to some of their private donors and really starting to shift some of that focus of their funding. So it's a great time to start a planned giving strategy if you don't have one already.

Candice Meth:
Okay. So it seems like the majority of our listeners today don't currently have one. And so hopefully by the end of this presentation, you'll be interested in pursuing whether it makes sense for your nonprofit. With that, I'll turn it over to Jen.

Jennifer Mistretta:
Thanks, Candice. Now we're going to walk through some of the more common planned giving vehicles. And our purpose today is not certainly not to turn you into an expert or to understand all of the accounting for them in the matter of an hour, but it's really to help you recognize the structures, understand how both your organization and donors can use these planned giving vehicles, and then to identify any operational or financial implications for your nonprofit organization. Your organization can begin to identify whether you want to expand or get into some of these planned giving opportunities and to include some of these particular vehicles we might discuss today. So the categories we're going to cover today are listed here on this slide. It'll be an overview of bequests, beneficiary designations, property subject to life interest, and then a variety of split interest agreements. And as we walk through these areas, there's going to be a couple of key things to think about for each one.

First, which ones might feel like a natural fit for both your organizations and some of your core donors, excuse me, that you have already? And secondly, what are some of the internal capabilities your organization will need in order to manage and build out these giving types? And it'll be kind of keeping in mind and thinking through some of those risks that Candice mentioned just a few minutes ago. So first we'll start off with bequests. A bequest is one of the more common and relatively easy to request from a donor perspective, and it gives you a path because it doesn't impact a donor's current cashflow. So bequests are really a giving area that allow a broad range of donors to participate. It's the vehicle that's accessible, not only to some of your high net worth donors, but also to really a lot of your donor base as well.

Many times we see these bequests that are structured either for a specific amount, or they might be a percentage of an estate. Bequest can also be contingent, which means that if the gift might happen, only if a certain condition occurs. But from a financial accounting perspective, these agreements are generally not recorded by a nonprofit until you receive notice that the donor has passed away and the estate process begins. At that time, you would then receive all of the necessary documents to understand the amount that the organization's going to potentially receive, and then also understand any potential donor restrictions that might be coming along with that money and making sure that you track that in your financial systems. So it's really a best practice for your development team to help in tracking these bequests in order for the organization overall to be aware of this future possible funding.

And then once the bequest is actually received, it's important to have discussions about some of the 990 reporting impacts as well. So depending on the size and the nature of that final gift, it may not impact your public support test, but it is something to make sure that you discuss with your financial professionals and to make sure you're preparing for as you're preparing that annual report once you receive the gift. If your organization doesn't currently offer any type of planned giving, bequests are really a commonly used area and something that's easy to kind of dip your feet into. They're relatively more straightforward to implement if you're thinking about expanding further into the planned giving area. A lot of organizations I've seen too will have a quest language on their websites or they might create some type of legacy giving society, which can help build these programs over time and foster some development within the organization.

Candice Meth:
Yeah. So just a couple of things to unpack here, right? So many people have a living will, and that's not going to be recordable because obviously as somebody who is still alive, you have the ability to change your mind, right? And so it really is once the individual has passed away and it turns into a request that you can record it. But the will may be very important because sometimes when you get that notice that you're going to receive funds, it has no indication of whether or not there's any sort of restriction on the money. So making sure that you have all documentation related to the bequest, including the will, may actually include language about what the donor intended the money to be used for. Obviously, this is an amazing way for someone to create something in someone's memory, right? So people want to leave a legacy, and so this might be a wonderful way to do that.

But the other thing that I think is very important here is a lot of times we've seen clients get a bequest out of the clear blue sky. They didn't know it was coming, and it's a significant dollar amount. And what does that do to the public support test? So when we talk about public support test, I always say that being a public charity is a privilege, not a right. And for that privilege, you have to demonstrate that you're getting more than 33 and a third percent of your donations from the general public. And as long as you don't flunk that test in back-to-back years, you're considered a public charity. Well, as we've seen, organizations have lost some of the government funding, and so the population of contributions is shifting. And so if they were to receive a significant bequest, what would that do to the overall test?

And so the IRS has basically said that if the bequest didn't come from an insider, if it wasn't something that you knew in advance was coming your way, it might meet the definition of an unusual grant, in which case it will be scoped outside of the calculation for public support, meaning it won't cause you to flunk the test. So again, for many different reasons, these are really great gifts. And just by virtue of putting on your website that you as an organization are interested in receiving requests, doesn't mean that you have knowledge that one was coming your way. It has to be a little bit more than that. You have to have cultivated the gift and had discussions and documentation that you knew about it ahead of time. So with that, I'll give back to Jen.

Jennifer Mistretta:
So now let's talk about another common type of planned giving vehicle, and that's beneficiary designations. These are also another type, if you're not in a planned giving situation yet and you haven't really developed it, this is really easy for donors to implement. It's easier than drafting a separate agreement or updating their will. Donors can easily update a nonprofit organization as the beneficiary on certain assets, and that could include perhaps a life insurance policy or a retirement account. It can sometimes even be a specific cash or investment account in their portfolio that they have. So for many donors, this is a bit more simple to update. They just have to contact the asset custodian to update the beneficiary information. And for your nonprofit organization, it's important to relay to donors the ease of this giving opportunity, but then it allows you to track these contributions so that you're also aware of these future commitments.

Again, if your organization hasn't dipped too far into the planned giving space, both the requests and these beneficiary designations are really non-complex way to get started, and it gives your donors additional paths to have a more long-term impact and to start thinking about the long-term impacts they can have on your organization's mission.

Next is a fun one I like to talk about, and this is property subject to life interest. This is one of the more complex types of plan giving. While it can on the surface seem more complex, it also has really positive benefit for your organization. And again, it gives donors another avenue that maybe they didn't think about before, because this is not something that people just naturally think about. So the property subject to life interest. In this situation, there's an agreement where the donor or their designated tenant of the property has the right to use, possess, and to receive the income and potential benefits from the property for the duration of their life. Generally, this includes living in and gaining any benefits from being in the property. And as part of the agreement, the nonprofit organization then holds the right to receive that property after that particular tenant's death.

This giving option has several things to think about, and it kind of packs a big punch of what to think about before you get into one of these agreements. One of the first questions we'll see people work through in setting up these agreements is, okay, who's going to be responsible in paying for the upkeep of the property while the tenant occupies that property and making sure that that is clear in the agreements and for things such as insurance, who's going to pay the insurance on the property? And then unfortunately, you also have to think about what happens when the tenant is no longer occupying that property. Who's going to handle the sale? Who's going to handle all of the real estate costs and the closing activities in order for the property to be sold? So making sure all of that is very clear, upfront. Sometimes people will make sure they put it in the agreements, just making sure to think through the process from beginning to end before you get into that agreement.

Those are all great questions to think about and ensure you have worked out. Now, from the donor's perspective, the donor may get a tax deduction in the year of that irrevocable donation while they're still able to use or have a designated tenant use that property. From your nonprofit organization's perspective, it then creates an asset that will sit on your statement of financial position, and that's generally non-current and non-liquid. So when you're thinking about that liquidity and availability of resources footnote, it would not be included in that footnote and you wouldn't have access to use the funds from that donation immediately. However, it can be a pretty sizable future commitment to your nonprofit organization. And from a financial accounting perspective, there are some long-term things to think about. You have risks of future impairment. If there's a natural disaster, if you live in an area where there might be flooding or fires or tornado or other damage to the property, that could ultimately impact the value of the property in your book.

So it's something to think about. It's not just that we got a contribution and we're going to think about it once a year. You have to continuously evaluate it and make sure that the value on your books is appropriate. It's important for organizations that are accepting these type of contributions to ensure that you have a clear understanding, a clear agreement, and a good gift acceptance policy with those criteria that you're going to follow once the contribution is ultimately accepted.

Candice Meth:
And so here, when do we see this come into play?

Jennifer Mistretta:
Candice, I know you have some fun stories from your past about some of these properties that are subject to life interest. Anything you wanted to chat about there?

Candice Meth:
Yeah. So when do we see this come into play is, for example, if there's an individual that is concerned that some of the family members might fight over the property, right? One way to kind of work that out is to say that they're going to donate to charity, and then there's not going to be any fighting amongst siblings. Can you hear me? Hopefully everyone can hear me. So in any case, that's certainly one time that we've seen this. The other thing that I want to highlight that Jennifer pointed out is making sure that there's

A good understanding between the development department, the finance department, and the board in terms of what these gifts really mean, because they will gross up the balance sheet, they will increase the revenue, but that doesn't translate into immediate cash flow. And so as all the numbers start ticking up in the right direction, you want to make sure that you're always doing the crosswalk between what the financial statements say on an accrual basis versus what is currently available today for the nonprofit to pay upcoming liabilities. So really important, if you go down this path and you start accepting these gifts, that there's a good crosswalk between your accrual basis financial statements and what you need for cash flow needs in the near future. Perfect.

Jennifer Mistretta:
So Candice, I think I'm back. So sorry for the technical difficulties.

Candice Meth:
No worries.

Jennifer Mistretta:
So let's move on and talk a little bit about another category of planned giving, and that's the split interest agreements. And the definition on this screen is direct from the AICPA. Under a split interest agreement, a donor makes an initial transfer of assets generally to a trust, a fiscal agent, or it could be directly to the nonprofit organization in which the nonprofit organization has a beneficial interest, but is not a sole beneficiary. So that's a lot of words, and it's a lot of impact in one sentence, right? More plainly, it means that one party benefits from the gift over time, and there's generally an income beneficiary, perhaps the donor or one of their family members, and then the nonprofit then receives the remaining interest at the end of the term of the agreement or upon death of the beneficiary. So what should you think about when it comes to split interest agreements?

When looking at split interest agreements, one of the key things to consider is whether the agreement is revocable. Can the donor make changes to that agreement? Can they change the beneficiaries in any way during the term? If so, it can impact how it is recorded by your nonprofit organization. Second, you'll want to think about the estimated timeframe of the agreement. Is it for a specified number of years or is it the remaining life of the donor? You want to determine those things upfront. And then think about who's going to administer these assets. Is your nonprofit organization going to act as the administrator and distribute the funds over time, or will you hire a third party administrator to help, or will the donor have a specific trustee that's going to oversee the assets? So those are things you want to think about. And one of the most important aspects I think of these agreements that we should understand is who's going to receive the remaining residual value of the assets at the end of the agreement.

It's generally going to be your nonprofit organization, but making sure we read through those agreements and understand it. Understanding the potential future amount of the donation is really important to understand as well as any possible donor restrictions on the use of those funds in the future. So when accepting these types of donations and entering into these agreements, it's really important to kind of think through, take a good read through them, ask any questions and get a good understanding for your organization upfront so that you can understand any of the work that might be involved and any potential risks and financial reporting implications to your organization.

Candice Meth:
And so Jen, I just want to pick up on one of the things that you talked about. So it really matters who's holding the underlying assets. So if the nonprofit is holding the assets directly versus a trustee or some other third party, that drives the gap accounting for these types of agreements. So that's very important to know. And the other thing is, it's incredibly important for those agreements that are subject to a life interest, for example, or a mortality table, that you're using the correct tables, right? So making sure you're not using an outdated mortality table, making sure that you're using an appropriate mortality table is very key in terms of the initial valuation of this gift. And that's why it's really important to perhaps seek the advice of an actuary to make sure that at the time you're recognizing the donation, you're doing it at the right value.

Jennifer Mistretta:
So let's take a look now at another vehicle that a lot of times comes up in some of these planned giving discussions, and that's what we call a pooled income fund. With a pooled income fund, the donor makes an ear of Revocable gift. It'll typically be in the form of some type of cash or securities, and that goes into a pooled income fund that is maintained and managed by the nonprofit organization. So the nonprofit organization will get donations from various sources and they will pull all of those and invest it together in order to maximize those investment opportunities. Over time, the donor or their designated beneficiary would then receive a pro rata share of the income that's earned on that original gift. And so that's based on actual earnings of the fund. And then upon the death of the income beneficiary, the original donor's pro rata share of the fund then transfers to the nonprofit.

So it's a great way for donors to lead their assets to the nonprofit now while receiving some of the income for a specific term or for their life, and then leaving the remainder for the nonprofit to use later. The nonprofit would then be responsible for tracking and managing the pooled income itself, ensuring that it's making appropriate allocations, tracking it, making payments. However, the ultimate benefit is really that donor's gift and is transferred to the nonprofit at the end of that agreement with consideration of any of the donor's restrictions, perhaps on the purpose of the funds.

So now let's talk a little bit about charitable gift annuities. This is an area that nonprofits will often ask us about when they're looking into planned giving opportunities. And the way a charitable gift annuity works is somewhat similar to the pooled income funds. But in this situation, a donor makes a gift and the donor or their designated beneficiary receives fixed income for life, so it's fixed. When the agreement terminates, then the remainder of the gift transfers to the nonprofit, subject to any donor restrictions as usual. But from the donor's perspective, it gives them the opportunity to make a contribution to your nonprofit organization today, but having a predictable fixed income stream in the future. So in practical terms, the agreement is usually set up, not always, but usually set up where the beneficiary receives a 1099 each year that they start to receive payments. And from your nonprofit organization's perspective, you'll consider who holds and administers the assets, essentially who's going to be administering and paying out those annuity payments.

If your nonprofit organization has the capacity to do so, you'll consider whether you need to get any type of insurance or whether insurance might be required. There is a lot of state laws throughout our country, and in these situations, some states have specific requirements related to insurance. So before entering into any of these types of agreements, you'll want to make sure that you're checking any applicable state law requirements, either where your nonprofit is organized or where the donor resides. Oftentimes we'll hear nonprofits have a third party administrator that will assist with managing these types of agreements, and a lot of times the nonprofits will hire an actuary to help manage these calculations just because they can get a little more complex. It can help reduce the administrative burden, but it also has costs. Before entering into these agreements, we really think it's important to think through the various administrative considerations and make sure you have a plan for how all of that is going to be managed by our nonprofit organization, and that you've really covered all of your basis at the onset of those agreements.

Candice Meth:
Perfect. So if we could just go back to that for one second, just two quick thoughts on this. So this seems to be a very popular type of split interest agreement amongst our client base. Two quick things to point out to you that sometimes can go wrong here. We've seen instances where the nonprofit is continuing to track someone that has actually already passed away. And so very important to make sure that you have the latest information, including if somebody has passed away, obviously wanting to make sure that it's handled appropriately. And then at that time, the residual balance transfers to the nonprofit. So you want to make sure that you're tracking these carefully. And then secondly, Jennifer mentioned that a donor can obviously put a purpose restriction on the donation, but even if they don't, these types of donations are inherently time restricted, meaning that when you record the revenue, they're going to show up in the with donor restriction bucket, even if the donor is silent as to what the money will ultimately be used for.

And that's because by virtue of the donor saying, "I'm making this contribution subject to my mortality." They have basically said, "It is not my intention for the nonprofit to have access to these funds today. It is my intention that they are time restricted to be utilized at a future year." And so they have then obviously communicated a time restriction and at such point that they pass away, then that time restriction goes away and the nonprofit can either recognize it as unrestricted revenue or if there is a purpose restriction, obviously release it for that particular purpose. So important to know that distinction upfront because many of the vehicles that we're talking about today do have that element of an inherent time restriction. Okay.

Jennifer Mistretta:
So now we'll move on to what I like to call, and I laugh about it. I call it the alphabet soup, the cruts and the cracks, otherwise known as charitable remainder unitrusts and charitable remainder annuity trusts. These plan giving structures are often targeted for donors that have larger or more complex asset base. The basic concept here is that a donor creates an irrevocable trust that provides income to one or more of their beneficiaries for a specified period of time, for example, let's say 20 years, up to 20 years, or for life. And after that time period expires, the remaining trust assets are then distributed to the nonprofit organization. So as we show here, there's two main types of trust. The first one we'll talk about is the charitable remainder unitrust. In this type of agreement, the trust is going to pay a fixed percentage based on the trust's fair market value, which will be recalculated annually.

The IRS parameters around this are generally that the amount paid out is at least 5%, but no more than 50% of the fair market value of the assets in the trust each year. In a charitable remainder unitrust, the beneficiary shares some of that risk because the annual payout can change based on the value of the portfolio and how the value of that portfolio changes. On the other end, let's take a look at the charitable remainder annuity trust. In these annuity trust agreements, the trust will pay a fixed dollar amount every year. Now, the IRS parameters here generally that the amount would be, again, between the five and 50% of the value of the property, but it's based on the value of when the trust was established. In this case, the donor would have less of the risk, and some of that risk and more of the risk then shifts to the nonprofit organization since the payouts are fixed regardless of the asset's performance in the portfolio.

So overall, when thinking about these trusts, they can get a bit more complex than some of the other giving type opportunities that we've talked about today. They're often set up for larger and more wealthy donors that have a larger asset base, and these donors will generally come to the table with a wide range of advisors that they usually rely on. So you'll likely have several of the donors, financial, legal, or wealth advisors that'll be included in the conversations and some of these discussions as the agreements are finalized.

All right. So now let's flip the script a little bit on who gets paid first, and let's talk about charitable lead annuity trusts. In these charitable lead annuity trusts agreements, the donor again sets up an irrevocable split interest trust where the nonprofit is going to be what we call the lead beneficiary. In more simple terms, your nonprofit organization is going to get paid first, and generally the nonprofit will receive a fixed dollar payment every year, and those payments will continue either for a specified number of years or a measured life of a donor. After that term ends, the remaining assets in that trust will transfer to a non-charitable beneficiary. That's often going to be the children, the grandchildren, or some other type of trust that the donor has set up once they pass away or at the end of the term. So a simple way to think about these charitable trusts is to think that these are often instances where the nonprofit is going to get paid first, and then the family member or some other type of beneficiary is going to get paid later.

For the nonprofit organization, it's a good planned giving option to offer as it can be appealing to donors who might want to contribute to the nonprofit today and kind of see that vision start to get carried out while also planning for the long-term stability of their families.

Candice Meth:
So I would say, I know this is biased, but this is definitely one of my favorite types of structures because as a donor, you get to make an impact now while still providing for your family members later on. And so I think we received a question about, this can be an awkward conversation to have with donors and they may be a little skittish about this, but I think that talking about this particular structure, it's a little bit easier because they get to make an impact right away in the charitable sector and still provide for their family down the road. But the question, of course, that always comes up is, can the trust run out of money? And the answer is yes. It is certainly possible that the trust can run out of money, and therefore it may be possible that the family doesn't get the money down the road because there's no money left, so there's a risk involved, but hopefully it's managed appropriately and prudently, and that won't happen.

Jennifer Mistretta:
And so now that we've gone through several types of planned giving vehicles, we're going to take another poll and see which vehicle you think might be most beneficial to your nonprofit organization. So here's polling question number three. Polling #3. We've included just a couple here, the charitable gift annuities, charitable remainder trusts, the pooled income trusts or requests. So go ahead and submit your response. And I think one of the things that has come up in the Q&A is it is hard to have these conversations and it's difficult to have these conversations, but really planned giving is about having a relationship with the donor and just communicating to the donor that you want to see their long-term vision for the organization kind of help the organization and creating that long-term term legacy for themselves and their family to help your organization.

So really cultivating those relationships and not thinking of it as just one donation, but thinking of it as a long-term relationship and ability for them to have an impact with the organization. And Akandice, what I think- I

Candice Meth:
Would say since I already expressed-

Jennifer Mistretta:
Sorry,

Candice Meth:
Go ahead. Yeah. Since I already expressed my preference for the CLATS, we didn't put that on this slide because I didn't want everyone to be biased by my comment.

Jennifer Mistretta:
What I think is really interesting here is that different organizations, and depending on your donor base, it could also be different. So you might find that different planned giving vehicles are going to work for different organizations even in the same city. It's not really a one size fits all, but it has to be customized for every organization and even for each donor. So choosing the right option for your nonprofit today that aligns with your organization's goals and the donor's goals is really important. So I think that we'll shift a bit and Candice is going to talk about how to develop a plan giving strategy for your particular nonprofit.

Candice Meth:
Perfect. Okay. So when trying to now implement this, some factors to consider is obviously very important to have conversations with the donors, right? Understand where they are in terms of their planning, what they're trying to achieve. Are they looking to make a significant impact, perhaps endow some sort of scholarship fund, create a program that currently lacks funding? Are they looking to make sure that the nonprofit that they love is around for the next hundred years? Are they looking to set up some sort of annuity where they can provide a stream of payments to family members? Obviously, there's some important tax considerations. Once you have an understanding of the donor's long-term goals, it becomes a lot easier to have these conversations and support the strategy. And again, you don't have to offer every type of vehicle, but having a good understanding of the different options, I think, allows you to approach the conversation in a bespoke manner.

And so, obviously, these can be complicated. And so what we've tried to do today is lay out the general definitions, the differences. We've talked about the accounting for them. We didn't dive too deep into the tax ramifications. We could do an entire extra session just on the tax side of things. So there's a lot to consider here. What I will say is it's great if you can team up with a wealth advisor, because obviously they are the ones that are having these planning sessions with their clients. And so if you can get together and be in that conversation and match the financial and the tax strategy along with the philanthropic desires of the donor, I think it makes the conversation a lot easier.

And so before you begin anything, number one is making sure that you currently have a gift acceptance policy. There's a question in the 990 in Schedule M about whether or not a nonprofit has a gift acceptance policy. Some organizations might not even need to respond to that because they're not receiving non-cash goods to begin with, but others are already responding to that question. But laying out the gift acceptance policy is the first step to deciding what's the risk appetite of the organization, of the board, of management? How important is liquidity? How long are you willing to hold an asset? Are you willing to incur the carrying costs, et cetera? So step one is making sure that you have that in place. And then step two is talking about whether you want to dive into planned giving, what types, again, I think is ultimately critical to manage expectations of the board, make sure that they understand that this doesn't give short-term cash other than perhaps my favorite, the CLATS, which would actually allow the nonprofit to have the cash upfront.

Then obviously making sure that everyone understands their role. One of the things that can go wrong is if you have the development team negotiating these types of instruments with donors and the financial team is not necessarily aware of those or hasn't actually had the opportunity to review the agreements. You want to make sure that development is meeting with the finance team frequently so that everything gets recorded and reported properly, especially because sometimes depending on the nature of the split interest agreement, you have to register with the state. So you want to make sure that you go into this eyes wide open and that you're doing all the necessary due diligence and the filings that this may trigger. Obviously, featuring this on the website, if you decide to go down this path is fantastic. That's the way donors know that it's out there and it's an option.

And also, there's a lot of donor advice funds that talk to their donors about these different types of structures. And so if your nonprofit frequently receives donations from a particular donor advised fund, perhaps it might make sense to meet with them and talk about what conversations they're having with donors in terms of seeking these types of structures.

And so Jennifer mentioned earlier that it is a little bit of alphabet soup today, so we thought we'd play around with that a little bit and just basically see if you can pick out which one of these is not a split interest agreement. So the crats, the crats, the clats, and the cats. Polling #4. So I think you probably get this one easily, but it can be a little tricky with all of these definitions and also just understanding what they mean for the organization. While we're waiting for people to respond, I think it's very important. We're going to make the slides available, of course, after the session, but very important to go back and see where we flagged who bears the market risk. In certain instances, it is the nonprofit that is bearing the risk of market conditions. In certain instances, it's the family members, the beneficiaries that are bearing that risk.

And so as you decide which vehicles you want to offer, you need to know upfront that based on market conditions, something could happen where the assets ultimately become unavailable to the nonprofit. And that's a risk that you face as you go into these types of structures. So really important to kind of diagram the pros and cons of each one and then decide what you want to offer.

And most people got it right away and the other ones are just having fun with us today. Okay. Jen, I'll turn it back to you.

Jennifer Mistretta:
Thanks, Candice. As we close up today, there's some key points to consider. First, as Candice mentioned, at the beginning of the session, there's really a significant transfer of wealth that's happening right now, and nonprofits need all of the tools and information at their disposal to try to capture and steward some of the funds from those donors. Another important item is understanding the tax advantages of these types of donations and how they can impact the donors. They can be a big motivator for donors when they're structured appropriately, so making sure that you're communicating that appropriately when you're talking to the donors. As a nonprofit organization, you're also going to want to be mindful of the additional expenses or other administrative items that might accompany a planned giving program. So it could include legal, actuarial, or just administrative costs and tasks internally to your organization. So thinking about this and building this into your program and as you outlay your program is going to be very important.

And then finally, to really develop a strategy. As I mentioned earlier, you have to find what's going to work best for your nonprofit organization. It's not one size fits all. A giving program and strategy is going to look different for every single nonprofit organization. And so you want to make sure that your organization will balance their short-term liquidity needs with some of the more long-term sustainability goals that you might have. So planned giving can be a tool to help bridge together your short-term strategy and your long-term strategy. And to make that balance a little more visible and tangible, we have a graphic on this slide that I think helps to capture how you should frame your planned giving strategy. It has to be a balance between your organization's goals, your donor's goals, and then the financial sustainability. So as you know, your donor's goals are really going to be their personal wishes, their values, their long-term income needs, and ultimately their desire to build that legacy with your organization and supporting your organization's mission in the long term.

While your nonprofit organizational goals will be your mission priorities, your program sustainability for the future, and really strategic growth of your organization. And then finally, financial stability, that component comes into play when you take a look at the long-term fiscal health of and risk management of your organization. And that has to include the ability to administer these long-term gifts and to handle any reporting and compliance requirements that might come along with it. But with these three kind of imbalance, planned giving can become a truly strategic approach for your organization. It's not just a set of giving vehicles here and there for donors to choose from. It's really a strategy for your organization and building and strengthening those donor relationships to help further the future mission of your organization and keep it alive for future generations.

So now we'd like to share a little bit of information on how you can connect with our EisnerAmper nonprofit team if you want to learn more about some of the services we offer, but also some of the information we share today. You'll find a lot of information right here on the EisnerAmper website. On our website, one of the tiles you'll see is the EisnerAmper Insights. These are designed where you'll get guidance about a broad range of topics for nonprofit organizations, and I think you'll find a lot of these helpful, especially with regard to planned giving and some of your administrative items for running your nonprofit organization. So be sure to check out these insights.

Candice and I have our contact information included here. If you have any follow-up questions or need clarification on any of the items, you can certainly reach out to us. We'd be glad to talk to you about planned giving and how it can be useful for your organization, so you can reach us at the contact information shown on the screen. And then as we mentioned, the slides will also be available after the session. And so with that, it wraps up our time with you today.

We appreciate you joining us!

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