The Journal of Gift Planning | Special Edition October 2025

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From the President and CEO Staying true to your mission in turbulent times can be challenging. It’s hard not to get overwhelmed with the sheer magnitude of change. Too often, this can lead to risk aversion and paralysis. Whether it is you personally, your donors, your department or your organization, a lack of initiative has negative consequences for everyone. The opposite approach is to react to everything and that is equally harmful. Trying to address the myriad individual stakeholder viewpoints, concerns, and sometimes agendas will lead you and your organization down a path of compromise, ultimately resulting in a loss of integrity and credibility with the very stakeholders you are trying to please. Staying true to your mission with a focus on your core values will provide the direction and stability needed to weather adversity and strengthen your organization.

We believe in our mission at CGP and are steadfastly dedicated to our members and the gift planning community. Our mission is simply stated: “To elevate the practice of charitable gift planning by driving awareness, defining excellence, and ensuring a strong community of professionals and organizations.” Throughout this tumultuous year, CGP has remained focused on delivering value to our members that is relevant and timely. We are proud to have increased our education programming, published a national compensation survey, added new council support events, increased activities with our Emerging Professionals and Diversity, Equity and Inclusion committees, launched a podcast, and engaged a small army of “CGP Advocates” to meet with legislators to advocate for charitable giving and push for changes to remove the obstacles to the timely release of IRA funds to charities. And now, after a nearly fifteen-year absence, The Journal of Gift Planning is once again being published. We are proud of all that has been accomplished this year, and we also recognize that we must continue to look forward.

Throughout 2026, CGP will upgrade our technology platform to include a new database, website, education platform and e-community. This requires significant investment in both financial and staff resources but is essential to fulfill our mission. This upgrade will transform your member experience, create new opportunities for online learning and provide a platform to advance educational programming around the National Standards for Gift Planning Success.

CGP remains focused on our mission and more committed than ever to helping you navigate these times of rapid and unpredictable change. Through the republishing of the Journal and all our programs, we will continue to advocate, educate, and provide a community that supports you and your organization’s efforts to create positive change in our world.

We all need to thank our Editor-in-Chief Bryan Clontz. Without his vision, passion, and sheer will, we wouldn’t be celebrating the Journal’s return. Thanks to the CGP staff for their heart, commitment, and creative energy in producing this first issue and setting us up for success in 2026. Finally, we thank the authors for sharing their expertise and the entire editorial team for their dedication to excellence.

Enjoy!

Michael Kenyon President and CEO National Association of Charitable Gift Planners THE JOURNAL OF GIFT PLANNING SPECIAL EDITION OCTOBER 2025

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From the Editor-in-Chief I was 23 years old, with a full head of hair, when I first attended a national CGP Conference. I was mesmerized by the fact people were as interested in gift planning as I was, and the conference sessions covered topics I didn’t even know existed. Thought leaders, most of whom are now in the CGP Hall of Fame, led discussions and I just couldn’t swallow the information fast enough. It was literally a life-changing experience which continues for me to this day. In the early 90s, there were very technical resources on charitable planning – namely Conrad Teitell’s Taxwise Giving and the Arthur Andersen Tax Economics of Charitable Giving. On a more practical front, we had Roger Schoenhals’ Planned Giving Today. During this time we struggled with trying to define the field, by vigorously debating the question: “Is gift planning a profession, and if so, what does that mean and what is required?”

By the late 90s and early 00s, we had robust resources like Lee Hoffman’s Planned Giving Design Center and CGP’s The Journal of Gift Planning 1.0. But the Great Recession had a major impact on the abundance of gift planning resources – firms went out of business or merged with others, individuals driving these publications retired/or passed, and budgets were being tightened dramatically. This theme of losing gift planning thought leadership seemed to accelerate until today for many of these same reasons.

But while many resources were lost or diminished over the ensuing years, the field continues to grow and has become increasingly complex. Shockingly to me, at the last CGP Conference, one-third of the participants identified as first-time attendees. It became clear to me, and the CGP staff and board, that a reboot of The Journal of Gift Planning (2.0) was a critically necessary, but until now missing, piece to help charities, advisors and donors make the most impactful gifts possible.

Our vision for the Journal is to disseminate gift planning thought leadership as broadly as possible, with an intentional focus on practical applications. The Journal will be delivered online within a user-friendly, searchable platform.

We plan to source topics from compelling CGP Conference or local planned giving council presentations, academic research (gift planning and ancillary professions), past articles which can be refreshed or repurposed, CGP Link topics and any other sources we or you think helpful. We hope this CGP member resource will be driven by members and their needs, wants and desires for timely, accurate information. On behalf of CGP, our incredible Journal Editorial Board and all the CGP members, we hope you enjoy this first issue.

Bryan Clontz, Ph.D. , CFP®, CAP® Editor-in-Chief

© National Association of Charitable Gift Planners 2025. You are allowed to download, print, distribute, and reuse full, unedited articles from this magazine for non-commercial purposes without permission, as long as the original source and author(s) are properly attributed.

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Editor-in-Chief Bryan Clontz, Ph.D. , CFP®, CAP® Managing Editor Melissa Burlock, MA Lead Editors Reynolds T. Cafferata, J.D. Dan Heist, Ph.D. Jennifer B. Keyo, CSPG Assistant Editors Aquanetta Betts, J.D. , AEP®, CAP®, CFRE Joseph O. Bull, J.D. Caleb M. Knepper, J.D. , LL.M. Anne Kathryn Zamkovsky, J.D. Technical Editor Russell A. Willis III, J.D. , LL.M. President and CEO Michael Kenyon, MM Creative and Marketing Director Jessica Hall , MA, CAE Cover & Illustrations Scott Johnson, Studio F60 Publication Production Hillary Jorgensen Content Strategy Consultant Elisabeth S. Rhodes, MS

Connect with CGP

CONTENTS 10 Unlocking Potential: The Case for Latine Philanthropic Engagement

Liana Garcia, MS, PMP, CAP® Tara Sanabria Davila, MSW Lindsay Fresher, LMSW 18 Overcoming Obstacles When Charities Collect Deceased Donors’ IRAs

Johni Hays, J.D. , FCEP 26 You’re in the Will; Now What?

Strategies for Maximizing Legacy and Lifetime Gifts

Russell James, J.D. , Ph.D. , CFP® 34 The More Things Change, the More They Stay the Same

Lynn Malzone Ierardi, J.D. 38 Giving USA 2025 Trends in Individual and Legacy Giving

Hannah J. Yaritz, CSPG 44 Charting a New Course Gift Planning After 2025 Tax Reform

Lynn M. Gaumer, J.D. , CAP® 52 CGP Hot Links

Russell A. Willis III, J.D. , LL.M. 56 How Far Is Too Far Who is Your Judge?

Emanuel J. Kallina, II, J.D. , LL.M.

Tara Lynn Angulo, CAP®

JOIN US ONLINE www.CharitableGiftPlanners.org FACEBOOK: CGPNational INSTAGRAM: CGPNational LINKEDIN: National Association of Charitable Gift Planners VIMEO: CGPNational YOUTUBE: National Association of Charitable Gift Planners

CONTACT CGP PHONE: 317-269-6274 EMAIL: info@charitablegiftplanners.org

THE JOURNAL OF GIFT PLANNING SPECIAL EDITION OCTOBER 2025

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Contributors

Tara Lynn Angulo, CAP® is currently pursuing her J.D. at Vermont Law and Graduate School (VLGS).

She obtained her Chartered Advisor in Philanthropy designation from the American College of Financial Services. She serves on the Christian Law Fellowship board as secretary and the Veterans’ Law Students Association as treasurer at VLGS.

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Tara Sanabria Davila, MSW is a clinical social worker and assistant professor at Yale Child Study Center, where she holds several leadership roles, including vice chair for collaborative excellence.

She has provided leadership to Progreso Latino Fund for 18 years, as an engaged donor, advisory committee member, and as co-chair.

Lindsay Fresher, LMSW is a Latiné policy practitioner and recent UConn MSW graduate. Her work bridges evidence-based policy and equity-driven systems change. She is passionate about philanthropy’s role in strengthening communities while challenging the systemic exclusion of Latiné voices in both philanthropy and public policy.

Liana Garcia, MS, PMP, CAP® is director of gift planning at The Community Foundation for Greater New Haven. A first-generation Cuban American, she brings 35+ years of leadership and she holds Chartered Advisor in Philanthropy and Project Management Professional credentials.

She is recognized for her expertise in diversity, donor engagement, and philanthropic planning.

Contributors

Lynn M. Gaumer, J.D., CAP® is the senior gift planning consultant for The Stelter Company. Lynn serves on the board of directors for the National Association of Charitable Gift Planners (CGP). She is a member of the CGP development and government relations committees and chaired the CGP Leadership Institute (2021-2023).

Johni Hays, J.D., FCEP is a CGP Hall of Fame Inductee and RIFT Project founder with over three decades of charitable gift planning experience. She is a member of CGP’s Leadership Institute, the Smithsonian’s Professional Advisors Network, and past president and current faculty of the Charitable Estate Planning Institute.

Lynn Malzone Ierardi, J.D. is a sought-after speaker and author of Storytelling: The Secret Sauce of Fundraising Success. She has over three decades of estate and gift planning experience, and a proven track record of building successful programs. She is a member of CGP’s Leadership Institute, mentor committee, and a past national board chair.

Russell James, J.D., Ph.D., CFP® is a professor at Texas Tech University directing the online graduate program in Charitable Financial Planning.

He is a CGP Hall of Fame member and an Honorary Fellow of the American College of Trust and Estate Counsel (ACTEC).

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Contributors

Emanuel (“Emil”) J. Kallina, II, J.D., LL.M. is the managing member of Kallina & Associates, LLC, and focuses his law practice on estate and charitable planning for high-net-worth individuals and charitable organizations. Emil is the founder of CharitablePlanning.com, a website providing the tools to complete planned and major gifts, especially noncash gifts.

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Russell A. Willis III, J.D., LL.M. is a consultant to licensed professionals—an advisor to the advisor—on issues arising in connection with wealth transfers.

Much of his practice is focused on structuring charitable contributions of closely held business and real property interests.

Hannah J. Yaritz, CSPG is a senior vice president with CCS Fundraising.

She is a fundraising consultant with deep expertise in capital campaigns, gift planning, and strategic philanthropy. She leads multimillion-dollar initiatives, advises on noncash and deferred gifts, and serves on the board of the National Association of Charitable Gift Planners.

The Journal of Gift Planning Special Edition Sponsors With gratitude for these leaders within CGP and the broader gift planning community who made this publication possible.

Principal Sponsors ($2,500+) Charitable Solutions, LLC The James Foundation Thompson & Associates Kathryn Miree

Major Sponsors ($1,000+) Crescendo Margaret May Damen Nicole Engdahl National Gift Annuity Foundation PG Calc Cathy R. Sheffield

Supporters ($500+) Joseph O. Bull Chisholm Chisholm & Kilpatrick LTD Lynn Ierardi Kathy Kielar

Russel Kost Pamela Miller JiHae Munro Ericka Webb

Friends (up to $500) Janice Burrill Julie Captain Matthew Clark Steve Clark David Clough Meryl Cosentino

Randal Daugherty Shari Fox Sheila Hard Stacey McKinley Kevin Melvin Stacy Sulman

Unlocking Potential:

The Case for Latine Philanthropic Engagement — Liana Garcia, MS, PMP, CAP®; Tara Sanabria Davila MSW*; Lindsay Fresher, LMSW

With the enactment of the “One Big Beautiful Bill Act” (OBBB) on July 4, 2025, the charitable sector faces significant challenges raising funds to fill gaps created by cuts to Medicaid, food assistance programs, and the U.S. tax code (H.R. 1, 2025). These new tax codes have created a floor and cap for those individuals who itemize starting in 2026 (Strike, 2025). Under the new law, charitable contributions must be more than 0.5 percent of the adjusted gross income. Additionally, individuals in the top tax bracket are capped on itemized deductions at 35 percent, rather than 37 percent, which may significantly disincentivize charitable giving, particularly among high-net-worth individuals who consistently represent the largest segment of annual individual donations.

In addition to the tax implications, OBBB has fueled a reversal of Diversity, Equity, and Inclusion (DEI) efforts put into place following highly publicized events that brought racial disparities into sharp focus (White House, 2025). This Act has created financial pressures to further the attack on DEI-related programs and has created a climate of fear, increased compliance burdens, and diverted critical resources away from direct services (National Center for Civil and Human Rights, 2025). Nonprofits, especially those dependent on federal funding, are experiencing reductions in program capacity and mounting legal scrutiny at a time when the demand for services is rapidly increasing.

In this challenging landscape, nonprofits and their fundraising staff must identify new markets and inno-

Executive Summary: Nonprofit organizations are facing an increasingly complex landscape marked by tax law changes, heightened political opposition to Diversity, Equity, and Inclusion (DEI) practices, and rising demands for services amid funding cuts. The 2025 tax and spending bill (H.R. 1), also known as the “One Big Beautiful Bill Act" has constrained the philanthropic ecosystem by reducing federal program support, disincentivizing charitable giving from high-net-worth donors, and suppressing DEI efforts. These shifts have placed added strain on nonprofits and intensified the need for innovative fundraising strategies that reflect the values and demographics of the communities they serve.

This article identifies Latine communities as a vital and untapped philanthropic force. With over $4 trillion in purchasing power and a demonstrated culture of giving, both informal and formal, Latines are poised to play a transformative role in shaping the future of philanthropy. However, fewer than one percent of philanthropic dollars are directed to Latine-led causes, highlighting a significant disconnect between giving capacity and institutional investment.

This article features a case study of the Progreso Latino Fund at The Community Foundation for Greater New Haven, which illustrates how culturally responsive, equity-driven, and relationship-based strategies can expand Latine engagement in formal philanthropy. With the support of seed incentives, trust-building efforts, and a values-aligned approach, the Progreso Latino Fund successfully grew the number of Latine-founded funds from 10 to 36, over two years, multiplying The Community Foundation’s long-term charitable resources while empowering the Latine community.

This article shares 10 actionable strategies for nonprofits seeking to meaningfully engage Latine donors. These strategies underscore the importance of inclusive leadership, cultural humility, barrier removal, and sustained investment in equity-driven practices. *The contribution to this publication was made in this author's individual capacity and represents her opinions, not those of her institution.

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vate approaches to strengthen their sustainability. One such opportunity lies in engaging Latine communities.

According to the U.S. Census Bureau (2020), approximately 65.2 million people in the United States identify as Hispanic or Latine, representing about 19.5 percent of the total population. The Washington Post noted on June 26, 2025, that this population is the fastest-growing ethnic group after Asian Americans (Sheinerman & Mourtoupalas, 2025). Even though Latines comprise 19.5 percent of the population, they accounted for an impressive 30-31 percent of the national Gross Domestic Product (GDP) growth between 2019 and 2023. CNBC’s report on the 2023 Latino Donor Collaborative done in partnership with Wells Fargo states, “If Latinos were an independent country, their GDP would rank fifth in the world, ahead of the United Kingdom, India and France” (Gomez, 2023). Latine communities represent a significant economic force, with $4.1 trillion in purchasing power as of 2025 (Ramos, 2025).

While certain purchasing behaviors among Latines have shifted in response to social and political concerns, overall spending remains strong, underscoring the potential for deeper engagement with this dynamic and influential segment of the U.S. population.

Despite the community’s economic strength, Latines are not invited to participate in formal philanthropy. Instead, many Latines engage in robust informal giving practices, such as providing direct support to family, friends, neighbors, and sending remittances to relatives in their home countries (Cabero-Ireta & Pantoja, 2019; MIF FOMIN, 2005). A report from the Inter-American Development Bank estimates that this informal giving climbed to $32 billion in 2002 (MIF FOMIN, 2005). A 2023 report produced by the Lilly School of Philanthropy on giving trends amongst various racial and ethnic groups found that while more than 60 percent of Hispanics and Latines in the sample reported they gave to their families, 65 percent said they donated material goods, 49 percent reported that they volunteered their time for a philanthropic cause, and 50 percent reported giving through crowdfunding or social media (Thapa et al. , 2023). These figures demonstrate that regardless of wealth, Latines contribute a larger share to charitable initiatives than their White counterparts. In fact, a study conducted by Bank of America found that affluent Latines are nearly 4.5 times more likely to have a private foundation than affluent White or Caucasian individuals and are approximately six

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times more likely to participate in a giving circle or help establish one (Muñoz, 2022; Osili et al. , 2021).

These impressive economic contributions and demonstrated capacity for giving stand in stark juxtaposition to the disproportionately low philanthropic investment directed specifically toward Latine-led organizations and causes. Data from the Lilly School of Philanthropy research on charitable giving found that less than one percent of U.S. philanthropic dollars are allocated to Latine communities (Indiana University Indianapolis, 2025). This significant funding gap represents both a challenge and an opportunity. As nonprofits navigate an increasingly difficult fundraising landscape, engaging Latine donors and aligning philanthropic initiatives with their cultural values and community priorities could be crucial for addressing systemic inequities and ensuring sustainable support for vulnerable populations. An important and growing dimension of Latine philanthropy is the rise of Latine-led philanthropic initiatives that harness community networks and culturally-grounded approaches to giving. Across the country, several successful Latine Giving Circles exemplify this trend.

The Community Foundation for Greater New Haven’s Progreso Latino Fund, whose mission is to empower a diverse Latine community in the Greater New Haven region through education, leadership and philanthropy, chose a different path, with a group of local Latine leaders establishing a committee-advised, donor-advised fund. This structure offered the advisory committee greater flexibility to support community initiatives in ways that extend beyond grantmaking alone.

Over the past twenty years, the Progreso Latino Fund has invested in building a strong base of community relationships through in-person forums featuring prominent local and national speakers, publishing feature articles celebrating Latine leaders, making grants to advance Latine-serving programs, and fostering the next generation of leaders. These efforts not only strengthened trust and visibility but also built a database of 4,700 prospects, which became a critical foundation for the Fund’s next phase of growth. Aligned with The Community Foundation’s Equity and Opportu-

nity strategic plan, a special campaign to incentivize the creation of new Latine charitable funds over two years was launched. At the time, only 10 of the 1,100 funds at The Community Foundation were founded by individuals who self-identified as Latine. To address this gap and advance equity, The Community Foundation committed $2,000 in seed funding for each new fund established by a self-identified Latine donor, with fundholders given four years to contribute the remaining $8,000 to reach the $10,000 minimum required to establish a permanent fund.

Early in 2023, The Progreso Latino Fund launched its 20th Anniversary campaign with an in-person celebration that drew 135 attendees. The event highlighted five new Latine fund founders, all members of the advisory committee, whose personal stories inspired interest and inquiry among those present. Each attendee received an informational sheet and response card with a QR code linking to a campaign webpage, which provided additional details and staff contact information. That same evening, staff received five inquiries, which were promptly followed up. Building on this momentum, the campaign expanded through one-onone conversations designed to educate the community on how establishing a fund could make giving more strategic, engage family members, and create a lasting legacy. Early outreach revealed a significant barrier: many community members had never been asked to participate in structured philanthropy and held the perception that such charitable vehicles were only accessible to the very wealthy, a belief substantiated by the literature (Cabero-Ireta & Pantoja, 2019). While this lack of awareness initially hindered engagement, once introduced to the concept, many community members expressed excitement at the accessibility of philanthropy and the opportunities it could provide for them and their families.

Throughout the year, the advisory committee spotlighted the campaign across multiple platforms and events. This included three webinars on mental health, two library events featuring a local Latine author, two networking events, and two legacy planning workshops.

At each event, the Anniversary campaign was empha-

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sized. In addition, Progreso en Acción, the Fund’s electronic newsletter published every other month, regularly featured new Latine-founded funds, each with a link directing readers to the campaign webpage.

At the close of the first campaign year, a celebratory event with 121 attendees showcased the 21 new funds created to date. Five more funds were added in the second year. Over two years, staff received and followed up on 54 inquiries, 26 of which resulted in the establishment of new named charitable funds. This initiative expanded the number of Latine-founded funds at The Community Foundation from 10 to 36. With a modest investment of $52,000 (26 funds × $2,000), the initiative is projected to generate a minimum of $260,000 in charitable dollars over four years (given the $10,000 fund minimum), a return five times greater than the original investment. This represents a strong return and measurable success.

More importantly, the campaign amplified the voice of the Latine community within The Community Foundation and strengthened its collective philanthropic power to address the issues impacting neighbors and families.

Through this initiative, Latine donors are not only building legacies and involving their families, but also actively shaping solutions to local issues they care about.

This campaign represents an extraordinary and successful effort to inspire, expand, and elevate Latine philanthropy while shifting the narrative from Latines being seen solely as the recipients of charity to being recognized as leaders and drivers of change.

Organizations do not have to be community foundations to successfully engage with the Latine community, but philanthropic efforts in any diverse community must be culturally and racially informed. Here are key lessons that any organization can apply, informed by the values and culture-based strategies that were successful for the Progreso Latino Fund.

1

ENGAGE THE LATINE COMMUNITY Bring Latines onto an organization’s board or committee. Listen to them as experts in their community. Offer support while honoring what they know. Organizations may be an expert in philan-

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thropy, but Latines are experts in their lived experience and community.

2

INVEST TIME IN RELATIONSHIPBUILDING Philanthropy’s origins do not engender trust. Communities that have been historically marginalized will understandably be cautious.

Organizations must demonstrate that their intentions and actions are truly in support of the community by taking a slow, respectful, and thoughtful approach to relationship building. Authentic listening and consistent connection are essential. While the Progreso Latino Fund’s campaign began in 2023, the seeds for success were planted 20 years prior.

3

AVOID GATEKEEPING Organizations often make decisions for and about the Latine community without consultation. This perpetuates harmful power dynamics and works against relationship building.

Another gatekeeping practice is to operate from a “we know best” mindset, which may require unnecessary levels of approval and consultation to access resources.

These practices impose barriers that impede momentum, growth, and perpetuate divides.

4

REMOVE BARRIERS/CREATE INCENTIVES Work towards eliminating practices informed by unconscious biases and assumptions based on stereotypes. To do this effectively, organizations must engage in a process of self-reflection and scrutiny at both the interpersonal and institutional level, to recognize, analyze, and create incentives to mitigate their impact.

5

COMMUNICATE CONSISTENTLY Use varying forms of electronic communication (social media, email, videos) to reach Latine audiences. Share programs and organizational impact and amplify community events that align with the organization's mission and values.

Ensure all communications are culturally relevant and available in appropriate languages so they’re responsive and accessible.

6

DO THE WORK Commit to an organization-wide approach of learning to center equity and justice.

Authentic engagement with historically marginalized communities requires both learning and unlearning. Asking for trust and resources while continuing to perpetuate harmful structures is disingenuous and unproductive. Even if staff share the same identity as the group being supported, organizations must commit to doing the work of understanding the cultural nuances, values, and experiences of the Latine diaspora.

7

BUILD TRUST Establish trust by offering in-person and virtual education events that highlight culture and issues that are relevant to the Latine community. Feed attendees, offer time for fun—like music or activities to encourage connection— provide top-quality speakers and panels, and educate attendees on the organization’s work and impact on their community.

8

INVEST IN RESOURCES NEEDED FOR SUCCESS Hire culturally and linguistically appro-

priate staff, not just someone who speaks Spanish, but individuals who are culturally aware, have an accurate analysis of structural barriers, and possess lived experience. This demonstrates sensitivity to the vastness of the Latine diaspora.

9

BUILD CAPACITY Offer professional development opportunities, including training in inclusive and equitable practices. Many organizations choose to hire diverse individuals, but ignore the importance of creating an inclusive environment that nurtures them. Take an equitable approach to professional development. Organizations should be mindful that there are

entry points to mentorship and professional development that are more common for certain groups. Invest in providing Latine staff opportunities for development, growth, and upward movement within the organization.

10

COMMIT TO EQUITY, INVITE AND ASK Recognize and adjust for structural barriers that impact engagement with the Latine community. Commit dollars to improve these relationships. Offer varying opportunities and invite members of the community to grow their power through the different equitable options offered.

CONCLUSION As tax and DEI policy shifts challenge traditional philanthropic models, nonprofits must adopt culturally relevant strategies to grow their donor base and strengthen community partnerships. The Latine community, with over $4 trillion in purchasing power and a strong culture of generosity, remains an under-engaged yet transformative force in U.S. philanthropy (Ramos, 2025).

The fund building strategy of the Progreso Latino Fund at The Community Foundation for Greater New Haven demonstrates what is possible when engagement is grounded in cultural humility, equity, and intentional relationship-building. By offering a flexible giving vehicle and removing structural barriers, the Fund significantly increased Latine philanthropic participation by 160 percent, reshaped institutional perceptions, empowered the local Latine community and expanded their natural propensity to give and support their community.

Latines are not new to philanthropy. They are already giving through informal channels. The opportunity lies not in solely inviting them in, but in aligning with their values and honoring their leadership in the process of giving. To remain relevant, philanthropic institutions must evolve: reassessing assumptions, shifting narratives, and embracing equity-driven frameworks. The question is no longer whether Latines are ready to give, but whether our sector is truly ready to listen, learn, and partner in meaningful ways.

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[Executive Order 14173]. https://www.whitehouse.gov/

Muñoz, A. (2022, October 25). Are Latinos really “not philanthropic”? Hispanic Osili, U. , Clark, C. , Bergdoll, J. , & Davis Kalugyer, A. (2021). (rep.).

Ramos, B. (2025, April 10). U.S. Latino GDP hits high of $4.1 trillion, marking “growth spot” for the nation. UCLA. https:// newsroom.ucla.edu/releases/us-latino-gdp Ramos, D. (2025). Latine Generosity and the Future of American Philanthropy. Latino Donor Collaborative.

ScholarWorks: Indiana University. https://hdl.handle. net/1805/35577

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Sheinerman, M.-R. , & Mourtoupalas, N. (2025, June 26).

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presidential-actions/2025/01/ending-illegal-discrimination-and-restoring-merit-based-opportunity/ The White House. (2025b, July 4). One Big Beautiful Bill Act. https://www.whitehouse.gov/legislation/2025/07/onebig-beautiful-bill-act/ ■

The National Association of Charitable Gift Planners (CGP) established the Legacy Circle in 2020 to recognize those individuals who have elected to leave a legacy gift to provide for the long-term sustainability of the organization. These commitments will ensure educational opportunities through endowed scholarship funds and programs as well as general endowment support for CGP. For more than 35 years, CGP is the recognized leader for setting guidelines, standards, and ethics for the field of charitable gift planning. With the establishment of the Legacy Circle, CGP will continue to shape the profession and philanthropy for generations to come.

LEGACY CIRCLE MEMBERS *Christine and Jon Abrams *Cynthia Atmar Elizabeth Ayers *Gregory W. Baker *Dianne Belk and Lawrence Calder Michael L . Bell *L . Patience Boudreaux *Alexandra Pia Brovey *Ron Brown *Joe Bull *Elizabeth Chambers *Lisa Chmiola *Matthew Clark *Steven T. Clark Margaret Cline *Bryan Clontz *David Clough *Meryl Cosentino *Margaret May Damen *Pamela Davidson *Laura Hansen Dean *David Disend *Nicole M. Engdahl *Jacqueline W. Franey *Lynn Gaumer

*James Gold Jessica M. Hall *Sheila A. Hard *Donald Hastings *Johni Hays *Andrew and Elizabeth Hibel B.J. and Teri Hull Lynn Ierardi *Anne and Emil Kallina *Christopher Kelly *Michael Kenyon *Kathy Kielar Robert and Elizabeth King *Bob Lange *Nicola Jane Lawrence *Rick McKelvey Stacey L . McKinley *Philip E. Melberg Claire Meyerhoff *Pamela Miller and Michael Cummings *Frank Minton Anne M. Morgan *Melanie Norton *Marilyn Parker *Philip Purcell

*Cynthia Randazzo *Ed Sandifer *Patrick Schmitt G. Roger Schoenhals *Robert Shafis *Greg and Ginny Sharkey *Cathy R. Sheffield Phyllis Silverstein Gordon P. Smith *Kelli Smith *Nathan Stelter *William Strickland *Johnne D. Syverson Joe Thiegs *Sheryl and Eddie Thompson Matthew and Jenna Treadwell *Kimberley Valentine *Ray Watts *Kent C. Weimer *Grant Whitney Jennifer Yelovina *Marion Yongue *Legacy Circle Charter Member

Join CGP’s Legacy Circle and support the future of CGP. For further information please visit the CGP website at charitablegiftplanners.org/donate or contact Michael Kenyon at mkenyon@charitablegiftplanners.org.

Overcoming Obstacles When Charities Collect Deceased Donors’ IRAs — Johni Hays, J.D. , FCEP

One would think that when a generous donor decides to name a charity as the beneficiary of a retirement account, the intended charity should quickly and easily receive payment upon that donor’s death. But alas, that is not what is happening. The reality is that charitable organizations for the last ten years have been facing a difficult time in receiving their donors’ gifts from the financial firms (banks, broker dealers, financial institutions, etc.). In fact, it has become such an obstacle that many charities are asking for assistance in eliminating the barriers to payment.

When the nonprofits question the reason for payment barriers, the financial firm’s response is usually a variation of this: “This information is required by FINRA to meet their CIP (Customer Identification Program).”

Or, maybe they say: “The IRS requires it.” But, is that the case? We’ll take a look behind the scenes to see what’s really happening.

This article shares information as to what the facts are so charities can effectively push back: • Why this situation is happening to charities.

• What you can do today to successfully push back.

• What work is being done on a national and state basis to affect change.

Since the 1800s, charitable organizations have been the beneficiary of retirement or financial accounts. After the donor’s death, the charity submits basic information to the financial firm (i.e. , donor’s death certificate, tax-identification number of the charity, proof of tax-exempt status, and information on who at the charity has legal authority to act).

Then, the typical death claim is paid within 30 days.

I call this the standard approach in paying claims. In the last ten years, however, some financial firms came up with a different strategy to pay claims – I call it the mandatory new customer approach.

Executive Summary: Has your nonprofit bumped into roadblocks while attempting to collect IRA accounts from a deceased donor? Have IRA custodians delayed the death claim process by requesting more forms every time you send in what they asked for? Or, has your nonprofit been required to set up an entirely separate, second account (i.e. , an Inherited IRA) just to get paid?

Did they ask for driver’s licenses, Social Security numbers, net worth, and other personal information about your officers or board members? More and more, nonprofits struggle receiving funds from donors’ accounts after a donor’s death. Financial institutions implement payment policies that can be cumbersome and can stand in the way of the nonprofit conveniently and quickly receiving the donor’s intended gift. The RIFT Project was formed to remove the payment obstacles by advocating for change in the financial industry. The goal is to enable all charities to easily receive donor’s funds quickly and efficiently because what charities have to go through now seems out of control. What was once a simple practice of providing a death certificate and receiving your share of the IRA within 30-60 days has now turned into what feels like an unwinnable battle – so much so that some charities are completely giving up on applying for their share. They are frustrated with the payment delays that can last for months, and yes – even years.

Read on to find out how to avoid all this and learn about national and state efforts for change and a workable solution for all.

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This approach requires the charity to become a full customer of the firm, and thereafter, the charity has to liquidate the new account. Unfortunately, by the very nature of having a new account created and then liquidated, this approach creates a longer time lag in paying the claim. Instead of 30 days, a claim now may take one to two years to pay.

One charity said it took six years, and another is still waiting for payment after 10 years. Implementing the mandatory new customer approach provides the financial firms with the ability to retain assets longer under the theory of “asset conservation.”

• Passport • Home address • Home phone number • Annual income (including child support) • Value of personal assets (and source of wealth) • Credit checks • Criminal background checks • Marital status • Number of dependents • Spouse’s maiden name • Verification of the deceased’s last three residential addresses

THE HARM OF THE MANDATORY NEW CUSTOMER APPROACH Under the mandatory new customer approach, the firms never pay a death claim to a customer’s beneficiary. That sounds harsh, but that is exactly how it is.

Instead, their systems are established to only have the ability to pay a customer. To receive payment, the firms’ policies mandate that the charity—as a beneficiary—first and foremost must become a full customer of that firm and open up a new account before the firm will put the deceased’s funds into the new account. But, the charity still doesn’t have its gift.

Instead, the charity must complete a new set of forms and paperwork (and more time taken) to close the newly opened account and finally receive payment.

One might think: “What kind of a big deal is opening a new account?” And the answer to that is:“It’s a huge deal.” Why? Because the government implemented rules that state when new customer accounts are opened, the firms must have a “reasonable belief they know the identity of the new customer.” To do this, each firm establishes its own policies and procedures—so no two firms’ policies are the same—creating a lack of uniformity from the charities’ perspectives. To become a new customer, these firms mandate any one or more of the following types of information from the charity’s board members, officers, and/or certain employees: • Social Security number • Date of birth • Driver’s license

Do these requirements sound intrusive and even overzealous? What does this personal information have to do with the charity which is the donor’s account beneficiary? It doesn’t appear to make sense that these firms’ policies require this personal and sensitive information when the charity is the beneficiary, not the employee. Certainly, one solution everyone could get behind would be to implement the standard payment approach. This has the benefit of making it easy for the firms to pay the claims because they wouldn’t have to require charities to open up new accounts only to close them as soon as they are funded. Without opening new accounts – none of the personal and sensitive information is necessary under the standard payment approach.

On the other hand, if the firm chooses to maintain the mandatory new customer approach, then another solution would be for the firms to determine the identity of the charity as the new customer by accessing information online from IRS publication 78 to see if it is a valid charity. This would be easy enough for both the charity and the financial firm in that none of the personal information would be necessary.

BURDENS CHARITIES FACE Beyond the lengthy time delays, charities face additional burdens. Here are a few examples that illuminate the problems: • The opening of a new account happens with every single IRA death claim—every time—without exception. If a charity has five IRA death claims in the

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year, the staff has to go through this entire process five different times – even if the claims are all with the same firm.

• One university said it could have given out three full-ride scholarships with the lost interest from the time it took to get just one claim paid.

• One national charity was told the CFO had to authorize part of the paperwork over the phone and when he called the financial firm, he was placed on “hold” for more than eight hours straight.

• One firm wanted all the driver’s licenses and Social Security numbers of every board member, and these board members were some of the most prominent and well-known people in the US. • On more than one occasion, charities have experienced the financial firms losing their paperwork.

One nonprofit had to resend its paperwork eight different times because the financial institution couldn’t find it. And in the era of rampant identity theft and data breaches at large financial institutions, it begs the question, “Where did the paperwork end up and who now has access to the missing personal information including Social Security numbers?”

• Some firms will not disclose to the charity the dollar amount of the gift in advance of completing the paperwork. After three years of paperwork back and forth, one charity finally received a check for 10 cents. They would have never spent the staff time on this claim if the firm would have disclosed the claim amount up front.

• These firms send 50+ pages of paperwork to open a new account. Then another round of paperwork must be completed to immediately liquidate the new account. Plus, they may charge fees for opening the new account and also when closing it.

• Some firms erroneously withhold income taxes on IRAs when the charity has made it clear they are a tax-exempt entity. The firms will not refund the amount withheld, forcing charities to wait to obtain a refund from the IRS. • Another huge obstacle occurs when there is more than one charity named as beneficiary. A recent

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trend is now some firms are requiring multiple charities on a donor’s account to all send in their paperwork within an arbitrary 60-day time frame.

What makes it impossible is the firm refuses to share the names of the other charities with each other so they can coordinate the timing of their paperwork submission.

• Another erroneous step occurs when the firm places the charity’s funds in a private account in the name of the employee from whom they asked for the personal information – creating a lengthy hassle to unwind that transaction. One firm disturbingly advised the nonprofit employee that she had the right to personally withdraw the funds.

• Most firms do not share with the charity that the forms are necessary to create a new account and become a new customer; the firm just sends forms for completion without communicating the procedure or its implications. I have yet—over the last 10 years—to find one charity who wanted to become the firm’s new customer.

IS THIS INFORMATION UNNECESSARY? These financial firms use the mandatory new customer approach when individual persons are the beneficiaries of these accounts. Is it possible the firms have copied their procedures for individual beneficiaries and implemented the identical procedures for charities? But, it is much easier to verify identities for charities than for individuals. Maybe it is a matter of educating the firms on how to identify charities, rather than using the same procedures for individual beneficiaries.

When politicians or other influential national leaders looked into this problem, some firms defended their policies stating they have no choice but to require this information. But if they switched their policies back to the standard approach, they wouldn’t have to ask for all this information. That is probably the most important take away from this article. Recall the firms have voluntarily set up the mandatory new customer approach – there is no mandate to use this approach. In other words, without requiring the charity to become a new customer, the firms wouldn’t need the intrusive informa-

tion. Going back to the standard approach would be an ideal solution for charities and the firms as well, as they would have less paperwork in setting up and liquidating accounts. What needs to be communicated as a solution to help all parties, is that if the firms would use the standard approach, they would never need personal and sensitive information from employees of the charity.

Absent a voluntary changing of the approach by the firms, possible solutions are urging national and state leaders to enact legislation that will: • Prevent financial firms from using the mandatory new customer approach with charities, or • Use data obtained from IRS Publication 78 to verify the identity of the charity (rather than personal information) if they continue to use the mandatory new customer service, or • Require firms to use the standard approach The good news is that some firms have changed their internal procedures when they understand the mandatory new customer approach doesn’t work for charities.

Edward Jones worked with the charitable sector and changed back to the standard approach. However, more than a dozen major financial firms still use the mandatory new customer approach and have not made exceptions.

All this led to why the RIFT (Release IRA Funds Timely)

Project started. RIFT was formed as an all-volunteer, all pro bono project to advocate for nonprofits to receive their rightful claims in a couple of months rather than years.

YOUR BEST RESOURCE – THE RIFT DATABASE

RIFT created a database of financial firms and their death payment requirements for both IRAs and brokerage accounts (TOD/transfer on death). Our fellow nonprofits populate the database with crowdsourced materials. It lists who to contact at each firm and sample letters to push back against their requirements for personal information.

RIFT discovered over the years that some financial firms will not make an exception and other firms will. To access the database, go to: charitablegiftplanners.org/ ira-distribution-resource-center and find the section Charitable Beneficiary IRA Distribution Center (RIFT).

Scroll down to the table of contents. It’s filled with resources and is updated frequently as information changes. Be sure to check the database each time you have a new claim.

The National Association of Charitable Gift Planners houses and updates the RIFT database and make it freely available to all nonprofits in the country, not just members of CGP.

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RIFT ADVOCATES Beyond the database itself, Karen Smedley, an estate administration expert, created an expanded resource: Karen launched RIFT Advocates, a community of fellow estate and bequest administrators.

The Advocates collaborate with and support each other by sharing tools, strategies, and offering one another support.

Karen shares her inspiration in forming RIFT Advocates: “I started RIFT Advocates as part of the RIFT Project because I saw a real need – one that wasn’t being talked about enough. Estate and bequest administrators often find themselves stuck in a maze of delays, unclear processes, and uncooperative financial institutions, especially when it comes to IRA beneficiary gifts.

In fact, a growing number of nonprofits report that these gifts are among the most difficult to collect, even when the donor’s intentions are crystal clear. I created RIFT Advocates to offer support, clarity, and a sense of community for professionals navigating these challenges.

We’re here to share knowledge, advocate for smoother processes, and make sure these important gifts actually reach the charities they were meant for. Too often, estate and bequest administrators feel alone when faced with certain challenges. Gift planning resources tend to focus on donor intent, while the practical realities of acquiring the donor’s gift are frequently overlooked.

My goal in founding RIFT Advocates was to help estate administration professionals navigate the complicated landscape of IRA beneficiary designation gifts by pooling our shared knowledge. Through collaboration, education, and peer support, we’re building a stronger network – and making sure no one has to go it alone.”

Anyone can freely join RIFT Advocates through the RIFT section on the CGP website. Patricia Bowen serves as the current liaison to RIFT Advocates.

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MORE NATIONAL EFFORTS In 2024, CGP hired Integer, LLC, which lobbies in the charitable sector in Washington, DC. As one of his projects, Grant Berkshire, assistant vice president, has been working to find a path forward for RIFT on a national basis.

To do this, Grant has been educating policymakers on this issue and pursuing a federal solution to streamline the distribution of these death benefits nationwide.

What CGP has found is that few in the federal government were aware of the current arduous process. Once they learn about it, they are eager to help but unsure what laws and/or regulations they need to change to address the issue. Lawmakers are discussing directing a governmental agency to undertake a study and issue a report on the breadth of the issue and options for a federal fix. CGP is hopeful the finding of such a report would provide all the information needed for policymakers to address the RIFT issue.

“With the advocacy effort CGP is leading,” Berkshire explains, “and the possible report we hope is undertaken and released next year, it feels we are on the path toward making it easier for nonprofits to obtain these donations. We are continuing our education efforts to prime more lawmakers to support potential solutions identified in a report or elsewhere. We would not be in this place without all of the gift planning professionals who have participated in this advocacy, and I would encourage anyone interested in getting involved to become a CGP Advocate.”

Policymakers in Washington, DC, believe that the RIFT issues should be easily solved because of these three main benefits: 1. Policymakers are hopeful there will be a relatively easy resolution to the situation.

2. A solution would likely cost the government very little—if any—revenue to implement.

3. It is truly a nonpartisan issue.

NEW IOWA LAW BRINGS 100 PERCENT SUCCESS To protect charities, the Iowa Legislature passed a law (Iowa Code 633.358), effective July 1, 2024, preventing this payment practice with charities. The Iowa law passed all three votes in the House and all three votes in the Senate with zero “nay” votes, indicating the truly nonpartisan nature of this law.

The law applies when an Iowa charity is the beneficiary of an IRA, retirement account, brokerage TOD account, annuity, or life insurance policy. In order to pay the claim, the law prohibits financial institutions from demanding the Social Security number, driver’s license, contact information, or personal financial information from any employee or board member of the charity. The charity can push back if these items are still requested by providing an affidavit with simple data on the charity, proof of its tax-exempt status, a corporate resolution, IRS Form W-9, and either a death certificate, notice of death in a newspaper, receipt of paid funeral expenses, or the obituary. The financial institution has 30 days from the receipt of the affidavit to either pay the claim or provide the information if requested (e.g. , the dollar amount of the claim).

If the financial institution fails to provide the payment (or information if requested) within 30 days, the court can award any (or all) of these: 1. Damages the charity sustained 2. Costs of the legal action 3. A penalty between $500 and $10,000 4. Reasonable attorney fees incurred by the charity Many Iowa charities have used the law since its inception with 100 percent success. All the charities received their check within a couple of weeks. And, instead of having to use the full affidavit approach, most of the charities just needed to mention the law’s very existence. Luckily, that was all that was needed to avoid the hassles and red tape. The law is successfully working to help Iowa charities.

OTHER STATES The rising popularity of the Iowa law encouraged many other states to work toward passing similar leg-

islation. Legislation modeled after the Iowa law is now available for any state to use, called the “Charitable Organizations Privacy Protection Act.” You’ll find it on the RIFT website. The best advice is for each state to use the model law without deviations in the language, where possible. This prevents the financial institutions from adding exceptions or exemptions that give them the ability to continue to use the mandatory new customer approach.

FINCEN’S INVOLVEMENT The Financial Crimes Enforcement Network (FinCEN), part of the US Treasury, had some involvement in this issue. FinCEN issued FIN-2024-R001 which stated that broker dealer firms which require an inherited IRA (i.e. , mandatory new customer approach) could ask for the Social Security number of the charity’s control person – even after FinCEN received more than 300 emails and letters from charities that very week, asking them not to rule in this fashion. RIFT hopes that FinCEN will review their position. An ideal resolution would be if CGP and other charitable advocates could formally meet with FinCEN and each side could share their perspectives to come to a mutually workable resolution. It’s a matter of sharing how our charitable industry works with the staff at FinCEN to gain mutual understanding of both sides and their positions.

JUDICIAL OPTIONS What about going to court to get these claims paid?

Many charitable organizations are incredibly frustrated, and they know that certainly one of their paths to find success is going to court. In fact, charities may discover their best approach to affect change as quickly as possible could be banding together for one large lawsuit as a class.

In conclusion, charities face red tape and delays in collecting death claims when their donors pass away.

What was for decades a simple straightforward approach to receive payment in 30 days has turned into an overwhelming set of paperwork and delays of several years. These firms mandate that charities must become new customers to pay the claim and that kicks off a

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set of rules the firms have implemented to determine the identity of the new customer. The paperwork and processes to prove the charity’s identity as the new customer creates the obstacles that charities would like to address and find a reasonable solution that works for all. In the meantime, charities have the RIFT Project and its database to help navigate the claims on a day-today basis, while CGP hired a lobbyist to affect national change. In addition, state laws are beginning to pop up across the country to protect charities from the obstacles, delays, and requests for personal information of

the charities’ employees and/or board members. Finally, the courts are another avenue charities may choose to affect faster change. With all these avenues of possible change (legislation both nationally and at the state level, as well as judicial options), we hope for a resolution where the charitable sector finds relief by eliminating these obstacles to receiving our donors’ intended gifts.

Learn more about the RIFT Project at charitablegiftplanners.org/advocate ■

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You’re in the Will; Now What?

Strategies for Maximizing Legacy and Lifetime Gifts — Russell James, J.D. , Ph.D. , CFP® INTRODUCTION Learning your organization is included in a donor’s will is exciting. It shows trust and loyalty from the donor and potential future resources for the organization.

But, it’s important to recognize that being named in a will is not the end of our fundraising process. Instead, it should be the beginning. It’s the start of an important phase in the donor relationship.

Many charities mistakenly acknowledge these legacy gifts once, then ignore them. They treat joining the legacy society as the end of the process. But, getting in

the will is not a gift – not yet. Getting a new legacy society member only starts a process that might eventually lead to money. That sounds problematic. It sounds like a lot of extra work. But, it can actually be a great opportunity. We can use the planned gift as a first step to make the gift bigger and even to convert part of it to a current gift.

The most popular way to treat new legacy commitments is to “count it and forget it.” The goal is to get a person in the legacy society, celebrate the win, and

Executive Summary: When a donor names a charity in their will, it marks the beginning, not the end, of a critical stewardship opportunity. Many organizations mistakenly treat this commitment passively, celebrating once and then disengaging. However, legacy plans frequently change due to life events such as health shifts, family transitions, or new financial priorities. Regular engagement is essential to maintain a charity's place in a donor's evolving estate plan.

Effective stewardship involves regular communication, expressions of gratitude, and emotional reinforcement of legacy intentions.

Research demonstrates that consistent outreach significantly reduces the likelihood that charities will lose these commitments.

Moreover, charities can actively increase legacy gift sizes by encouraging donors to envision specific, permanent impacts. Structured options such as named scholarships or endowments motivate larger, more enduring donations. They do so by aligning with donors' personal identities and desires for symbolic immortality.

Additionally, transitioning planned legacy gifts into immediate lifetime contributions provides tangible outcomes donors can experience firsthand. Flexible solutions like virtual endowments, charitable gift annuities, charitable remainder trusts, and retained life estates facilitate immediate generosity, strengthen donor relationships, and secure irrevocable commitments.

Finally, estate planning can serve as a powerful gateway to major giving. Once donors consider estate-based asset gifts, they become more open to substantial lifetime asset-based donations. Proactive conversations and donor education help charities leverage this opportunity effectively.

Strategically managing legacy gifts through active stewardship, structured giving opportunities, immediate contributions, and asset-based philanthropy transforms uncertain future promises into substantial and lasting support.

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move on to the next person. Research and real world practice show that this approach is risky. There are better ways to approach this.

This essay covers four strategies for charities after learning they are beneficiaries in a donor’s will. First, it explains why just acknowledging legacy gifts isn’t enough. Next, it outlines active strategies to keep and strengthen these commitments. Then, it discusses ways to increase the value of legacy gifts through structured giving. This includes using the donor’s identity and emphasizing permanence to inspire larger donations.

Finally, it explores methods to convert future pledges into immediate lifetime gifts. These approaches help donors experience the direct impact of their generosity right away.

By understanding why and how donors give legacy gifts, charities can better secure and enhance these generous commitments.

STRATEGY 1: COUNT IT AND FORGET IT?

A charity learns it’s included in a donor’s will. That feels like a big win. But too often, organizations stop there. They count the gift and forget to stay connected.

This approach is tempting, but it doesn’t work.

Research shows clearly that charitable plans often change. Plans shift when donors face significant life events. Declining health, a negative diagnosis, becoming widowed, or family changes can disrupt previous intentions. Divorce, remarriage, or birth of grandchildren also

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trigger estate-plan updates. A nationally representative study in the U.S. shows that only 55 percent of estate plans with a charitable component still have any charitable component 10 years later. This instability actually increases as the end of life approaches. The most common time for donors to add or remove charitable gifts is within five years of death.

An Australian probate study highlights this instability. About 60 percent of charitable wills were signed within five years of death, and 31 percent within two years. And these last wills typically include changes to the charitable component. A longitudinal U.S. study tracking lifetime plans showed that most charitable estates had no charitable beneficiary at some point within the last five years of life. IRS data shows that the likelihood of dying with a charitable plan increases dramatically with age. Again, this demonstrates that the charitable component of estate plans is fluid. The bottom line is that plans are changing. They’re unstable, especially at older ages and near the end of life.

Charities that ignore donors risk losing their place in updated plans. Without regular communication, a charity may quietly disappear from a donor’s estate plans. This isn’t necessarily because the donor has different feelings about the charity. They might simply not have thought about the charity during the planning process. This isn’t the 18th century; we’re not using

quill pens to add codicils to existing wills. Estate

planning attorneys employ automated systems that create new will documents based on the client’s current desires, intentions, family structure, and assets. The old will document (which will be automatically revoked) doesn’t matter, unless there is some issue of testator capacity. The point is this: There is no automatic carryover of provisions in the old document. And beyond this, donors are changing their estate plans every time they open a new account with a beneficiary designation.

Adding a beneficiary or transfer-on-death designation to a bank account, IRA, life insurance policy, or even a piece of real estate? If the charity isn’t top of mind, the charity gets left out.

This doesn’t mean that getting in the estate plan early isn’t valuable. It is. First, it increases current

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giving. In a national study, this increase in annual giving averages 77 percent and is sustained two, four, six, even eight years later. Once donors begin to consider their wealth (i.e. , their estate), not just their disposable income, as donation relevant, big giving feels more feasible. Beyond this, decedents who added the charitable provision earlier than in their final five years of life, on average, left charitable estate gifts that were three times larger. Getting in early leads to bigger estate gifts, but only if the charity stays in the plan. Maintaining that position requires active engagement. The decision to leave a charitable gift is rarely final until death. For charities, a bequest is just the beginning, not the end, of stewardship. The real work begins after inclusion in the will.

STRATEGY 2: HANG ON TIGHT!

If charities want to move beyond “count it and forget it,” what’s next? The answer is active stewardship.

Stewardship means regularly communicating with legacy donors. It involves expressing appreciation, celebrating, and reinforcing their decision.

Research results emphasize this clearly. A study including ten of the largest Australian charities provided strong evidence. It looked at loss rates among pledged legacy donors, in other words what share ultimately transferred no money to the charity at the end of life.

When charities continued communicating with pledged legacy donors near the end of life, these loss rates fell dramatically. Donors who heard from charities at least once within two years before death had a 24 percent loss rate. Donors without that communication had a 48 percent loss rate. Regular engagement cut donor losses in half.

So, why would these large, sophisticated charities just go “radio silent” with their pledged legacy donors?

Because charities communicate based upon recency of the last donation. There are two things we know about those who leave gifts to charity at the end of life.

First, their plans are likely to change during the last few years of life. Second, they tend to stop making current gifts during the last few years of life. Often healthcare concerns intervene, making a current gift no longer a

priority. But these same healthcare concerns also trigger new estate planning.

Consider the implications: charities have adopted a communication system precisely designed to go silent right at the most critical moment of decision for estate gifts. It’s the worst possible strategy. What’s the fix? It’s simple. Once a donor or other person with a life history of connections with the charity reaches a certain advanced age (let’s call it 75), you never stop communicating with them. Add a checkbox that treats them like a regular donor. This one simple change can dramatically impact estate planning gifts received by the organization.

Some communication works better than none. But, are there some types that work better than others? Yes. Although we don’t have experimental data on fulfilling a legacy giving pledge, we do have experimental data on fulfilling a current giving pledge. Some messages work well to get people to follow through on their original charitable plans.

One powerful strategy is expressing gratitude. In experiments, even simple thank-you messages significantly increased pledge fulfillment. Events honoring donors also fall into this category. For example, Doctors Without Borders held events showcasing their work and thanking legacy donors personally. Because other donors were also invited to the event, this approach led to more legacy gift commitments. The “thank you” not only solidified the current legacy gift commitments, but it also created a social norm for other donors to see.

It showed them that other people just like them made estate gifts.

In experiments, specificity and formality matter too. When donors pledge specific amounts, they follow through more often. One experiment used a written pledge card that was signed only by the solicitor, not the donor. Using that card dramatically boosted completion rates. The gift commitment felt more official and formal which led to greater pledge fulfillment rates. Additionally, showing social proof, i.e. , showing other donors who also pledged to make a gift, led to higher fulfillment rates. People fulfill pledges more often if they observe peers doing so as well.

Also, connecting pledges to memory and emotion strengthens commitments. In one experiment, donors who were asked to pledge in honor of someone special showed higher follow-through. This matches with what we know from neuroimaging research on bequest gifts.

Tribute bequests to charity—these are donations that are linked to loved ones—more strongly engage emotional regions of the brain. These emotions reinforce decisions and protect against change.

If we want to hang on to our current planned legacy donors, active stewardship is vital. It reduces uncertainty and protects these gifts. Charities must regularly thank donors, communicate clearly, and foster emotional connections. Consistent contact makes legacy gifts stable and secure.

And finally, to actually get the dollars in the door there is one last critical step. Charities must be actively involved in the estate administration. They have a responsibility to the donor to make sure the donor’s wishes are fulfilled. When charities don’t show up – they get left out. The donor’s wishes get ignored. Pro tip: Let

the business office manage this, not the fundraising office. Fundraising offices are not well-suited for the adversarial role required in these, sometimes contentious, legal proceedings.

STRATEGY 3: MAKE IT LARGER!

Getting a donor’s commitment is good. Growing that commitment is better. Most legacy giving comes from a small number of large gifts. A few substantial estate gifts vastly outweigh many smaller ones. Ask yourself: “Would you rather have the 10 largest estate gifts received by your charity or all of the others?” Most charities, even very large ones, would be financially better off with the gifts from their top one percent largest estate donors than with the other 99 percent. Estate giving is a highly skewed area of donations. Consequently, focusing on increasing gift size makes sense strategically.

What characterizes large estate gifts? They almost always include detailed instructions. Instructions reflect donors’ values and personal stories. They make a gift compelling. Specific guidelines help donors visualize their legacy’s impact.

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What is the highest level of detailed instructions with a gift? It’s the private family foundation. Back when the estate tax exemption levels were lower, we could see more estates. In different years, IRS data showed that for estates of $5MM+ between 74 percent to 78 percent of all charitable bequest dollars went to private family foundations. Set aside for a moment any policy concerns with this reality and consider that, from a human behavior perspective, it means we know exactly what motivates massive gifts of wealth in an estate plan. It’s exactly those features of the private family foundation.

They live forever. They’re named for the donor or the donor’s family. They’re used only for the specific purposes designated by the donor.

Those same features are what motivate massive estate gifts to public charities as well. These might include named endowments, scholarships, professorships, lectureships, bespoke donor advised fund agreements that mimic many features of the private family foundation. These all involve detailed instructions reflecting the donor’s values through permanent structures. From a psychological perspective, they provide symbolic immortality to the donor, allowing the donor’s personality to continue impacting the world long past their death.

Experiments with current donations confirm that allowing instructions with a gift (a.k.a. gift restrictions) increase donation size. Donors give more when they direct how charities use their money. Restrictions transform generic gifts into meaningful expressions of donor identity. This personalization motivates larger contributions both in current giving and in estate giving. This reality in estate gifts is nothing new. One study of wills in the 1800s found that estate gifts were restricted in only 14 percent of small cash gifts, but 58 percent of real estate or large cash gifts and 70 percent of gifts of a share of the entire estate.

Large gifts often reflect donors’ desire for permanence. Research shows that donors facing thoughts of mortality prefer lasting impacts. In one experiment, a charity was described as either “meeting the immediate needs of people” or “creating lasting improvements that would benefit people in the future.” For typical donors the first description worked better. But for those who

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had first been reminded of their own mortality, the second description generated three times more gifts.

Notice that this didn’t even use permanence structures or gift restrictions, it just used permanence language when describing the charity’s impact. Psychologically, death reminders drive people to seek symbolic immortality through enduring gifts.

So, how can we convert this statistical and psychological reality into real-world practice? Start with a simple question. If a donor is in the legacy society after thanking them for their commitment, ask them, “Have you ever thought about how you would like your gift to be used?” If they haven’t (or even if they have) then share a story about a planned estate gift from another donor.

For example we might say, “The reason I ask is that I was working with another donor. You remind me of her because you both [insert similarity]. She spent her career helping other people get their finances in order and she recently signed a new will that one day will create a permanent endowed professorship to make sure that there will always be someone doing research in charitable financial planning. She named it after her grandmother who inspired her to go into the field. That type of professorship starts at about $2 million, and I didn’t know if that might be something you would be interested in learning more about?”

If that amount seems too large, then we might continue with, “I understand. In fact, many people like to create permanent scholarship funds instead. Those start at about $50,000. The named scholarship can be directed to students in particular areas of study to help them have a chance at an education.” Notice how we have moved beyond the small pat-on-the-head gift. We’re now talking about specific, visualizable, permanent impact. These come with price tags. These price tags provide a legitimate reason to talk about the exact size of the planned estate gift. They provide a reason to make that planned gift larger. And it all starts with a simple question.

Simply asking donors how they envision their gift’s impact can lead to larger commitments. Sharing inspiring stories of other donors also helps. Hearing real-world

examples creates a social norm, provides inspiration, and motivates donors to increase their legacy intentions.

To create large estate gifts, charities can emphasize permanence and personal impact. Clearly visualizable outcomes resonate deeply with donors. Permanence transforms gifts into powerful legacies. When donors see their identity reflected in lasting impact, they give generously. These gifts are not only bigger, they’re sticky. They won’t get accidentally left out of the next plan.

STRATEGY 4: MAKE IT LIFETIME!

While future gifts hold promise, immediate contributions create tangible outcomes right now. We can look at this next step after putting the specific meaningful and visualizable legacy gift into the estate plan. We might open up the conversation by saying, “Thank you so much for including us in your plans. To treat us like a family member – that means so much. It’s great to think about the impact your permanent endowed [cause area/ scholarship/professorship] will make over so many years.

I’m curious, would you ever consider starting that now so you could see the impact personally while you’re still alive?”

Facilitating lifetime gifts requires proactive conversations. Converting legacy intentions into immediate lifetime gifts benefits both charities and donors. Donors appreciate seeing their generosity in action. Charities gain certainty and resources to drive immediate progress. Encouraging donors to shift some or all of their planned bequests into current gifts requires thoughtful conversation and flexible strategies. Often, donors will feel that a current gift of that size isn’t feasible. When that happens, we can use alternative strategies to make it happen. For example, we might respond, “I understand.

It’s a common circumstance. Many people in your situation have decided to start their permanent fund right away using our “5 & 5” plan [or “virtual endowment”].

Your permanent fund will pay out five percent per year.

If you decide to make annual gifts of that five percent payout plus five percent to fund the endowment, you could start your permanent fund immediately. Because it’s backed up by your estate plan, your named fund will

be permanent no matter what. But this way you can see the impact right away. Is that something you might consider?”

This “virtual endowment” or “5 & 5” approach allows donors to fully fund a permanent endowment gradually.

Each year, donors contribute a small percentage like five percent to establish and grow the endowment. Simultaneously, another five percent provides immediate operational support, creating instant impact. Because the full gift remains secured through a will or estate plan, organizations can treat it as a permanent endowment.

And donors can enjoy seeing their philanthropic vision become reality during their lifetime. Donors find joy in watching their impact unfold right away, often creating deeper connections with their chosen charity.

This approach can create a virtuous cycle of philanthropy. We make it attractive, then we make it possible.

Moving an estate gift to a permanent endowment gift with specific, visualizable impact makes it attractive. This increases gift retention. This also gives a reason for a larger gift. This increases gift size. Making it a permanent endowment gift with specific, visualizable impact also motivates starting it today through “5 & 5” or “virtual endowment” funding. This makes the gift right now.

Other irrevocable gift options can also provide alternative ways of making a more secure or immediate impact.

Charitable Gift Annuities (CGAs) offer lifetime income, financial security, and immediate tax benefits. These reliable income streams can appeal strongly to older donors. They see benefits immediately while knowing the remainder of the gift eventually supports their chosen charity.

Charitable Remainder Trusts (CRTs) similarly encourage immediate, irrevocable transfers. Donors transfer assets into a trust, receiving ongoing income and immediate tax deductions. After the donor’s lifetime, the remaining assets pass to the charity. CRTs can appeal to donors who seek to balance philanthropy with personal financial needs.

The Retained Life Estate (RLE) approach also transforms future gifts into immediate commitments. Donors gift their property (homes or farmland), but retain lifetime use. They receive immediate tax deductions

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while maintaining familiar living or farming arrangements.

After the donor’s death, the charity takes ownership. RLE agreements provide security, financial benefits, and visible proof of the donor’s legacy. These types of irrevocable transfers can lock in the estate gift, removing it from the risk of revocation.

Moving estate plans to current plans often allow donors to experience satisfaction from seeing their generosity at work. Positive experiences encourage additional future gifts to expand endowments and deepen their commitment. Charities gain predictable funding, helping them plan confidently for future initiatives. This mutual reinforcement builds a powerful and lasting donor-charity relationship, grounded in shared experiences and visible outcomes.

nity. For instance, a survey of over 18,000 supporters of a large humanitarian charity revealed a dramatic difference among legacy society members. They were 50 times more likely to have already made a current gift of assets such as stocks, real estate, retirement accounts, or life insurance than those who said they were unlikely to make a gift in a will (21.2 percent vs. 0.4 percent). And even among those who hadn’t yet made such gifts, planned legacy donors were 6 times more likely to say they would consider doing so (15.6 percent vs. 2.2 percent).

This difference highlights estate planning’s power as a critical first step toward broader generosity.

Charities benefit greatly from actively guiding donors through this transition. Providing clear, accessible information on how to donate assets increases donor comfort. Case studies, testimonials, and easy-to-under-

ESTATE PLANNING AS A GATEWAY TO MAJOR GIVING Estate planning opens donors’ eyes to new forms of giving. Traditionally, donors give from disposable income.

Estate plans, however, introduce the concept of donating assets. Including a charity in a will reframes donors’ thinking about their wealth. Suddenly, significant assets, such as real estate, stocks, or retirement accounts, become relevant sources of charitable gifts.

Research confirms the financial impact of this psychological shift is significant. Once donors commit to charitable gifts in their estate plans, they are more likely to make major lifetime asset donations. (The likelihood of making gifts over $10,000 more than doubles.) This shift occurs because donors mentally reclassify their assets as “giftable.” The initial estate gift creates a pathway toward larger and more impactful lifetime philanthropy.

Charities should leverage this gateway effect intentionally. For example, when a specific need or project arises, we might ask, “You’ve included a gift in your will already. Would you consider moving 10 percent of that to a current gift in order to [describe the charitable outcome]?

Encouraging donors to discuss their estate gifts also opens doors to asset-based giving conversations. These can gently move donors toward larger lifetime gifts by normalizing asset donations.

Studies of donor behavior underscore this opportu-

stand explanations simplify complex financial concepts.

When charities educate donors about asset giving’s ease and benefits, donors are more likely to engage.

Proactive, personalized conversations further enhance outcomes. Development officers who explicitly discuss estate and asset-giving strategies see increased donor engagement. They can frame asset donations as logical extensions of the donor’s existing philanthropic estate plans. By linking estate planning with immediate asset giving, charities unlock significant philanthropic potential.

Ultimately, viewing estate planning as a gateway transforms the charity-donor relationship. It can move from small, pat-on-the-head gifts of general approval to major life investment gifts that accomplish something specific, visualizable, and lasting. It can move from transactional, income-based donations to strategic, asset-fo-

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cused philanthropy. Donors find deeper satisfaction by contributing significantly both during and after their lifetimes. Charities can gain substantial, predictable support to drive long-term success. Estate planning can become more than just future intentions; it can be a pivotal step toward meaningful, lifetime generosity.

CONCLUSION Legacy gifts represent enormous potential for charities. But, simply counting legacy gifts and moving

on is not enough. Actively managing and nurturing these commitments is essential. Charities must understand and strategically respond to these realities of real-world legacy giving.

Legacy commitments are inherently fluid. Donors often revise plans due to health issues, family changes, or financial fluctuations. Charities that ignore these shifts risk losing valuable gifts. Regular, intentional communication stabilizes these commitments. Simple actions like expressing gratitude, providing specificity, and connecting emotionally protect against instability.

Enhancing the value of legacy gifts is powerful.

Donors respond positively when they see permanence and personal meaning in their gifts. Charities must clearly communicate potential lasting impacts. Structured giving opportunities, such as endowments, scholarships, and named funds, motivate donors to give more generously. Encouraging donors to detail their gift’s use also increases this visualizability and resulting commitment.

Converting future legacy pledges into immediate lifetime gifts transforms donor experiences. Immediate gifts allow donors to witness their generosity firsthand.

Strategies like virtual endowments or charitable gift annuities offer flexibility and immediate benefits. These approaches create lasting donor-charity bonds based on visible, tangible outcomes.

Estate planning serves as a critical gateway for major giving. Once donors consider asset-based gifts through wills, they become receptive to lifetime asset donations.

Charities must actively encourage this transition through education and clear communication. Highlighting the ease and impact of asset giving turns initial estate gifts into lasting lifetime generosity.

Strategically managing legacy gifts creates substantial opportunities for charities. By understanding donors’ motivations and actively nurturing relationships, charities secure more stable, generous commitments.

Emphasizing structured giving, personal impact, and permanence further enhances donor generosity. Ultimately, proactive stewardship transforms legacy giving from uncertain promises into powerful, immediate, and lasting impacts.

RESOURCE EncourageGenerosity.com

REFERENCES Andreoni, J. , & Serra-Garcia, M. (2021). The pledging puzzle: How can revocable promises increase charitable giving? Management Science, 67(10), 6198-6210.

James, R. N. , III. (2020). The emerging potential of longitudinal empirical research in estate planning: Examples from charitable bequests. UC Davis Law Review, 53, 2397-2431.

James, R. N. , III. (2020). American charitable bequest transfers across the centuries: Empirical findings and implications for policy and practice. Estate Planning & Community Property Law Journal, 12, 235-285.

James, R. N. , III. (2016). The new statistics of estate planning: Lifetime and post-mortem wills, trusts, and charitable planning. The Estate Planning & Community Property Law Journal, 8(1), 1-39.

Koessler, A. K. (2022). Pledges and how social influence shapes their effectiveness. Journal of Behavioral and Experimental Economics, 98, 101848.

Saeri, A. K. , et al. (2023). What works to increase charitable donations? A meta-review with meta-meta-analysis.

VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations, 34(3), 626-642.

Wade-Benzoni, K. A. , Tost, L. P. , Hernandez, M. , & Larrick, R. P. (2012). It’s only a matter of time: Death, legacies, and intergenerational decisions. Psychological Science, 23(7), 704-709.

Wishart, R. , & James III, R. N. (2021). The final outcome of charitable bequest gift intentions: Findings and implications for legacy fundraising. Journal of Philanthropy and Marketing, 26(4), e1703 ■

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— Lynn Malzone Ierardi, J.D.

“Plus ça change, plus c’est la même chose.”

—Jean-Baptiste Alphonse Karr (1808–1890) Gift Planning has changed significantly over the last thirty years! In many ways, it’s a different world from the one I joined in 1994 after practicing trusts and estates law. It was a field that I didn’t know existed until a few gift planners introduced me to their work. Little did I know at the time that I would have the privilege of witnessing the growth and evolution of an amazing industry.

While many aspects of our field have been radically transformed, core principles and key foundational elements remain steadfast. This article explores the dynamic changes and enduring constants in gift planning, offering insights and examples to guide fundraisers and allied professionals as we look back on yesterday, dream of tomorrow, and ponder: What will set us up for future success?

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FROM INDEX CARDS TO PREDICTIVE MODELING In the 1990s, data management was in its infancy.

At the American Heart Association, we were building a prospect pool and launching a formal gift planning program. Among other things, I asked for reports of loyal donors with long giving histories, and donors who had made gifts to the organization three times in the last five years. I was told “Oh, we can’t provide that information. Our database is not that sophisticated!”

We relied at the time on rudimentary methods to track donor information – including boxes of index cards that contained details about our most loyal donors. Despite the obstacles, we were successful.

Fast forward to today, and we have sophisticated data analytics, predictive modeling, and artificial intelligence at our fingertips. We can analyze donor history and behavior, and we have a variety of wealth screening vendors available to analyze our donor files for gift capacity. These tools have revolutionized how we iden-

tify potential donors and tailor our approaches using data-driven strategies.

THE SHIFT FROM PRINT TO DIGITAL Our marketing materials and donor proposals have also undergone a significant transformation over the last few decades. In the past, print materials were the primary means of communication with our donors. Changes were costly and time-consuming.

Today, digital marketing offers flexibility and immediacy, enabling us to tailor and customize our messaging to focus on funding needs and priorities and respond to specific donor interests in a personal way. With digital messaging, we can also respond quickly to changes such as gift annuity rates, fluctuations in the economy or tax law changes.

TAX CHANGES AND GIFT STRUCTURE OPTIONS Income and estate tax rates and exemption amounts have vacillated over the years, influencing gift planning strategies and impacting donor decisions. The rise of donor-advised funds (DAFs), qualified charitable distributions (QCDs) and other gifts of retirement assets have reshaped the gift planning landscape.

Donors today are placing greater restrictions on gifts and seeking more control over how their contributions are utilized. These donors—sometimes younger than in past decades—are seeking options that consider the best asset, the best structure, and the best timing for their gifts. This is especially true in the context of mega-gifts, naming gifts, and campaigns, which have all become more prevalent over the last few decades.

THE CHANGING ROLE OF GIFT PLANNING As campaigns have continued to grow in size and frequency, so too has the role of gift planning. I observed this firsthand during two mega-campaigns over my two decades at the University of Pennsylvania. It is not uncommon to see gift planning represent twenty-five, thirty, or even fifty percent of a campaign goal.

While there are significant inconsistencies among organizations in how planned and blended gifts are counted and credited (particularly in the context of campaigns), it has become standard practice to include gift planning in campaigns.

This shift has influenced the evolving role of gift planners. Gift planners are essential to campaign success. They are the “go-to” professionals for legal and tax questions, gifts of complex assets, and problem-solving.

Too often, however, the gift planner is consulted too late in a gift conversation. Bringing a gift planner to the table sooner can enhance the effectiveness of fundraising strategies and maximize gifts.

Unfortunately, there are a growing number of organizations that do not hire gift planning professionals.

Instead, gift planning responsibilities fall on a fundraiser wearing multiple hats. To some degree, this is due to a lack of investment by organizations in gift planning. At times, it’s also because some of the best gift planning professionals feel the need to move into a role with increased management responsibilities to advance their careers (to become, for example, a vice president of development). As a result, gift planning often takes on a secondary role to cash gifts – which may be smaller.

Executive Summary: This article is written as an opinion piece about the evolution and state of the gift planning field from the perspective of a seasoned and experienced practitioner. The article includes trends observed (good and bad) and changes. The growth and evolution of gift planning has included changes in such things as data management, predictive modeling, and other revolutionary tools due to advancing technology. This has caused a shift in gift planning marketing as well. The increased role of gift planning in campaigns and shift to data-driven decisions have changed the role of the gift planner. There have been many other changes over the last three decades—from the 1990s to today. Beyond the trends and changes, the article examines the enduring core principles of gift planning. Bequests and beneficiary designation gifts consistently remain the most popular planned gifts.

Continuing education is essential to gift planning success—and a heightened focus on metrics and return on investment make sharing information all that more valuable and important. These factors remain steadfast and critical to gift planning success. So too are the timeless values, skills, and talents that drive our success—our listening and interpersonal skills, genuine curiosity, human desire for connection, and shared purpose. If we focus on these core principles and embrace both change and continuity, our work will resonate for generations.

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WHAT STAYS THE SAME? Despite the many changes over the decades, there are aspects of the gift planning field that endure. It has remained nearly universal over the decades that bequests and beneficiary designation gifts continue to be the most common (80-85 percent) of all planned gifts and according to the Giving USA annual report, bequests have consistently represented 8-10 percent of individual giving over the past four decades. This trend underscores the enduring appeal of these straightforward giving options.

It also underscores the fact that while there are opportunities with other gift structures such as gift annuities, gifts of complex assets, and charitable remainder trusts, a gift planner should not be discouraged by a lack of technical skills. It is better to start a program with the bread and butter of bequests and beneficiary designation gifts – and keep learning!

CONTINUOUS LEARNING The need for continuing education in gift planning never ends. There is always something new to learn!

Attending conferences and networking with colleagues is invaluable. More than ever before, we have information at our fingertips – articles, blogs, webinars, and more. Connecting with each other and connecting with our donors are important aspects of gift planning that will never change. We can help each other by sharing information.

Giving USA 2025: The Annual Report on Philanthropy for the Year 2024, a publication of Giving USA Foundation, 2025, researched and written by the Indiana University Lilly Family School of Philanthropy

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STAY ARMED WITH INFORMATION This includes sharing information with organizational leadership—where gift planning continues to be a bit of a mystery. Organizations have become data-driven and with that comes a heightened focus on metrics and return on investment (ROI). Major gift metrics or “key performance indicators” are often applied to work plans for gift planners and programs without consideration for the differences in our work. To address this issue, the National Association of Charitable Gift Planners (CGP) has worked for more than a decade to provide metrics for gift planners and standards for success in gift planning programs.

The resources available from CGP are valuable as organizations sometimes scrutinize the dollars brought in by gift planning programs in making budget decisions. Armed with information, we can make the argument for why gift planning is important, share evidence that focusing on gifts of assets will

“Philanthropy” is derived from the Greek root words “philos,” meaning love, and “anthropos,” meaning man or humanity. Literally translated as "loving people." increase results, point to studies indicating that donors will increase their current giving when they have made a planned gift, and highlight the fact that the ROI on gift planning is much higher than other fundraising options.

The need for this information has not changed over the decades.

Success). Finally, the gift planner doesn’t end the conversation when a donor indicates they’re ready to make a gift, but instead follows up on that commitment with an inquiry about how the donor wishes to fund their gift.

IN CONCLUSION… While the landscape of gift planning fundraising has evolved significantly over the past thirty years, the core principles of successful gift planning remain unchanged.

The timeless values, skills, and talents continue to drive our success. If you can focus on those core principles, and embrace both change and continuity, the work you do will resonate for generations. ■

THE CORE PRINCIPLES AND HUMAN CONNECTION OF GIFT PLANNING How can we avoid being distracted by the shiny new technology and tools, the next big tax law change, or threats to our funding? We can focus on the core principles of our work. The tools will continue to change in the coming decades. We can’t begin to imagine what the gift planning world will look like in ten or twenty years.

But our goals and missions remain the same: working for the greater good and our desire to make the world a better place.

Our desire for human connection and shared purpose continues to be the cornerstone of successful fundraising. In gift planning, listening and interpersonal skills will always be more crucial than technical expertise. The most successful gift planners will talk only about 25 percent of the time during a donor visit and listen about 75 percent. They are genuinely curious and ask open-ended questions. They focus on the donor’s interests and passions in addition to the funding opportunities. They include the donor in plans and visions for the organization’s future. They understand that storytelling is one of the most powerful ways to connect with donors and build relationships (for more information, see my book Storytelling: The Secret Sauce of Fundraising

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Giving USA 2025

Trends in Individual and Legacy Giving — Hannah J. Yaritz, CSPG Executive Summary: This year’s Giving USA: The Annual Report on Philanthropy for the Year report provides insight into philanthropic contributions and their recipients in 2024.

This article focuses on individual and bequest giving trends as that is most relevant to our work as gift planning practitioners.

However, there is valuable information to be gleaned from the full report related to foundation and corporate giving as well as insights on giving to each nonprofit sector. The full report can be purchased at givingusa.org.

In 2024, charitable giving in the US reached a record $592.50 billion, a 6.3 percent increase from 2023, driven by strong economic performance and easing inflation. Individual giving remains dominant, however, donor acquisition and retention continue to challenge nonprofits, even as wealth concentrates at the top.

Bequest giving totaled $45.84 billion, slightly down from the previous year. IRS data shows that 24.4 percent of estates claimed charitable deductions, with the highest rates among estates over $50 million. Legacy giving remains a stable and vital source of nonprofit support.

Donor Advised Funds (DAFs) held $251 billion in assets, representing 24 percent of individual giving. Non-cash gifts are increasingly significant, though underutilized due to communication gaps and donor unfamiliarity. Family foundations are growing in scale, but engagement with younger generations is declining.

Tax-efficient tools like Qualified Charitable Distributions (QCDs) are gaining popularity, especially amid new IRS rules for inherited IRAs. Meanwhile, cryptocurrency donations surpassed $1 billion, with younger, tech-savvy donors driving adoption.

These trends underscore the importance of educating donors, aligning with funders’ missions, and adapting to emerging technologies and generational shifts in giving behavior.

As charitable gift planners and allied professionals, we can utilize this data to inform our unique approaches to fundraising, charitable giving, and wealth strategies.

OVERVIEW Each year, The Giving USA Foundation publishes Giving USA: The Annual Report on Philanthropy for the Year. This year’s report reveals that charitable giving in the US reached an estimated $592.50 billion, marking a 6.3 percent increase over 2023 and setting a new record. The rise was driven primarily by individual and corporate contributions, buoyed by a strong stock market and GDP growth. Notably, as inflation eased compared to previous years, giving outpaced inflation for the first time in three years, signaling renewed momentum in philanthropic support.

Of particular relevance to gift planning are the findings on charitable giving from individuals, giving by

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bequest, and the use of non-cash gift vehicles. In 2024, individual charitable giving grew 8.2 percent from the previous year to $392.45 billion, though contributions are increasingly concentrated among the wealthiest donors even as participation from everyday donors declines. Charitable bequest giving contributed $45.84 billion and continues its long-standing role as a stable 7-9 percent share of total philanthropy despite modest fluctuations. Increasingly, donors have turned to strategic, tax-efficient tools such as Donor Advised Funds, Qualified Charitable Distributions, and gifts of non-cash assets, though limited communication and donor understanding still hinder broader adoption.

CHARITABLE GIVING BY INDIVIDUALS Individual giving, estimated at $392.45 billion in 2024, grew by 8.2 percent from 2023 in current dollars. Adjusted for inflation, this growth represents 5.1 percent in 2024, emphasizing the continued importance of individuals as cornerstone contributors of philanthropic support.

Giving USA estimates include contributions of cash, securities, and property from itemized and non-itemized households (p. 28).

While total giving is on the rise, many nonprofits are grappling with shifting donor dynamics. Fewer everyday donors (people giving less than $5,000) are giving to charity, with the Fundraising Effectiveness Project’s

2024 Q4 Report citing a decrease of 4.5 percent (p. 78).

This trend reflects a broader shift: dollars are up, but donors are down, signaling a concentration of wealth and giving at the top, a potential indicator of ongoing wealth transfer.

■ Key Report Insight: Donor retention is increasingly vital for nonprofits, especially as everyday giving continues to decline. According to the Fundraising Effectiveness Project’s Q4 2024 Report, donors who remained engaged over extended periods accounted for a substantial 60 percent of all contributions made throughout the year, underscoring the long-term value of stewarding donor relationships (pp. 78-79).

Philanthropic giving remains highly concentrated among the nation’s wealthiest individuals. In 2024, the top 50 US donors gave a combined $16.2 billion to charity, an increase from $11.9 billion in 2023. Mean-

2024 contributions: $592.50 billion by source of contributions (in billions of dollars — all figures are rounded)

7%

8%

Bequests

Corporations

$44.40

$45.84

19%

Foundations

$109.81

66%

Individuals

$392.45

Giving USA 2025: The Annual Report on Philanthropy for the Year 2024, a publication of Giving USA Foundation, 2025, researched and written by the Indiana University Lilly Family School of Philanthropy

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while, Forbes reported that the 400 richest Americans held a collective net worth of $5.4 trillion, nearly $1 trillion more than the previous year. Despite this immense wealth, their estimated lifetime charitable giving amounts to just five percent of their total net worth. Strikingly, over 70 percent of those on the list are believed to have donated less than five percent of their fortune, and only 10 individuals have given more than 20 percent of their wealth to charitable causes (p. 80).

Generational shifts are also shaping the future of philanthropy. Between 2021 and 2024, Millennials boosted their average annual giving by 22 percent (to $1,616), while Gen Z increased by 16 percent (to $867) (p. 191). Notably, donors across all generations give online with Millennials reporting the highest rate of online giving at 82 percent, Gen Z at 79 percent, Gen X at 69 percent, and Baby Boomers giving at a rate of 58 percent (p. 89).

■ Key Report Insight: Engage Millennials and Gen Z through hands-on experiences that align with their values and interests. These next-gen donors are drawn to opportunities where they can actively participate, whether it’s volunteering, championing causes they care about, or using their social media platforms to amplify impact (p. 79).

Despite these promising trends in wealth and giving, donor retention continues to decline. In 2024, retention dropped by 2.6 percent, marking the fifth consecutive year of decline. Only 32.1 percent of onetime donors were retained, compared to 86.8 percent of donors who had given seven or more times, highlighting the importance of long-term engagement strategies (p.

78).

CHARITABLE GIVING BY BEQUESTS Bequest giving has consistently accounted for seven percent to nine percent of total charitable contributions in the US over the past four decades, underscoring its

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role as a stable and vital source of nonprofit funding (p.

51). In 2024, charitable giving by bequest totaled $45.84 billion, reflecting a 1.6 percent decline in current dollars and a 4.4 percent decrease when adjusted for inflation (p. 47).

These year-over-year fluctuations are not uncommon and often stem from the timing of estate settlements and the presence of a few exceptionally large gifts (p. 117). Despite this variability, the long-term reliability of bequest giving highlights the importance of engaging donors in legacy planning conversations.

■ Key Report Insight: Research shows that only about 37 percent of charities have the skills and systems in place to manage planned giving. The other 63 percent are likely to leave potential gifts unrealized because they lack the ability to guide donors through the process. To close this gap, organizations can adopt gift planning strategies that spark donor interest in bequests and make it easier for fundraisers to have these conversations. For example, discuss with donors the possibility of naming the nonprofit as a beneficiary of their IRA or 401(k) (p. 125).

Research from Caring.com’s annual Wills and Estate Planning Study offers insight into estate planning behaviors and donor awareness. Notably, the report found that most individuals with wills have updated them within the past five years, typically due to life events such as retirement, the death of a loved one, or family expansion. Common reasons for not updating estate plans include procrastination and a perception of insufficient assets (p. 120).

Estate planning is widely acknowledged as important, yet action to create plans still lags behind. According to Trust & Will’s 2025 Estate Planning Report, 83 percent of respondents recognize the value of having a plan in place, while only 31 percent currently have a will.

The data reveals generational differences in document creation with the Silent Generation having the highest share of respondents with a will (66 percent), followed

by Baby Boomers (44 percent), Gen X (26 percent), Millennials (22 percent), and Gen Z (15 percent) (p. 121).

Looking ahead, demographic trends suggest a po-

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tential rise in planned giving. Giving USA highlighted research by Russell James, J.D. , Ph.D. , indicating that Baby Boomers are likely to increase use of charitable gift annuities between ages 75-79. Research also noted that realized bequests are expected to peak as Boomers reach age 88, estimated to be in 2048. There is also emerging evidence of a shift from traditional wills to non-probate wealth transfers, which may reshape how legacy gifts are structured in the coming years (p.

123).

■ Key Report Insight: Tailor gift vehicle strategies to align with donor age demographics and their financial priorities. Donors under 65 tend to prioritize tax benefits, making tax-deductible options especially appealing.

For older donors and retirees, preferences shift charitable remainder trusts often resonate with those aged 70– 74, while charitable gift annuities are more attractive to individuals between 75 and 79. If your donor base skews younger than these age groups, consider emphasizing bequests, which allow for long-term legacy planning without immediate financial commitment (p. 125).

In 2024, the IRS released data from estate tax returns filed in 2022, offering a detailed look into charitable behavior at the end of life.

Of all estates filed in 2022, 24.4 percent claimed a charitable deduction, underscoring the importance of legacy giving in estate planning (p. 126). The likelihood of claiming a charitable deduction increased with estate size: • 40.8 percent of estates valued at $50 million or more claimed charitable deductions • 28.7 percent of estates valued between $20 million and $50 million did the same This trend highlights a clear correlation: larger estates are more likely to include charitable giving as part of their legacy strategy. These findings reinforce the importance of engaging high-net-worth individuals in planned giving conversations early and often, especially as wealth continues to concentrate at the top.

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ASSETS, VEHICLES, AND EMERGING TRENDS Individual giving as reported through Giving USA—including contributions of cash, securities, and property—continues to evolve as donors explore more strategic and tax-efficient ways to support the causes they care about.

According to the 2025 CCS Philanthropy Pulse Report, non-cash assets are becoming increasingly significant. 27 percent of nonprofit leaders reported that gifts of non-cash assets accounted for more than onefifth of their total giving. However, barriers remain with nearly half of respondents citing weak organizational communication (48 percent) and limited donor understanding (45 percent) as key challenges to securing these types of gifts (p. 124).

Among donors with $1 million or more in assets, awareness of planned giving options varies (p. 122): • Over 50 percent are familiar with charitable bequests • 47 percent understand beneficiary designations in retirement plans or life insurance • 43 percent are aware of charitable gift annuities and trusts • Only one-third know about donating appreciated assets, and one-quarter are familiar with qualified charitable distributions (QCDs) from IRAs ■ Key Report Insight: Educating donors of all ages about tax-efficient giving tools - such as Donor Advised Funds (DAFs) - can unlock greater philanthropic potential. In 2024, DAFs held $251 billion in assets, representing nearly 24 percent of all individual charitable giving (p. 168).

Family foundations are also playing a growing role in individual philanthropy. Nearly 50 percent of family foundations now hold assets exceeding $10 million, up from 30 percent in 2015. In 2023, 71 percent of family foundations distributed more than the 5 percent minimum required. Grants of $1 million or more from

these foundations also increased by 13 percent from the prior decade (36 percent in 2024 compared to 23 percent in 2015) (p. 102).

However, family foundation engagement with younger generations is waning. The National Center for Family Philanthropy’s Trends 2025 Report found that site visits involving younger family members dropped from 56 percent in 2015 to 28 percent in 2024. Further, formal intergenerational discussions fell from 62 percent to 21 percent. While the reasons for generational engagement vary, one in four foundations cited proximity to family as a key factor for lagging engagement (pp. 102-103).

■ Key Report Insight: Be clear and compelling about your organization’s mission and values. Foundations are increasingly selective, and alignment is key to securing support (p. 104).

Meanwhile, Qualified Charitable Distributions (QCDs) are gaining popularity as a giving tool, especially among older donors (p. 119). In 2024, the IRS clarified rules for inherited IRAs (p. 118): • Most non-spousal beneficiaries must distribute IRA funds within 10 years of the account holder’s death • If the owner dies before their required minimum distribution (RMD) start date, beneficiaries may choose flexible withdrawal options such as waiting 10 years to withdraw funds, yearly distributions, or skip years • If the owner dies after the RMD start date, annual payouts are required • Roth IRAs follow the same 10-year rule but are not taxed, and the owner’s date of death does not affect distribution timing

charities now accepting crypto. According to The Giving Block, the average crypto donation was $10,978.28, with donors typically being wealthy, tech-savvy individuals in their 20s and 30s (p. 88).

CONCLUSION In light of these findings, the path forward for charitable gift planners is clear: success will come to those who blend time-tested relationship-building with a willingness to embrace innovation. By leveraging the insights from Giving USA 2024—from the enduring strength of bequests to the rise of donor-advised funds, QCDs, and even cryptocurrency—we can craft strategies that meet donors where they are today and inspire them to leave a lasting legacy. The philanthropic landscape continues to evolve, but with informed, adaptable approaches, we can ensure that charitable giving not only keeps pace with change but thrives in it. ■

These changes are designed to limit long-term tax-free growth of inherited IRAs, making QCDs a more attractive option for donors seeking to maximize impact while minimizing tax liability.

Finally, emerging technologies are reshaping giving behaviors. Cryptocurrency donations surpassed $1 billion in 2024, with 70 percent of the top 100 US

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Charting a New Course Gift Planning After 2025 Tax Reform — Lynn M. Gaumer, J.D. , CAP® The newly enacted tax law signed into law by President Trump on July 4, 2025, represents the most significant tax reform since the Tax Cuts and Jobs Act (TCJA) of 2017. While the new law makes some of the TCJA's individual provisions permanent, it also introduces substantial changes that will reshape the landscape of charitable giving.

For gift planners, fundraisers, and donors alike, understanding the nuances of these changes is crucial for effective and strategic philanthropy. This article provides a comprehensive analysis of the key provisions affecting the charitable sector, including the new above-the-line deduction for non-itemizers, floors on deductions for itemizers and corporations, and increased excise taxes on university endowments.

We’ll begin by presenting a side-by-side comparison

of the charitable giving provisions followed by reflections from the National Association of Charitable Gift Planners (CGP) community on how the new law will impact charitable conversations, plans, vehicles and techniques. We'll also examine several proposed provisions that were ultimately left out of the final legislation, which fundraisers should still be aware of as they may signal future policy directions.

To help fundraisers quickly understand the impact of these changes, the table below compares key charitable giving provisions before the TCJA, after the TCJA, and under the new tax law.

In addition to the foregoing extensions and permanent changes, several entirely new provisions will take effect—here’s a snapshot of what’s new.

Executive Summary: The tax reform signed into law on July 4, 2025, introduces the most significant changes since the 2017 Tax Cuts and Jobs Act (TCJA), permanently extending many TCJA provisions while reshaping charitable giving rules. For donors, fundraisers, and gift planners, these updates create both opportunities and challenges that will influence strategies in the years ahead.

Key elements include a permanent extension of the higher standard deduction with additional benefits for older taxpayers, an increase in the state and local tax (SALT) deduction cap, and continuation of the 60 percent adjusted gross income (AGI) limit for cash gifts. The estate tax exemption also rises to $15 million for individuals beginning in 2026.

The law introduces entirely new provisions. Corporations must donate at least 1 percent of taxable income to qualify for deductions and itemizers must contribute at least 0.5 percent of AGI to benefit from deductions—potentially encouraging “bunching” strategies and DAF giving. High-income taxpayers face a reduced cap of 35 cents per dollar deducted. For non-itemizers, a universal charitable deduction of up to $1,000 ($2,000 for couples) for cash contributions provides a modest but broad incentive.

Fundraisers are encouraged to act quickly in 2025—advising high-net-worth donors to give before new limits take effect and promoting noncash giving. Looking ahead to 2026, donor communications should emphasize the universal charitable deduction for non-itemizers. Qualified charitable distributions remain a powerful tool in both years since they are unaffected by deduction limits.

The article also reviews proposals excluded from the final legislation, such as steeper taxes on college endowments and foundations, treatment of nonprofit royalties as taxable income, and expanded rules on excess business holdings. While not enacted, these ideas may resurface, signaling future policy risks.

Ultimately, the reform underscores the need for proactive donor communication, strategic planning, and advocacy to navigate a dynamic charitable landscape.

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LET’S TAKE A DEEPER DIVE INTO WHAT’S NEW FOR CHARITABLE GIVING IN 2026 Corporations required to give more to keep their deductions The new law requires corporations to donate at least one percent of their taxable income to qualified

charities to be eligible for charitable deductions beginning in 2026. This provision may prompt increased corporate philanthropy and open new opportunities for partnership. A corporation earning $10 million in taxable income, for example, would need to donate at least $100,000 to maintain deduction eligibility. This thresh-

Pre-Tax Cuts and Jobs Act (TCJA)

TCJA

New Tax Law

Income tax rates (%)

10, 15, 25, 28, 33, 35, 39.6

10, 12, 22, 24, 32, 35, 37

Permanently extends the 10, 12, 22, 24, 32, 35, 37 tax rates

Standard deduction

$6,350 for single filers, $9,350 for heads of households, $12,700 for married couples filing jointly

Nearly doubled the standard deduction.

Permanently extends the higher standard deduction – with a small boost. For 2025: $15,750 for single filers, $31,500 for married couples filing jointly.

Provides an $6,000 additional deduction for taxpayers 65 and older for tax years 2025– 2028.

The full deduction is only available to taxpayers with incomes below a certain level.

Itemized deductions

Increases the $10,000 cap on the SALT deduction to $40,000 effective for the 2025 tax year.

The increase is temporary and will be adjusted upwards by 1% each year from 2026 – 2029.

Common itemized deductions included: • State and local taxes (SALT), including income or sales taxes and property taxes • Mortgage interest on qualifying home loans • Medical expenses that exceeded a certain percentage of adjusted gross income (AGI) • Charitable contributions to qualified organizations • Unreimbursed job-related expenses

Retains the charitable deduction but limits the mortgage interest deduction and the SALT deduction to $10,000. Limited or eliminated several other deductions

Cash contributions

Limited to 50% of AGI

Increased to 60% of AGI

Permanently extends the 60% of AGI limitation but now allows it to be stacked on top of deductions for non-cash gifts

Estate tax exemption

$ 5.49 million for individuals, $10.98 million for married couples

Doubled the estate and gift tax exemption

Beginning in 2026: $15 million for individuals, $30 million for married couples. Will be indexed for inflation each year.

Beginning in 2026, the value of itemized deductions will be capped at 35 cents per dollar.

Corporate Tax Rate

35%

21%

21%

Net Investment Income Tax on Private College and University Endowments

Exempt

Institutions enrolling at least 500 students with endowment assets exceeding

New tiered structure: • $500,000-$750,000 per student – 1.4% • $750,000-$2 million per student – 4% • Over $2 million per student – 8%

$500,000 pay 1.4% on net investment income Excess Compensation Tax

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N/A

21% tax on compensation over $1 million for the top five highest paid employees

21% tax on compensation applies over $1 million for all employees

old could encourage strategic alliances between corporations and nonprofits. Fundraisers should be mindful of potential limitations, however, as it could also cap giving in some cases.

■ Tip: Positioning your organization as a strong, mission-aligned partner can help you take advantage of this new landscape. It’s important to diversify your funding.

New law could encourage corporate bunching – the concentration of multiple years of contributions into single tax years to surpass the threshold.

GIVING THRESHOLD FOR ITEMIZERS The new law adds a minimum charitable contribution rate for taxpayers who itemize their deductions.

The law will require taxpayers to give at least 0.5 percent of their AGI starting in 2026 to receive a tax benefit for their charitable giving. For example, an individual with $200,000 in adjusted gross income would only get a tax break on the contributions they give beyond $1,000.

LIMITATION ON CHARITABLE DEDUCTION FOR THOSE IN THE TOP TAX BRACKET Under current law, the top income tax bracket is 37 percent, meaning top earners receive a tax benefit of 37 cents for each dollar deducted from their taxable income. The new law caps the tax benefit at 35 cents for each dollar of itemized deductions beginning in 2026.

■ Tip: Encourage your highest-income donors to give now to avoid losing tax benefits starting in 2026.

TAX BREAK FOR NON-ITEMIZERS In a notable change, the act includes an above-theline charitable deduction, allowing taxpayers to deduct up to $1,000 for single filers and $2,000 for married couples beginning in 2026. For an individual in the 24 percent tax bracket, for example, a $1,000 donation would mean $240 in tax savings. This provision does not have an end date, and gifts to donor advised funds (DAFs) are excluded.

■ Tip: You may wish to encourage donors potentially affected by this provision to accelerate their giving this year, before the new law goes into effect. We could see an increase in bunching gifts and DAF giving in 2026 and beyond.

Your Quick Guide to What is Changing in 2026 Giving Threshold for Corporations

Corporations must donate at least 1% of their taxable income to qualified charities to maintain eligibility for certain tax deductions

AGI Limit for Cash Gifts to Public Charities

60% of AGI (made permanent); can now be stacked with non-cash gifts

Giving Threshold for Itemizers

The new law requires taxpayers to give at least 0.5% of their AGI to receive a tax benefit for their charitable giving

Limited Deduction for Taxpayers in Top Tax Bracket

Under current law, top earners receive a tax benefit of 37 cents for each dollar deducted from their taxable income.

The new law caps the tax benefit at 35 cents for each dollar of itemized deductions beginning in 2026

Universal Charitable Deduction

Allows non-itemizers to deduct $1,000 for individuals and $2,000 for joint filers.

Contributions to DAFs are not eligible

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■ Tip: This creates a new opportunity to engage entry-level and younger donors. While these amounts are modest, history suggests they can have a big impact.

During the CARES Act period (2020-21), about 90 million taxpayers took advantage of a similar, lesser deduction, contributing an estimated $30 billion to charity.

WHAT YOU SHOULD DO NOW

This new law renews the need to educate donors and refocus your messaging. Here are a few next steps: • Update your donor communications to reflect both 2025 opportunities and new benefits beginning in 2026.

• Emphasize non-cash giving options, including stock and real estate.

• Encourage your high-net-worth donors to make strategic gifts to maximize their itemized giving this year.

• Highlight qualified charitable distributions (QCDs) for donors age 70½ and older, since QCDs are unaffected by itemized deduction limits and can be more tax-efficient than giving through deductions.

1. Significantly Higher Increase in Net Investment Income Tax for Certain Colleges and Universities The Proposal: This measure would have increased the net investment income tax (NIIT) for higher education institutions with endowments valued at more than $750,000 per student, using a steeply tiered rate structure: • $500,000–$750,000 per student: 1.4% • $750,000–$1.25 million per student: 7% • $1.25 million–$2 million per student: 1% • More than $2 million per student: 21%

Charitable giving remains one of the most powerful tools individuals have to reduce tax liability while making a lasting impact.

We recommend you begin reaching out to your supporters to remind them of your mission and inform them how the new tax law may impact their charitable giving.

Potential Impact: Institutions with large per-student endowments could have faced a significant increase in their annual tax liability, reducing the funds available for scholarships, research, and capital projects. The steep graduated rate structure would have placed the highest burden on the wealthiest institutions, potentially leading to increased scrutiny of how endowment earnings are used. Fundraisers at affected institutions might have needed to adjust their messaging to donors, emphasizing the urgency of unrestricted giving to offset higher tax costs and maintain student support.

What Actually Passed: The new tax law signed did adopt a tiered NIIT structure, but the rates are lower than those proposed—capping the rate at eight percent.

While the financial impact is still notable for high-endowment institutions, it is less severe than the original text of the bill.

WHAT DIDN'T MAKE THE CUT? UNDERSTANDING THE NONPROFIT IMPACT OF UNENACTED TAX PROPOSALS As fundraisers, we constantly navigate the evolving landscape of regulations and policies that shape our ability to support our missions. While the new tax law brought some changes, six key proposed measures with significant potential impact on the nonprofit industry were ultimately not included. Understanding these near misses is crucial for anticipating future legislative pushes and strategizing effectively. Let's delve into each of these unenacted proposals and the impact they could have had:

2. Proposed Increase in Tax Rate on Net Investment Income (NIIT) for Certain Private Foundations The Proposal: The suggestion was to significantly increase the NIIT for private foundations based on their assets under management exceeding $50 million. This would have introduced a graduated tax rate system, climbing as high as 10 percent for foundations with assets over $5 billion. The tiered system would have been structured as follows: • Less than $50 million: 1.39% • $50 million to $250 million: 2.78% • $250 million to $5 billion: 5% • $5 billion to $10 billion: 10%

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Potential Impact: Private foundations currently pay a flat rate of 1.39 percent. The increase could have substantially reduced the funds available for grantmaking by larger private foundations. Foundations might have been compelled to adjust their investment strategies, potentially prioritizing lower-risk, lower-return options to mitigate tax burdens. Nonprofits relying on grants from these large foundations could have faced a more competitive funding environment and potentially smaller grant awards. The change might also have spurred discussions within foundations about their spending policies and the balance between endowment growth and immediate charitable impact.

3. Proposed Increase in Unrelated Business Taxable Income (UBTI) Due to Disallowed Fringe Benefit Expenses The Proposal: This measure aimed to permanently increase a nonprofit's UBTI by the amount of expenses incurred for transportation or parking fringe benefits for which a deduction was disallowed. Notably, an exception was proposed for religious organizations.

Potential Impact: This change could have increased the tax burden for many nonprofits that provide these common employee benefits. While seemingly technical, it could have led to higher tax liabilities, diverting resources away from program activities and fundraising efforts. Nonprofits might have had to re-evaluate their employee benefits packages or absorb the increased tax costs, potentially impacting their ability to attract and retain talent. The exclusion for religious organizations could have also created an uneven playing field within the nonprofit sector.

4. Proposed Treatment of Name and Logo Royalties as Unrelated Business Taxable Income (UBTI) The Proposal: The proposal sought to classify income derived from the sale or licensing of a nonprofit's name or logo (including trademarks and copyrights) as UBTI. Potential Impact: Many nonprofits generate revenue through affinity programs and licensing agreements

that utilize their brand recognition. If these royalties were classified as UBTI, the associated income would become subject to federal income tax. This could have significantly impacted the financial models of organizations that rely on this form of revenue generation, potentially leading to decreased funding for their charitable programs. Nonprofits might have had to restructure these agreements or face unexpected tax liabilities.

5. Proposed Termination of Tax-Exempt Status for Terrorist Supporting Organizations The Proposal: This measure aimed to amend Section 501(p) to grant the Secretary the authority to designate an organization as a terrorist supporting organization if it provided material support or resources to a terrorist organization within a preceding 3-year period, leading to the potential termination of its tax-exempt status.

Potential Impact: This proposal, while targeting a specific issue, could have introduced a new layer of scrutiny and potential risk for nonprofits operating internationally or those working with partners in complex environments. The ability of the Secretary to designate organizations could have had significant implications for due diligence processes and risk management within the sector. While intended to combat terrorism financing, there were potential concerns about the breadth and application of such a designation and its impact on legitimate humanitarian work.

6. Proposed Retroactive Amendment of Excess Business Holdings Rules for Private Foundations The Proposal: This proposed a retroactive change to the rules governing excess business holdings for private foundations. It would have treated certain voting stock repurchased by a business enterprise as outstanding stock when calculating a private foundation's permissible holdings.

Potential Impact: The excess business holdings rules are designed to prevent private foundations from unduly influencing businesses. This retroactive amendment could have had complex implications for foundations

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holding significant business interests, potentially requiring them to divest holdings to comply with the adjusted rules. This could have led to significant financial and administrative burdens for affected foundations and potentially impacted the businesses in which they held stakes. The retroactive nature of the proposal would have added further complexity and uncertainty.

LOOKING AHEAD: While these proposals did not become part of the new tax law, their consideration signals potential future areas of legislative focus. For fundraisers, understanding these discussions is vital for: • Advocacy: Being informed allows us to engage in proactive dialogue with policymakers about the po-

tential impacts of such proposals on the nonprofit sector.

• Strategic Planning: Recognizing these potential shifts can inform long-term fundraising strategies and diversification of revenue streams.

• Risk Management: Awareness of potential changes in tax laws can help organizations assess and mitigate future financial risks.

The nonprofit landscape is dynamic. By staying informed about proposed legislation, even those that are not enacted, we can better prepare our organizations to navigate future challenges and opportunities in our vital work.

PRACTICAL THOUGHTS FROM THE FIELD

Many planners suspect that donors/clients who may have been considering larger charitable gifts will likely pull those forward into 2025, given the slightly diminished tax benefits as well as the associated complexity. The following quotes capture planning opportunities and realities from various perspectives on the changes effective in 2026.

• With the OBBBA being incredibly lengthy and far reaching, much of it has specifically impacted donors’ fear through misconceptions.

• It certainly tests the relationship(s) you have built. If a strong foundation is present, they will come to you for help.

• If you build a meaningful solution on the relational foundation, the door opens to more of their financial world.

• Treat the OBBBA as another tool to connect with clients, instead of as a homework project, so you begin to embrace these questions.

Preston Hudson, CTFA Director of Planned Giving Waters Edge The bill makes the QCD more beneficial for taxpayers who can use it. So, for donors old enough to make a QCD, current gift planning should start there.

• The deduction rate cap and 0.5 percent AGI floor make quantifying benefits for donors harder. The complexity alone may discourage some giving.

• Only time will tell the extent to which the non-itemizer deduction increases giving versus is used by people who already were making gifts.

• Some planning may be to use the QCD, the standard deduction and the non-itemizer deduction.

Reynolds T. Cafferata Partner Rodriguez, Horii, Choi & Cafferata, LLP

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There are now a "bunch" [of] more reasons to "bunch" giving for both individuals and corporations. (Finally, DAFs may start to see some growth, right?) But I haven't heard much talk about one I might call "Kiss the Sky," stealing IP from Jimi Hendrix (or maybe "Kiss the Limit" or "Kiss the Ceiling"). But the new tax code says you don't lose that 0.5 percent "haircut" if you touch ANY of the income giving limits. Instead, it carries over to be potentially used later.

This actually makes the "less favored" gifts like appreciated assets to a private foundation, potentially more attractive because they have the lowest income giving limitation of 20 percent.

Russell N. James III, J.D. , Ph.D., CFP® Professor & CH Foundation Chair in Personal Financial Planning Director of Graduate Studies in Charitable Planning Texas Tech University The One Big Beautiful Bill (OBBB) may change how we give, but it does not change why we give, which is to make an impact and leave a legacy. While itemizing deductions may no longer make sense for some donors, this does not diminish the difference they can make through philanthropy. The OBBB reinforces strategies already at the forefront of our donor conversations, such as: • the timing of contributions through bundling and the use of donor-advised funds • gifts of non-cash assets also remain powerful tools for maximizing impact and establishing legacies • and more than ever, working with a trusted advisor team is essential in helping donors align strategic giving with their values and achieve their philanthropic aspirations Kimberlee Riley, CAP® Chief Philanthropy Officer Seniors First, Inc. ■

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HOT LINKS

— Russell A. Willis III, J.D. , LL.M.

Note from the Editor-In-Chief: There are few things that I can be confident about in life. One is that, assuming Google is accurate, there are 8.2 billion fellow humans on our planet. The second is that Russ Willis, JD, LLM has provided more reasoned and helpful posts to the CGP Listserve (formerly GiftPl) than anyone who is living, who has ever lived and, dare I say, anyone who will ever live. Similar to some athletic accomplishment where people say, “No one is EVER breaking that record!” he has done this consistently for nearly 30 years and there isn’t anyone in our field who hasn’t benefited directly or indirectly from his free and timely advice. I personally learn from him all the time. Because of this, I thought this recurring CGP “Hot Links” column would be a perfect way of highlighting the hottest CGP Link topics in recent months where a more expansive response was warranted. —BC

Background: In 1993—pre-worldwide web—CGP Hall-of-Famer Craig Wruck started an email listserv called GIFT-PL. More than 30 years later, as the all-member discussion forum in CGPLink, that “list” is still helping CGP members seek advice from colleagues. Many topics raised in the forum deserve a deeper dive than forum Q&A usually allows. In this column, we take that dive (not, we hope, to brain-crushing depth) and swim further to consider matters related to the original queries. —RW

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8283 AND 8282 REPORTING THE QUERY We begin with a post from January—thread number 2486—asking what would seem to be a straightforward enough question: if a flipCRUT is funded with real property and the property is sold within three years, who completes the Form 8282, reporting the disposition—the trustee, using the trust’s EIN, or the trust remainderman?

Almost immediately, someone provided what ought to be the straightforward answer. The trust is the donee, so its name and EIN should go on the first line. And if the remainderman happens to also be the trustee, you nonetheless sign the form as trustee, not as the remainderman.

Straightforward, yes? Maybe not.

THE FINE PRINT What the instructions actually say is that the form is to be filed by the “original” or a “successor” “donee organization.” Note the word “organization,” which arguably does not apply to a split interest trust, as a trust is not itself a legal entity, but a relationship among the donor, the trustee, and the income and remainder beneficiaries.

The quoted terms are defined in the instructions, but in a manner that does not clear up the confusion. The “original donee” is the first donee “to or for which” the donor gave the property. Note the phrase “or for,” which might indicate the designated trust remainderman, but only if the designation were irrevocable, and even then as a practical matter only if the remainderman is serving as trustee. It is after all the trustee who has sold the property, and who should have the responsibility to report the sale to IRS. In a bit of circular reasoning, the instructions then say the “original donee” would have been required to sign the Form 8283 substantiating the noncash contribution, a couple or three years back.

If there has been a further distribution in the interim to a “successor donee,” that entity, rather than the “original donee,” is responsible to file the 8282 if there is a sale or other disposition.

Okay, but who was required to sign the 8283?

Here again, the instructions refer to a “donee organization.” And the form itself at Part V requires the “organization” to acknowledge that it is exempt under Code section 170(c). This again suggests we are talking about the remainderman, as the trustee might be an individual or some other nonexempt entity.

Also, what the “organization” signing Part V of Form 8283 is acknowledging is “that it received the donated property as described in Section B, Part I,” which ought to recite the present value of the remainder. But again, if the trust settlor has reserved a power to redesignate the remainder, who if anyone should sign Part V? Probably the trustee, maybe striking through the language about being an exempt organization.

WHAT TO DO? IRS has been made aware that these forms and instructions do not adequately describe the situation, but they do not seem to have undertaken a project to make any changes. So we just have to do the best we can.

What we cannot do is leave key fields blank.

Following its victory in the Tax Court in RERI Holdings back in 2017, IRS has learned that it is much easier to make a case that the taxpayer has failed to comply with the reporting requirements to substantiate a claimed charitable deduction than it is to sift through the complexities of the underlying transaction or slog through competing theories of valuation.

Two syndicated conservation easement cases, Belair Woods in 2018 and Oakhill Woods in 2020, underscore the point. In each case, the partnership

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completely omitted to report its basis in the subject property, field 3(f) in Part I of Section B of the Form 8283.

On cross motions for summary judgment on the question whether the taxpayer had nonetheless met the substantiation requirements of reg. section 1.170A-13(c), the tax matters partner argued that the missing information was reported elsewhere on the return, on the balance sheet, schedule L of the Form 1065, and that this should be treated as “substantial compliance.”

But the Tax Court was not having it. The purpose of requiring the taxpayer to report basis side by side with the claimed deductible fair market value, the court said, is to highlight potential discrepancies and alert IRS “as to whether (and to what extent) further investigation may be needed.” An examiner, the court said, “cannot be required to sift through dozens or hundreds of pages of complex returns looking for clues about what the taxpayer’s cost basis might be.”

It is in that spirit that we need to approach these ambiguities in the form itself. What information does IRS need in order to determine that there is or is not something here that might require an audit?

On one hand, an accurate “description of the donated property,” field 3(a), would be a remainder interest in trust. On the other hand, the “appraised fair market value,” field 3(c), date acquired, how acquired, and cost or adjusted basis, fields 3(d) through 3(f), all would appear to relate to the property with which the trust is funded, not just the remainder interest—even if the trust is funded entirely with cash and marketable securities, which would ordinarily be reported in Section A instead.

But then, it is the present value of the trust remainder that is reported at field 3(i), “amount claimed as a deduction.” So there is quite a bit of inconsistency here, which we might want to explain in a supporting schedule. The more we explain, the

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more likely we can establish “substantial compliance” with what is, after all, not a well-designed form.

REAL PROPERTY FOR GIFT ANNUITY The flipCRUT is the vehicle most planners would reach for in designing a life income gift funded with real property, even if we do not have clear answers who should be signing the form 8283 on acceptance or the form 8282 on disposition. But sometimes the donor is seeking a fixed payout without reference to when the property is sold.

THE QUERY In June, there was a post—thread number 2642— asking what others are doing in terms of discounting and/or deferring a gift annuity funded with real property, to account for the likely delay in selling the property and for interim carrying costs.

In this particular case, we were looking at a six-unit apartment building valued in the low seven figures. The querent was concerned not only about carrying costs pending a sale that might not occur for a couple of years, but also closing costs when it did, and the uncertainty of the eventual sale price.

There was a general consensus that the annuity should be deferred as much as a year, and discounted maybe ten percent.

The original poster then expressed a concern that deferring the annuity would cause difficulty for the donor, who had been used to receiving rents from the property. Someone suggested the issuing charity might consider combining the annuity with a bargain sale, which would provide a cash cushion for the interval. But then another participant worried that this combination might disqualify the gift annuity as an exception to the acquisition indebtedness rule, in light of the requirement at Code section 514(c)(5) that the annuity itself be the “sole consideration” given in exchange for the property.

THE FINE PRINT Here your editor wants to pause for a moment and say, what a valuable resource this listserv is, what a collegial bunch you all are, what a privilege it is to be a part of this community. But let’s talk for a moment about the “sole consideration” requirement of section 514(c)(5).

The statute makes an exception for a mortgage that has been in place for more than five years, cross referencing section 514(c)(2)(B), which is itself another exception to the acquisition indebtedness rule. But if the mortgage does not meet that exception, then what?

Either way, it would be treated as part of the consideration given “in exchange for the property acquired” by the issuer, as a deemed assumption of the debt under section 1011(b). In other words, a bargain sale. Of course, the exchange of property for a gift annuity is already by definition a bargain sale, with or without a mortgage.

Interestingly, the regulation interpreting the statutory requirement that the present value of the annuity be “less than 90 percent of the value of the property received in the exchange” frames that requirement in terms of the transferor’s “equity” in the property. See reg. section 1.514(c)-1(e).

This might suggest that if there were a mortgage, the debt component would be recognized immediately, rather than ratably over the expected return multiple, but the gift annuity would still qualify, even if the debt did not meet the five year exception.

Example 2 under the cited regulation is unclear on this question, and IRS has not issued any informal guidance.

WHAT TO DO? But to return to the question on the listserv.

If the issuer were to purchase a fractional interest in the property outright to meet the donor’s interim cash needs, while issuing a deferred annuity

issued in exchange for the remaining fraction, IRS might very well collapse these two transactions and argue that the annuity was not the “sole consideration” for acquiring the property.

One possible workaround might be to use a separate, related entity, possibly a supporting organization, or simply a single member LLC, to effect the purchase of the fractional interest. But tread with caution.

Disclaimer: Although your editor was a tax lawyer for twenty-odd years, and although he has been a non-lawyer consultant to other tax professionals for another twenty-odd years, he is not here offering legal advice. —RW

Join active discussions in CGP Link, CGP’s virtual community space, to ask questions, network with colleagues who share your workplace experiences, challenges and goals, and build career-long connections. Share ideas, resources and templates and get new perspectives on familiar challenges when you need them.

Log in at charitablegiftplanners.org and follow the path to CGP Link!

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How Far Is Too Far Who is Your Judge?

— Emanuel J. Kallina, II, J.D. , LL.M.; Tara Lynn Angulo, CAP®

Executive Summary: This article examines the complex legal issues when a donor gives an appreciated, non-cash asset to a taxexempt charity shortly before an intended sale. On the sale of the asset, will the donor or the charity be treated as the taxable party? The central question is how much pre-arrangement between donor and a third-party buyer is permissible before the donor has gone “too far” in arranging the sale of the asset and the IRS can successfully argue the donor is taxable under the doctrine of “anticipatory assignment of income.”

The foundational case of Palmer (1974) and Revenue Ruling 78-197 established a clear test: donors avoid taxation unless the charity is “legally bound or can be compelled” to sell the donated asset. This objective standard has provided predictable guidance for charitable planning for years.

However, individual judges have applied varying and sometimes contradictory legal theories to similar fact patterns. Pro-taxpayer decisions in Palmer, Greene, Rauenhorst, and Dickinson contrast sharply with pro-IRS outcomes in Blake, Ferguson, and Hoensheid.

These courts (sometimes a single judge) have moved beyond the objective “legal obligation” test of Palmer and the Revenue Ruling, introducing problematic subjective standards.

The Second Circuit in Blake suggested that mere “understanding” or “expectation” of sale could be sufficient for taxation, even without legal enforceability. Similarly, Ferguson and Hoensheid expanded liability based on whether sales were “practically certain” or “virtually certain.” However, these cases holding for a subjective standard could have been decided based upon the objective standard of “legally bound,” and their ultimate expression of a subjective standard were dicta in each case.

The article reveals several danger zones for donors to avoid and recommends planners still focus on the objective standard of Palmer and Revenue Ruling 78–197.

INTRODUCTION How does a taxpayer give an appreciated, non-cash asset to charity, knowing the charity will sell it in redemption or to a third party, and yet avoid being taxed on the inherent gain? How much time needs to elapse between the gift to the charity and the sale by the charity?

How far may a donor go in arranging a sale of the asset before making the gift to charity?

There have been numerous cases and rulings over the years, many of which apply multiple and sometimes competing legal theories. There are various judges who have decided similar cases in the same jurisdiction using different and sometimes inconsistent legal theories and standards. There are some judges who have apparently decided to develop their own subjective standards for taxing donors who have “gone too far,” presumably to prevent aggressive taxpayers from employing a brightline, objective standard that allows them to avoid taxa-

of a non-cash asset, the pre-arranged plan is to sell the asset!

Some of the legal theories IRS has employed, and courts have entertained, should not be given serious consideration. For example, IRS argued the “step transaction doctrine” in the seminal cases of Palmer and Blake to tax the donor on gifts of appreciated stock to charity. However, this doctrine historically is employed in complex corporate reorganizations involving multiple interrelated transactions and not in cases involving gifts to charity.4 To answer the question “how far is too far,” it is best to ignore illogical and misplaced legal theories and focus on an accepted legal doctrine, namely the concept of “assignment of income,” where the person earning the fruits (i.e. , income) from an asset should pay the taxes.

On this issue, there is significant legal authority.

tion when the gifted asset is sold.

In short, there are rules, but it depends on the judge.

One reason this area lacks clear authority is that the most important cases have been decided by individual judges, with no one judge speaking definitively for an entire court, such as the Tax Court. For example, there were pro-taxpayer decisions in Palmer (Judge Simpson), Greene (Judge Goettel), Rauenhorst (Judge Ruwe), and Dickinson (Judge Greaves), and pro-IRS decisions in Blake (Judge Raum), Ferguson (Judge Halpern), and Hoensheid (Judge Nega). There was no en banc decision by the currently active (19) Tax Court Judges which could help solidify the law in this area, much less a decision by the Supreme Court.

Another reason for the lack of clarity is that some of the legal theories employed are illogical. For example, some judges have stated a “pre-arranged plan”1 on the part of the charity to sell a gifted asset is fatal. But common sense tells us a non-cash gift must be sold. From a policy standpoint, Congress and IRS want non-cash gifts to be liquidated and sold, so the proceeds from the sale can be used to fulfill the donee’s charitable purposes.2 In fact, if a charity failed to liquidate an asset and obtain cash to fulfill its charitable purposes, it might be in jeop-

ASSIGNMENT OF INCOME DOCTRINE

ardy of losing its charitable status.3 Thus, if a gift is made

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The principles underlying the assignment of income doctrine are well established in Supreme Court cases: the incidence of taxation depends upon the substance of the transaction and not mere formalism;5 taxation is not so much concerned with the refinements of title as it is with actual command over the property;6 a mere transfer in form, without substance, may be disregarded for tax purposes;7 and a given result at the end of a straight path is not made a different result because reached by following a devious path.8 The assignment of income doctrine taxes income “to those who earn or otherwise create the right to receive it and enjoy the benefit of it when paid.”9 The “assignment of the right to receive income is not enough to insulate the assignor from income tax liability” where “the assignor actually earns the income or is otherwise the source of the right to receive and enjoy the income.”10 “A person cannot escape taxation by anticipatory assignments, however skillfully devised, where the right to receive income has vested.”11 Fortunately, the above quotes are not the entire story. Judge Learned Hand commented, with these Supreme Court cases as background:12 [Anyone] may so arrange his affairs that his tax-

es shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.

Judge Hand reiterated his thoughts in another case:13 Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions.

The Supreme Court affirmed this concept:14 The legal right of a taxpayer to decrease the amount of what otherwise would be his taxes, or altogether avoid them, by means which the law permits, cannot be doubted.

The balancing act is for the courts to distinguish legitimate tax planning from sham transactions that are solely for tax avoidance and without legitimate business purposes.

Below, we analyze several cases in depth that we consider to be fundamental to this area of the law and worthy of consideration.

THE PALMER CASE (1974)15 In the seminal case of Palmer, the Tax Court addressed IRS’ arsenal of cases and theories. In analyzing the case, it is important to understand the facts and the timeline: 1. Before 8-31-66 a. A corporation (“Corp”)16 owned Palmer College, a for-profit chiropractic college (“College”). b. Corp’s stock was owned 72 percent by a Family Trust (“Trust”) and 28 percent by Daniel Palmer (“Donor”). c. Donor wanted College to be a tax-exempt entity (“Foundation”), capable of receiving charitable gifts.17 d. Foundation received a favorable IRS determination letter on 1-13-1965.

e. Donor was sole trustee and primary beneficiary of the Trust, President and director of the Corp, President and director of the College, President and director of the Foundation, and presumably hand-picked members of the Board and officers of the Corporation and College. f. Before and after the transactions described below, Donor ran/controlled the Corp, College, and the Foundation. g. All meetings of the Corp, College, and Foundation were held in the same office on the College’s campus.

2. 8-31-1966 a. Foundation (with less than $38,000 of assets) bought Trust shares for a $1.8M promissory note, with no downpayment, payable over 35 years at 4 percent simple interest.18 b. Donor gave 8+ percent of the Corp’s stock (“Gift”) to Foundation (this is the subject of the contest). c. Donor’s Gift to Foundation meant it owned approximately 80 percent of the Corp.

3. 9-1-1966 a. At 10:00 am, the directors and shareholders of the Corp met and agreed to a redemption of the Foundation’s shares in the Corp in return for all operating assets of the College. b. Corp retains 20 percent of assets, primarily real estate. c. At 2:00 pm, the directors/trustees of the Foundation approved the redemption.

IRS argued “the gift was illusory, incomplete, and transitory, and that in any event, it should be disregarded as an intermediary step of a single, integrated transaction.” If not a step transaction, it was “an anticipatory assignment of the proceeds of the redemption which would otherwise be taxable to the petitioner.”

The court began its analysis by quoting Humacid:19 A gift of appreciated property does not result in income to the donor so long as he gives the property

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away absolutely and parts with title thereto before the property gives rise to income by way of a sale.20 IRS countered, contending that the principles enunciated in Humacid are not controlling, it being the substance of the transaction and not its form which governs the tax consequences. IRS further argued that Donor had the power to mandate the redemption of stock, and thus the Gift was an assignment of income.

The Court did not buy into IRS’ version of the step-transaction doctrine or the assignment of income arguments: Despite the undoubted validity of those doctrines, we find them to be inapplicable in this case. Similar attacks have been presented by the [IRS] in a variety of cases involving gifts of stock followed by its redemption, and the attacks have generally been rejected by the courts. . . .21 The tax consequences to the donor turn on which path he chooses, and so long as there is substance to what he does, there is no requirement that he choose the more expensive way.22 As to the Foundation and its role, the court determined there was no allegation that Donor breached his fiduciary duty as a director/trustee/President of the Foundation, and no proof that the Foundation was a sham or an alter ego of the Donor, notwithstanding that the Donor was the controlling Trustee.

The court focused its attention on when the Gift occurred, and when the vote on the redemption took place.

It distinguished the present case from Hudspeth,23 Kinsey, 24 and Cook, 25 where the vote for redemption had taken place before the gift to charity. In this case, the court emphasized that at the time of the redemption vote, the Foundation owned 80 percent of the voting stock and could have stopped the Donor’s planned redemption.

It is important to note – because it rises to great importance later in the cases of Ferguson and Hoensheid – “the redemption had not proceeded far enough along for us to conclude that the foundation was powerless to reverse the plans of the [Donor].”

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REV. RUL. 78-197 26 Sometimes it is better to quote the source, rather than stating things in your own words. Following the Palmer decision, the IRS acquiesced (in the result only), using the following language: A taxpayer with voting control of a corporation and an exempt private foundation who donates shares of the corporation’s stock to the foundation and, pursuant to a prearranged plan, causes the corporation to redeem the shares from the foundation does not realize income as a result of the redemption.

The Service will treat the proceeds as income to the donor under facts similar to those in the Palmer decision only if the donee is legally bound, or can be compelled by the corporation, to surrender the shares for redemption. *** The Service will treat the proceeds of a redemption of stock under facts similar to those in Palmer as income to the donor only if the donee is legally bound, or can be compelled by the corporation, to surrender the shares for redemption. [emphasis added] It is interesting to note that IRS cites the same cases as authority for its conclusion, as does the Palmer court.

27 It is also interesting to note the Service does not rest its conclusion on any particular legal theory such as the step-transaction or the assignment of income doctrines.

THE BLAKE CASE (1981 & 1982)28 Once again, as with all cases involving non-cash gifts, the facts and the sequence of events are critical. The Blake case began at the Tax Court level.

• Prestley Blake (“Blake”) and his brother started an ice cream business with $547 borrowed from their parents, to become known as Friendly Ice Cream Corporation (“Friendly”).

• Eventually, Friendly owned 625 stores extending from the East Coast to the Mid-Western United States and went public.

• Blake, his brother, and their families owned 40 percent-45 percent of the Company, which later sold for $162 million.

•

•

•

• • •

January 1, 1973 – Blake was an avid yachtsman and bought the America (“Yacht America”) 29 for $500,000 through his solely-owned corporation.

The vessel was a money pit, and Blake decided to give the asset to charity, but no charity was interested in taking on a boat with huge carrying costs and no source of revenue.

March 17, 1975 – Blake structured a deal with the Kings Point Fund (“Fund”), 30 whereby Blake would give the Fund approximately $700,000 of Friendly stock (“Gift”) to be used by the Fund for the purchase of the Yacht America.

April 8, 1975 - The donation and sale of the Friendly stock was approved by the directors of the Fund.

April 22, 1975 – The Fund bought the Yacht America for $685,000 from Blake.

August 6, 1975 – The Fund sold the Yacht America for $246,000, substantially below its market value.31

Later, Blake testified he would not have given the Fund as large a contribution if he had not expected the Fund to use it to purchase the Yacht America, and he had reasonable confidence that the Fund would do so, notwithstanding that he knew that the Fund may not have been under a legal obligation to purchase the Yacht America with the proceeds from the sale of the stock. It is important to note, if Blake had not given the stock to the Fund, the Fund would not have had sufficient unrestricted resources to purchase the Yacht America since it had less than $10,000 in unrestricted funds.

Blake contended at trial that the Fund was under no legal obligation to purchase the Yacht America, and so the gift was legitimate. The Government contended that the Gift was “not a bona fide charitable contribution because petitioner’s dominant motive for the transfer was not detached and disinterested generosity in respect of those shares, but rather the desire to dispose of the American at a valuation set by [Blake].”

The court found that Blake lacked donative intent, received substantial economic benefit in return for his purported Gift, and thus was taxable on the appreciation in value of the Friendly stock he gifted to the Fund: Here, because petitioner clearly received consider-

ation for his purported gift of the stock, and because of evidence—circumstantial to a certain extent— that the gift was in fact conditioned on the Fund’s purchase of the America and payment of the price to petitioner, we have rejected petitioner’s assertions that his gift of stock to the Fund was unconditional.

If, by means of restrictions on a gift to a charitable donee, either explicitly formulated or implied or understood, the donor so restricts the discretion of the donee that all that remains to be done is to carry out the donor’s prearranged plan for disposition of the stock, the donor has effectively realized the gain inherent in the appreciated property. [emphasis added].

The Second Circuit, on appeal, did not agree with Judge Raum and his rationale, although it reached the same conclusion. In its opinion, the Second Circuit did not discuss the fact that the gift failed to be “unconditional” as quoted above, instead focusing its attention on whether there was a legal obligation imposed on the Fund to purchase the Yacht America as agreed upon by Blake and the Fund.

It was determined under state law that the charity was obligated to purchase the Yacht America under a theory of promissory estoppel. Blake maintained that the Fund made no commitment upon which his reliance was based, but the Tax Court made a factual determination to the contrary. This decision was buttressed by the testimony of a director of the Fund who stated that the Board of Directors understood the Fund would use the proceeds from the sale of the stock to purchase the vessel.

In case there were any questions still in the court’s mind, Blake resolved all doubts when he testified on direct examination that “. . .he would not have made a donation as substantial as the amount of the market value of the stock he transferred ‘except for the boat thing.’”

On the basis of the Tax Court’s factual findings, the Second Circuit had little trouble concluding that Blake expected the charity to purchase his vessel and that he had an enforceable cause of action under promissory estoppel theory, as a matter of law, if the charity refused: We need not decide which of the three states’ law

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would govern, however, because we are certain that each state would consider the Fund legally obligated to purchase the America under a theory of promissory estoppel on the facts of this case. Under this theory, a mere gratuitous promise by the Fund that it would purchase the America became legally binding when Blake acted in reliance on such an assurance.

It is obvious that Judge Raum and the Second Circuit could not allow Blake to manipulate the tax system. To prevent this result, Judge Raum found that the Gift was “conditional.” The Second Circuit quite rightly did not support this conclusion, basically holding that the Fund was under a legal obligation (e.g. , promissory estoppel) to purchase the Yacht America with the proceeds from the sale of the Friendly stock.

The Second Circuit’s opinion, if it stopped here, was consistent with Palmer and Rev. Rul. 78-197 and their focus on “legal obligation on the part of the charity” to sell.

Unfortunately, the appellate court went further, stating: Thus, whether or not the ‘understanding’ the Tax Court found here was legally enforceable under state law, we hold that where there is an understanding that a contribution of appreciated property will be utilized by the donee charity for the purpose of purchasing an asset of the contributor, the transaction will be viewed as a matter of tax law as a contribution of the asset—at whatever its then value is—with the charity acting as a conduit of the proceeds from the sale of stock. This makes the taxpayer/putative donor taxable on the gain of the stock. . . ...

More troublesome is the case of Palmer, which held that even an expectation of a stock redemption would not warrant denying charitable contribution status. The Service, in Revenue Ruling 78-197 acquiesced in Palmer, stating that it would treat redemption proceeds under facts similar to Palmer as income to the donor “only if the donee is legally bound, or can be compelled by the corporation, to surrender the shares for redemption.” The Service cited both Grove and Carrington as support for its position; what we have said above indicates our belief

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that this Ruling reads too much into those decisions.

Where there is, as here, an expectation on the part of the donor that is reasonable, with an advance understanding that the charity will purchase the asset with the proceeds of the donated stock, the transaction will be looked at as a unitary one. A wooden view that would require legal enforceability of an understanding or obligation to purchase the asset contemplated to be donated ab initio is not what the tax law contemplates. At least, this circuit will not take it to do so. [emphasis added]. [citations omitted] The Second Circuit in Blake created a great deal of uncertainty in the charitable world. The appellate court found that the Fund was under a legal obligation at the time of the Gift, exactly what Palmer and Rev. Rul. 78-197 said they would not tolerate.

It is not clear why the appellate court decided to comment negatively on Palmer and the Service’s Revenue Ruling, but it was not a necessary precursor to deciding Blake was taxable on the gain from the sale of the stock.

Was this last quote from the Second Circuit dicta, to be ignored by practitioners? This is something for the charitable practitioner to decide. There are currently 13 justices on the Second Circuit Court of Appeals. Would they agree with this last quote? Would they feel it is dicta? Remember, the Second Circuit covers only New York, Connecticut, and Vermont, and other jurisdictions may not be willing to adopt the language of the Second Circuit in Blake.

It is interesting to note, as discussed in the analysis of the Rauenhorst case below, even IRS has acknowledged that the above gratuitous language was dicta:33 In [Blake] the [Second Circuit], in dicta, questioned the Service’s acquiescence in Palmer in Rev. Rul. 78197, suggesting that a mere understanding between the contributing shareholder and the charity concerning the fact that the contributed stock would be redeemed should be enough to treat the shareholder as having received redemption proceeds. Rev. Rul. 78-197 remains in effect, however.

Why was the dicta in Blake necessary? What causes a court to issue dicta? Sometimes judges want to go outside the customary confines of precedent, to put themselves in a flexible position where they will not be forced into a static legal stance in the future. They prefer a subjective standard, rather than an objective one.

THE GREENE CASE (1992 & 1994)34 In Greene, the taxpayer (“Greene”) contributed futures contracts to a §501(c)(3) private operating foundation, which he founded in the early 1970s. In 1974, Greene obtained a private letter ruling from the Service to the effect that he would be entitled to a charitable income tax deduction equal to the fair market value of the contracts on the date of gift, and that there would be no gain recognized to him when the charity sold the futures contracts.

In 1981, Code §1256 was amended to provide that 60 percent of such gain on futures contracts would be long-term capital gain, and the balance would be treated as short-term capital gain. In 1982, Greene donated the 60 percent long-term capital gain portion to the charity, taking a full deduction.

In the lower court proceeding, the IRS contested the deduction, arguing that the 1974 ruling was inapplicable on its facts, since the law had changed. Accordingly, the Service contended (1) the gift of the 60 percent longterm capital gain portion was an assignment of income, and (2) the step transaction doctrine applied to collapse the transactions (a gift and then a sale) into one step.

As to the assignment of income doctrine, the lower court ignored Greene’s relationship to the charity as a director and officer, commenting that this fact alone did not cause Greene to be taxed on the long-term capital gain portion. Further, the lower court felt the “[r]easonable probability of gains existing from a property’s sale is not enough alone to make a gift an anticipatory assignment of income.” In fact, the lower court stated the Service should have expected, when it issued its 1974 ruling, that donated futures contracts “would be sold almost immediately to insure that the value of such volatile securities would be realized and thus useful to the recipient [the charity].”

Finally, from a factual standpoint, the court found that Greene retained no control over the timing of the sales of the futures contracts.

As to the step-transaction doctrine, Greene argued that the critical question was whether the futures contracts were donated with no strings attached or prearrangement made. The Service argued Blake, namely that: If, by means of restrictions on a gift to a charitable donee, either explicitly formulated or implied or understood, the donor so restricts the discretion of the donee that all that remains to be done is to carry out the donor’s prearranged plan for disposition of the stock, the donor has effectively realized the gain inherent in the appreciated property. Blake v. Commissioner, supra.

On appeal in Greene, the Second Circuit explicitly enunciated two tests which the Service and the courts use to apply the step-transaction doctrine, and implicitly referenced a third test: (1) The End Result Test: a series of separate transactions will be collapsed if they are really parts of a single transaction intended from the outset to achieve an ultimate result.35 (2) The Mutual Independence Test: a series of separate transactions will be collapsed if they are so interdependent that the legal relations created by one transaction would be fruitless without completion of the series.36 (3) The Binding Commitment Test: a series of separate transactions will be collapsed if there is a legal obligation, after the first step, for other steps to occur.

The Second Circuit held that the “end result” test did not apply, because there was no prearranged agreement to sell the property, although it was highly likely that such would occur. As to the mutual independence test, the Second Circuit likewise held this concept inapplicable: Moreover, this case is distinguishable from those in which the interdependence test has been met. For example, in Blake v. Commissioner, a taxpayer donated appreciated stock to a charity with an under-

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standing that the charity would liquidate the stock and purchase the taxpayer’s yacht. See [83-1 USTC ¶9121], 697 F.2d at 478-79. We applied the step transaction doctrine to disregard the initial gift of the stock, and treated the transaction as a gift of the yacht. Id. at 480. Here, in contrast, taxpayers made a substantial gift to the Institute and received nothing in return. They retained a right to a portion of the income from the contracts, but giving a partial gift is quite different from giving away something with an understanding that the donee will later buy something back from the donor with the proceeds of the donated gift. There was no understanding that the Institute would handle the contracts or the donated portion of the proceeds from sale in any way that would benefit the Greenes.In fact, they were not benefited by the charity.

THE FERGUSON CASE (1997 & 1999)37 Once again, the key facts and timeline are crucial.

• Pre 7/28: The Fergusons owned significant stock in American Health Companies, Inc. (“AHC”), which had been their family business.

• 7/28: AHC entered into a merger agreement with a buyer, contingent on a tender offer.

• 8/15 – 8/21: The Fergusons made arrangements with their broker to make gifts to charity.

• 8/25: A fire burns down AHC’s operating plant.

• 8/26: Charities are created.

• 8/31: Over 50 percent of shares were tendered or guaranteed, making the merger virtually certain.

•

9/9: The Fergusons transferred shares to charity, after this “point of no return.”

• 9/13: The buyer accepted and paid for the tendered shares; the merger was formally completed in October.

The court held that the Fergusons were taxable on the gain from the sale of the shares, even though the charities technically sold the shares, because the right to the merger proceeds was fixed on 8/31, before the gifts were completed. The Fergusons had, in effect, assigned the right to proceeds, not merely the shares themselves.

The purported gifts by the Fergusons took place in mid-August, before the merger was certain (on 8/31), but the gifts were mere transfers on the books of their broker, and not on the books of the broker or agent for the charity.38 Consequently, the gifts were not actually completed until sometime around September 9th, which is after the buyer had an absolute right to acquire their stock.

In effect, when the stock was given, it was under a legal obligation to be sold, and thus Palmer and Rev. Rul. 78-197 would tax the Fergusons on any gain inherent in the appreciated stock.

The Fergusons contended that until September 12, 1988—the date when the acquiring company formally announced its acceptance of over 95 percent of the outstanding AHC shares—the tender offer and the merger still could have been derailed and there was no legal obligation on the charities to sell. However, the Tax Court determined the possible derailment of the merger was remote and hypothetical and therefore irrelevant.

Given the timeline and the Tax Court’s decision that

All events occurred in 1988

8/3 Tender Offer

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9/9 Donor Transfers Shares to Charity

8/26 Charities Created

8/15–8/21 Purported Gifts

7/28 Merger Agreement

8/25 Fire Burns Down Plant

8/31 51% Vote Obtained

9/13 Closing for Cash

all shares of stock were under a legal obligation to be sold on 8/31 (within the discretion of the buyer), there could be no other result in this case no matter what legal theory is used.

The fact that the plant burned down on 8/25 certainly helped IRS’ argument that the merger was a done deal weeks before the actual gifts were made.

However, the 9th Circuit decided to add additional language to its opinion. It stated that “to determine whether a right has ‘ripened’ for tax purposes, a court must consider the realities and substance of events to determine whether the receipt of income was practically certain to occur”; in fact, “…the Tax Court could have relied on the way things were going, not merely how things were.”

Because there was a legal obligation on the part of the charities to sell the stock to a third party when they received the gifts, it seems as if quoted language from the 9th Circuit is gratuitous, and like Blake, not necessary for the decision. Once again, the question arises as to whether this dicta should be ignored.

THE RAUENHORST CASE (2002)39 In Rauenhorst, taxpayers owned shares in a company that received letters of intent from third parties offering to purchase their company. Anticipating a sale, the taxpayers gifted warrants to various charities, all of which eventually sold those shares to the buyer once a sale was finalized. IRS argued that the gift of warrants to four charities was an anticipatory assignment of income. In fact, IRS asked the court to ignore Rev. Rul. 78-197 entirely, and trigger the anticipatory assignment of income doctrine, providing that a sale was likely to occur.

Tax Court Judge Ruwe, in this case, however, took a totally different view than the judge in Ferguson. He publicly chastised the IRS for ignoring Rev. Rul. 78-197 and the Palmer case, demanding that the IRS live within the constraints of its own published rulings. The court provided: To that end, the IRS has committed itself ‘to increased and more timely published guidance,’ in the form of revenue rulings and revenue procedures, in the hopes of achieving increased taxpayer

compliance and resolving ‘frequently disputed tax issues.’ These stated goals will not be achieved if the Commissioner refuses to follow his own published guidance and argues in court proceedings that revenue rulings do not bind him or that his rulings are incorrect.

The impact of Judge Ruwe’s decision was felt so widely within the IRS that its own chief (legal) counsel felt obligated to publicly announce that the IRS “would never again argue that the IRS is not bound by its own revenue rulings.”40 Judge Ruwe in Rauenhorst also pointed out: 1. IRS has neither revoked nor modified Rev. Rul. 78-197.

2. IRS has continued to rely on the Revenue Ruling in private letter rulings such as PLR 200230004.41 3. “…taxpayers should be entitled to rely on revenue rulings in structuring their transactions, and they should not be faced with the daunting prospect of the Commissioner’s disavowing his rulings in subsequent litigation.”

One final note on Rauenhorst is worth strong emphasis: According to the court, IRS had admitted in PLR 199413020 that the language in Blake of the 2nd Circuit (discussed above in this paper) questioning the viability of Palmer and Rev. Rul. 78-197 was dicta and was not controlling.

THE DICKINSON CASE (2020) Judge Greaves handled this case for the Tax Court.

His opinion was clear and concise.

Dickinson (“Donor”) was a C-suite officer for a private corporation (GCI) and wanted to make gifts to Fidelity Investments Charitable Gift Fund (“Fidelity”), which had a donor advised fund. Fidelity had a policy of immediately liquidating non-cash gifts, but made it clear it was the exclusive owner of any gifted asset and was under no obligation to redeem, sell, or otherwise transfer a gifted asset.

The Board of GCI waived a transfer restriction that

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65

would otherwise have applied, authorized its shareholders to make gifts to Fidelity, and specifically approved Donor’s gifts on three occasions.

The Donor claimed deductions on his tax returns and IRS challenged his charitable deductions, claiming “that each donation of the GCI shares, followed by Fidelity’s exchange of the shares for cash, should be treated in substance as a redemption of the shares for cash by [the Donor], followed by [the Donor’s] donation of the cash redemption proceeds to Fidelity.”

The Donor argued IRS should honor the form of the transaction and the court agreed. Citing Humacid, the court held it would respect the form of the transaction if a donor “(1) gives the property away absolutely and parts with title thereto (2) before the property gives rise to income by way of a sale.” The court cited as authority Grove, Carrington, Behrend, and Rauenhorst. Note that the first three cases are the same ones cited in Palmer and Rev. Rul. 78-197.

IRS claimed the pre-arranged sale (redemption) by Fidelity and GCI was fatal, but the court said the policy of Fidelity to immediately redeem shares “does not convert a postdonation redemption into a predonation redemption.”

It is important to note that the court recognized Ferguson had “gone a step further.” The Ferguson court asserted “in dicta” that “stock sale proceeds are taxable to a shareholder who donates stock absent a binding obligation to sell if the facts and circumstances indicate that a tender offer and merger are ‘practically certain to proceed’ in the immediate future.” [emphasis added] This court refused to honor Rev. Rul. 78-197, however.

“This Court has not adopted Rev. Rul. 78-197…as the test for resolving anticipatory assignment of income issues, see Rauenhorst… and does not do so today.”

According to the court: The ultimate question, as noted in Palmer, is whether the redemption and the shareholder’s corresponding right to income had already crystallized at the time of the gift. Regardless of whether the donee’s obligation to redeem the stock may suggest the donor had a fixed right to redemption income at the time of the donation…[IRS] does not allege that

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[donor] had any such right in this case. Accordingly, respondent’s resort to Rev. Rul. 78-197, supra, is unavailing.

In other words, according to the court, the question was who earned the income, not whether the donee charity was obligated to sell. This may be a distinction without a difference, however. If a donee charity was obligated to sell, the income had already been earned.

THE HOENSHEID CASE (2023)42 The Hoensheid family founded the Commercial Steel Treating Corporation (Company) in 1927, and it remained in the family until 2015, when one of three grandsons who equally owned the Company (Kurt) decided to retire. The other two grandsons did not want to borrow money to redeem their brother’s shares, so they agreed to try to sell the Company to a third party.

One of the grandchildren, Scott, the Petitioner in this case, wanted to make a gift to Fidelity before “a definitive agreement” was in place, writing to his lawyer on April 20, 2015: Anne and I have agreed that we want to put 3.5M in the fund, but I would rather wait as long as possible to pull the trigger. If we do it and the sale does not go through, I guess my brothers could own more stock than I and I am not sure if it can be reversed.

I have not definitively given Richard [his wealth advisor] a number. Please know this and help us plan accordingly.

Shortly thereafter, the Company and its three shareholders signed a non-binding letter of intent (LOI) with an independent third-party buyer (Buyer) to sell the Company. The LOI contemplated that the Buyer would conduct its due diligence and the parties would enter into a binding sales agreement.

On June 1, Fidelity furnished the Petitioner a Letter of Understanding (LOU) which stated, among other things, that (1) “As holder of the [Gift], Fidelity is not and will not be under any obligation to redeem, sell, or otherwise transfer the asset” and (2) “No contribution is complete until formally accepted by Fidelity.”

On the same day, Petitioner emailed his lawyer requesting a shareholder consent agreement [and stock certificate] allowing him to transfer a portion of his stock to Fidelity. In the email, Petitioner reiterated to his lawyer, “I do not want to transfer the stock until we are 99 percent sure we are closing.”

On June 11, Petitioner and his two brothers held its annual shareholders’ meeting and a board meeting and unanimously approved the sale of the Company to the Buyer. On July 10, the Company paid over $6 million as employee bonuses.

Petitioner kept the incomplete stock certificate on his office desk until July 9 or 10, 2015, when he dropped it off at his lawyer’s office. Fidelity did not acknowledge the receipt of the Gift until July 13.

Early on the morning of July 14, Fidelity forwarded the signature pages for the sale transaction to Scott’s lawyer, who forwarded them to the Company’s counsel.

Later that day, Company counsel circulated a revised draft of the Contribution and Stock Purchase Agreement, which filled in the share contribution provision to specify that Petitioner had transferred the shares on July 10, 2015. The final draft made minimal changes to the prior circulated drafts. Additionally, on July 14, the Company made a pro rata distribution, characterized as a dividend, of approximately $4.8M to Petitioner and his two brothers. Fidelity did not participate in the

Fall 2014 Kurt H. announces intent to retire; family considers sale of CSTC.

4/1/15 Letter of intent from buyer to acquire stock of CSTC.

Early 2015 CSTC hires broker to solicit bids for sale.

6/1/15 Scott H. signs Letter of Understanding with Fidelity Charitable about stock donation.

4/23/15 Nonbinding letter of intent signed to sell CSTC stock to HCI for $107 million.

distribution. The distribution represented almost all the remaining cash of the Company.

The Company and all shareholders signed the final stock purchase agreement on July 15, after approval by all shareholders and the Board of the Company earlier in the day.

Following the sale, Fidelity issued a CWA stating the Gift had been made June 11, and the Petitioner filed Form 8283 reflecting June 11 as the date of contribution.

The appraisal report determined the FMV of the Gift as of June 11 but did not expressly state the actual date of the Gift. It valued the Gift more than $340,000 higher than the actual proceeds received by Fidelity.

Perhaps the facts can best be illustrated by the following timeline:

The court discussed several legal issues surrounding the case. The first—and most important one for the purposes of this paper—involved when the Gift took place and whether the donor was to be taxed on the appreciation in the Gift.43 The court determined the Gift had occurred on July 13, when Fidelity actually received the stock certificate for the Gift. The transfer of the stock certificates on that date by the Petitioner was an “objective act” evidencing an “open and visible change of possession” by the Petitioner. Likewise, the court determined that Fidelity accepted the Gift on July 13.

7/9/15– 7/10/15 Scott hands signed stock certificate to attorney; shares blank; bonuses to employees made.

6/11/15 CSTC shareholders and board approve stock sale to buyer and Scott's stock donation.

7/15/15 Closing: final agreements executed; Fidelity sells donated stock to buyer.

7/14/15 Shareholder distributions made (but none to Fidelity); Fidelity accepts gift.

4/14/16 Scott files tax return, claiming deduction for the gift.

11/18/15 Fidelity sends contribution confirmation.

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The court reviewed the legal theories surrounding the assignment of income doctrine.

The anticipatory assignment of income doctrine is a longstanding “first principle of income taxation.”

Commissioner v. Banks, 543 U.S. 426, 434 (2005) (quoting Commissioner v. Culbertson, 337 U.S. 733, 739-40 (1949)). The doctrine recognizes that income is taxed “to those who earn or otherwise create the right to receive it,” Helvering v. Horst, 311 U.S. 112, 119 (1940), and that tax cannot be avoided “by anticipatory arrangements and contracts however skillfully devised,” Lucas v. Earl, 281 U.S. 111, 115 (1930).

A person with a fixed right to receive income from property thus cannot avoid taxation by arranging for another to gratuitously take title before the income is received. See Helvering v. Horst, 311 U.S. at 115-17; Ferguson, 108 T.C. at 259. This principle is applicable, for instance, where a taxpayer gratuitously assigns wage income that the taxpayer has earned but not yet received, see Lucas v. Earl, 281 U.S. at 114-15, or gratuitously transfers a debt instrument carrying accrued but unpaid interest, see Austin v. Commissioner, 161 F.2d 666, 668 (6th Cir. 1947), aff’g 6 T.C. 593 (1946). *** In determining whether an anticipatory assignment of income has occurred with respect to a gift of shares of stock, we look to the realities and substance of the underlying transaction, rather than to formalities or hypothetical possibilities. [citations omitted] The Petitioner attempted to rely on Dickinson, a 2020 Tax Court Memorandum decision, but this court distinguished the Dickinson case (with a lack of clarity for its reasoning). The Petitioner also cited Rauenhorst, where the Tax Court ruled: We must also initially address the role of the Commissioner’s prior issued guidance, which petitioners have raised. In Rauenhorst v. Commissioner, 119 T.C. 157, 173 (2002), we held that, “[u]nder the circumstances” of that case, the Commissioner was bound not to argue against his own subregulatory guidance,

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as expressed in Rev. Rul. 78-197, 1978-1 C.B. 83.21 In Rauenhorst, we treated Rev. Rul. 78-197 as a binding concession by the Commissioner that precluded him from relying in that case on factors other than the donee’s obligation to sell contributed property in his anticipatory assignment argument.

However, we also recognized in Rauenhorst, 119 T.C. at 171, the axiom that “revenue rulings are not binding on this Court, or other Federal courts.” See Dickinson, T.C. Memo. 2020-128 (“This Court has not adopted Rev. Rul. 78-197 as the test for resolving anticipatory assignment of income issues and does not do so today.” [citations omitted] For a taxpayer to rely on a revenue ruling, the facts of the taxpayer’s transaction must be “substantially the same as those considered in the revenue ruling.”

This court did not feel the facts of the instant case were substantially similar to Rev. Rul. 78-197 and thus were not binding on IRS in this instance.

The court went on to state: While we consider a donee’s legal obligation to sell as “significant to the assignment of income analysis,” it “is only one factor to be considered in ascertaining the ‘realities and substance’ of the transaction.”

Instead, “the ultimate question is whether the transferor, considering the reality and substance of all the circumstances, had a fixed right to income in the property at the time of transfer.” We thus look to several other factors that bear upon whether the sale of shares was virtually certain to occur at the time of petitioners’ gift. In this case the relevant factors include (1) any legal obligation to sell by the donee, (2) the actions already taken by the parties to effect the transaction, (3) the remaining unresolved transactional contingencies, and (4) the status of the corporate formalities required to finalize the transaction [citations omitted] The court determined that IRS did “not establish that Fidelity Charitable had any legal obligation to sell the [gifted] shares.” However, as to the second factor—“actions already taken by the parties”—the court determined

the $6M of employee bonuses and the $4.8M of shareholder distributions were compelling facts arguing in favor of “a conclusion that the sale was a virtual certainty and thus petitioners’ right to income from the shares was fixed as of July 13, 2015.” As to unresolved contingencies on the date of the Gift, the court felt there was none of substance. As to formal corporate formalities, the court determined “written consent was a foregone conclusion” and “formal shareholder approval [of the final sale and purchase agreement] was purely ministerial.”

On the anticipatory assignment of income determination, the court concluded: To avoid an anticipatory assignment of income on the contribution of appreciated shares of stock followed by a sale by the donee, a donor must bear at least some risk at the time of contribution that the sale will not close. On the record before us, viewed in the light [*34] of the realities and substance of the transaction, we are convinced that petitioners’ delay in transferring the CSTC shares until two days before closing eliminated any such risk and made the sale a virtual certainty. Petitioners’ right to income from the sale of CSTC shares was thus fixed as of the gift on July 13, 2015. We hold that petitioners recognized gain on the sale of the 1,380 appreciated shares of CSTC stock.

The court recognized that “our holding does not specify a bright line for donors to stop short of in structuring charitable contributions of appreciated stock before a sale.”

Looking only at the language of the opinion in this case, one must conclude Judge Nega has changed the landscape for donors making non-cash gifts to charity that are later sold. What Judge Nega fails to focus on, however, is shareholder and board approval on 6/11, which under Applestein44 and similar cases are definitive: any gift made after shareholder and board approval is too late, and the appreciation in the gift will be taxed to the donor when the ultimate sale occurs, not to the charity.

The judges in Blake and Ferguson clearly went beyond what was necessary to decide the case. Judge Nega did the same thing, in an apparent effort to “blur the line”

and make the decision a subjective one, not an objective one.

PRIVATE LETTER RULINGS & OTHER IRS PRONOUNCEMENTS We reviewed numerous Private Letter Rulings (“PLRs”), and none of them give us reason to question the viability of the Palmer holding or Rev. Rul. 78-197.45 CONCLUSION In Palmer, Rev. Rul. 78-197, Greene, Rauenhorst, and Dickinson, the test was whether the donee charity was under a legal obligation to sell the gifted asset, or stated another way, whether the donor had earned the income.

The court in each case decided the taxpayer had not waited too long to make the gift and non-binding pre-arrangements for the charity to sell were not fatal.

In Blake, the court determined the donor had a legal obligation to sell at the time of the gift and was taxable, but the court added data to the equation, making an objective standard a subjective one. In Ferguson, the court determined the donor was legally obligated to sell (if the buyer so desired) but blurred the lines by adding unnecessary language. In Hoensheid, the donor waited to transfer the appreciated non-cash gift until after the shareholder and board resolutions, which was fatal to the donor’s attempts to avoid taxation on the sale of the appreciated gift; and the judge chose largely to ignore these resolutions and add gratuitous legal standards in an attempt to make the analysis, for future charitable planners, subjective rather than objective.

So, while on first blush, the cases might seem to be inapposite, they are not!

LEGISLATIVE REMEDIES It seems a tremendous amount of time and effort has been wasted for decades by IRS, the courts, and taxpayers on this issue.

Why has IRS continued to contest the issue in cases when it must lose if Palmer and the Rev. Rul. are law?

Why hasn’t the Tax Court, once and for all times, issued an en banc decision affirming Palmer and Rev. Rul. 78-197?

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Perhaps the best alternative may be a legislative solution: allow a donor to sell a non-cash asset and avoid taxation on the gain, if the donor gives 100 percent of the asset’s value (in cash) to charity within, e.g. , 30 days of the sale. This would avoid useless litigation and might significantly reduce the concerns of Congress and IRS with inflated appraisals.

ENDNOTES 1

also, Blake v Com’r, TCM 1981-579 (1981).

2

Absent a sham transaction, the charitable planner should try to make sure that events have not gone so far as to mandate a sale, as in Ferguson when the plant burned down and as in Hoensheid when the donors distributed all working cash to employees and shareholders, before making the gift.

The charitable planner should also make sure a donor’s gift is made before a formal resolution of the board and shareholders, not afterwards as in Hoensheid.

Finally, the charitable planner should make sure the donor does not document in emails or texts any attempt to stretch the boundaries of the tax law.

Based upon the analysis above, the charitable planner should feel comfortable advising donors that they can rely on the legal standard of Palmer and Rev. Rul. 78-197. In other words, a gift of appreciated property to charity should not be taxed to the donor as long as the charity is not legally obligated to sell.

The charitable planner can give advice, but the donor is responsible for not going “too far” and thereby encouraging a judge who likes subjective tests to rule unfavorably. Of course, if the donor knows who the judge will be, that is a different matter!

Of course, there are exceptions to this rule where, e.g. , art is given to a museum and there is no intention to sell.

3

GUIDANCE FOR THE CHARITABLE PLANNER (UNTIL LEGISLATION IS ENACTED) The decisions by the judges in Blake, Ferguson, and Hoensheid should give one pause. Suffice it to say, if a donor is involved in a sham transaction as in Blake where this is a quid pro quo involved with a gift and where the taxpayer is obtaining an inflated tax deduction, the donor must suffer the consequences of a judge who decides to go outside of the customary boundaries of Palmer and Revenue Ruling 78-197.46

Greene v. United States, 806 F.Supp. 1165 (1992). See,

See Treas. Reg. Sec. 1.501(c)(3)-1(c)(1). Public charities must satisfy an operational test (a test proving they primarily carry on activities that accomplish their exempt purpose). A charity’s exemption may be at risk if its assets are not properly utilized to further its exempt purpose.

4

A third theory is the “sham transaction doctrine” as employed in Caruth Corp. v. United States, 865 F.2d 644 (5th Cir. 1989).

5

Commissioner v. Court Holding Co., 324 U.S. 331, 334 (1945).

6

Corliss v Bowers, 281 U.S. 376, 378 (1930).

7

Commissioner v. P.G. Lake, Inc. , 356 U.S. 260 (1958).

8

Minnesota Tea Co. v. Helvering, 302 U.S. 609, 613 (1938).

9

Helvering v. Horst, 311 U.S. 112, 119 (1940).

10 Commissioner v. Sunnen, 333 U.S. 591, 604 (1948).

11

Harrison v. Schaffner, 312 U.S. 579, 582 (1941).

12 Helvering v. Gregory, 69 F.2d 809, 810 (2d Cir. 1934).

13 Commissioner v. Newman, 159 F.2d 848, 851 (2d Cir. 1947) 14 Gregory v. Helvering, 293 U.S. 465, 469 (1935).

15 Palmer v. Commissioner, 62 T.C. 684 (1974), affd. on other grounds 523 F.2d 1308 (8th Cir. 1975).

16 The parties and entities involved in each case are defined in the same manner. For example, in each case the “donor” is the taxpayer.

17 According to the court: “In general, the foundation was organized to engage in religious, charitable, educational, and scientific activities. Specifically, it was intended and empowered to take over ownership of the college from the corporation. In addition, the foundation was empowered to accept gifts, to make loans to students, and to award scholarships, research grants, and prizes for meritorious essays.”

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18 In 1966, a reasonable rate of return for a commercial

fer Brewing Co. at a cost of $1,000,000. It was well

transaction—such as an arm’s-length loan, bond, or

known among yachtsmen. It had been used largely to

business investment—would typically have been in

promote the beer business of the Schaefer company.

the range of 5 percent to 7 percent per annum for

The America is a 105-foot long, gaff-rigged sailing

strong borrowers, and up to 8–9 percent for riski-

schooner, with a diesel auxiliary engine. It was not

er credits. Chat GPT 4.1. Consequently, rate being

suitable for racing or chartering.

charged by the Trust was not unreasonable.

30 The Kings Point Fund, Inc. , a charitable corporation

19 Humacid Co. v. Commissioner, 42 T.C. 894, 913 (1964).

described in section 501(c)(3), incorporated by the

20 As authority, the court also cited: Carrington v.

Alni Association of the Merchant Marine Academy

Commissioner, 476 F.2d 704 (C.A. 5, 1973), affirming a

for the benefit of the Academy.

Memorandum Opinion of this Court; Behrend v. Unit-

31 The boat sold in early 1977 for $575,000 plus a con-

ed States, an unreported case (C.A. 4, 1972, 31 A.F.T.R.

tingent payment of $50,000. According to the court:

2d 73-406,73-1 U.S.T.C. par. 9123); DeWitt v. United

“A boat of that size was not readily salable, and in or-

States, 503 F.2d 1406 (Ct. Cl. 1974); Sheppard v. United

der to realize its full potential value it would have to

States, 361 F.2d 972 (Ct. Cl. 1966); Winton v. Kelm, 122

be exposed to the market for a longer period of time

F. Supp. 649 (D. Minn. 1954); Apt v. Birmingham, 89 F.

than the relatively short period that elapsed between

Supp. 361 (N.D. Iowa 1950).

the time that the Fund decided to sell the America

21 The court’s citations of a string of favorable decisions on this point is meaningful: Grove v. Commissioner,

and the time that an agreement was reached with the purchaser as to the sales price.”

490 F. 2d 241 (C.A. 2, 1973), affirming a Memorandum

32 Dicta (singular: dictum) is a legal term meaning state-

Opinion of this Court; Carrington v. Commissioner,

ments, comments, or observations made by a judge

476 F.2d 704 (C.A. 5, 1973); Behrend v. United States,

in a judicial opinion that are not essential to the

an unreported case (C.A. 4, 1972, 31 A.F.T.R. 2d 73-

decision in the case. These statements go beyond

406, 73-1 U.S.T.C. par. 9123); DeWitt v. United States,

the facts and issues necessary to resolve the specific

503 F.2d 1406 (Ct. Cl. 1974); Sheppard v. United States,

dispute before the court.

361 F.2d 972 (Ct. Cl.1966); Winton v. Kelm, 122 F. Supp.

TheLaw.com and Black’s Law Dictionary (para-

649 (D. Minn. 1954); Apt v. Birmingham, 89 F. Supp.

phrased) defines dicta as follows: Opinions of a

361(N.D. Iowa 1950); see Humacid Co., supra.

judge which do not embody the resolution or deter-

22 Palmer v. Commissioner, supra, citing the Supreme Court in Gregory v. Helvering, supra.

23 471 F. 2d 275 (C.A. 8, 1972.

mination of the specific case before the court. Statements in a court’s opinion that are not necessary to the decision and therefore not binding as precedent.

24 8 T.C. 259 (1972), affd. 477 F. 2d 1058 (C.A. 2,1973).

33 PLR 199413020.

25 5 T.C. 908 (1945).

34 806 F. Supp. 1165 (1992), aff’d 13 F.3d 577 (1994).

26 1978-1 CB 83.

35 Penrod v. Commissioner, CCH Dec. 43,941, 88 T.C. 1415,

27 Grove, Behrend, and Carrington.

1429 (1987). See also, Stephen S. Bowen, “The End

28 Blake v Com’r, TCM 1981-579 (1981), aff’d by the 2nd

Result Test,” TAXES, Dec. , 1994 at p. 722.

Circuit at 697 F.2d 473.

29 The America is a replica of the original yacht America built in 1851, after which the America’s Cup is

36 American Bantam Car Co. v. Commissioner, 11 T.C. 397 (1948).

37 108 TC 244 (1997), aff’d 174 F.3d 997 (9th Cir. 1999).

named. The replica (hereinafter referred to simply as the America) was built in 1967 for the F & M Schae-

THE JOURNAL OF GIFT PLANNING SPECIAL EDITION OCTOBER 2025

71

38 The law is clear on this point, and Reg. Sec. 1.170A-1(b)

panies to their management team through recapital-

leaves little doubt the broker must be the agent of

ization, stock redemption, charitable contributions

the charity for the gift to occur:

to a foundation, and related-party stock purchases.

“Ordinarily, a contribution is made at the time

IRS ruled that, so long as all transactions occurred

delivery is effected. * * * If a taxpayer uncondi-

at FMV, (1) the recapitalization would be tax-free,

tionally

(2) the stock redemption would be treated as capital

delivers or mails a properly endorsed stock

transactions rather than dividends, and (3) the chari-

certificate to a charitable donee or the donee’s

table contributions would be deductible.

agent, the gift is completed on the date of

2.

PLR 8035014

delivery or, if such certificate is received in the

a.

Taxpayer, the principal shareholder of a closely held

ordinary course of the mails, on the date of mail-

corporation, exchanged shares of serial preferred

ing. If the donor delivers the stock certificate to

stock for shares of nonvoting common stock, then

his bank or broker as the donor’s agent, or to the

donated portions of the received common stock

issuing corporation or its agent, for transfer into

to charities while claiming charitable deductions.

the name of the donee, the gift is completed on

IRS ruled that the exchange of preferred stock for

the date the stock is transferred on the books of

nonvoting common stock qualified as a valid Sec.

the corporation.”

368(a)(1)(E) reorganization because it served a legit-

39 119 TC 157 (2002).

imate corporate business purpose related to estate

40 Tax Analysts Reference 2002 TNT 205-1 (22 Oct

planning, and the resulting nonvoting common stock

2002).

was not treated as Sec. 306 stock, allowing full FMV

41 Private letter rulings may be cited to show the

charitable deductions.

practice of the Commissioner. See Rowan Cos., Inc. v.

3.

PLR 8140002

United States, 452 U.S. 247, 261 n.17 (1981); Hanover

a.

Taxpayers who were shareholders of a hunting club

Bank v. Commissioner, 369 U.S. 672, 686-687 (1962);

donated their shares to a conservation organization

Estate of Cristofani v. Commissioner, 97 T.C. 74, 84 n.5

with an understanding that the organization would

(1991); Woods Inv. Co. v. Commissioner, 85 T.C. 274,

negotiate in good faith for a lease/license agreement

281 n.15 (1985); Thurman v. Commissioner, T.C. Memo.

allowing former members to continue hunting on the

1998-233.

property at FMV rates. IRS ruled that the charitable

42 Estate of Hoensheid v. Commissioner, T.C. Memo. 2023-

contribution was fully deductible under Section 170

24 (U.S. Tax Ct. 2023).

because the taxpayers’ retained right to negotiate for

43 Other issues were addressed by the court, namely

a hunting lease/license at FMV was not substantial

whether the Petitioner substantiated their claimed

enough to trigger the partial interest rules of Sec.

charitable deduction properly and whether the

170(f)(3), making a valid donation of the taxpayers’

Petitioner was liable for penalties imposed by the

entire interest in the property.

Commissioner, but these are secondary.

44 80 T.C. 331 (1983). The court found that the approval

4.

PLR 8223055

a.

Taxpayer, a sole owner of a for-profit school and its

of the merger was an income-triggering event.

leased real estate, proposed donating all stock to a

45 Please see the following PLRs and their summaries,

newly formed tax-exempt nonprofit school (“M”) and

that followed Rev. Rul. 78-197:

selling the real estate to M on an installment basis,

1.

PLR 7930184

while retaining control as trustee, director, and presi-

a.

Taxpayers sought to transfer control of various com-

dent of M. IRS ruled that (1) the taxpayer could claim

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a charitable deduction for the FMV of the donated

8. PLR 9413020

stock, despite retaining control, through his fidu-

a.

Cattle Rancher plans to execute a CRUT to be able

ciary roles at M, and (2) the sale of the depreciated

to retire from his operations, involving two sepa-

buildings to M would not trigger Sec. 1239 ordinary

rate phases of irrevocable transfers: 1) transferring

income treatment for related party sales because M

slaughter cattle and crops to the CRUT, then, approx.

is not considered a “related person.”

2 years later, 2) transferring slaughter cattle, crops,

5.

PLR 8623007

breeding cattle, and farm machinery to the CRUT,

a.

Shareholders A, B, and C donated company stock

while the trust provides annual income during his

(subject to transfer restrictions) to a charity, which

life and then to his spouse throughout her lifetime

subsequently redeemed the stock from the company.

before the trusts ultimately passes the assets to a

IRS held that the transaction should be respected

charity while the trustee retains complete discre-

as structured—a stock gift followed by the charity’s

tion over whether and when to sell the transferred

redemption—because the charity was not legally

agricultural assets via agents or auctions rather than

bound or compelled to redeem the shares and could

regular farming operations. IRS found that Cattle

retain ownership indefinitely.

Rancher will not recognize gross income on transfer-

6.

PLR 8647001

ring farm assets to the CRUT or when the trust sells

7.

Taxpayer recapitalized his company by declaring a

those assets, and the trust will not owe unrelated

3-for-2 stock dividend of nonvoting common stock,

business income tax on the sales because they will

exchanged his voting common stock for preferred

be infrequent rather than regularly carried on.

a.

stock, then gifted all the nonvoting common stock to

9.

PLR 9550026

his wife and 22 charitable organizations, after which

a.

Married taxpayers who created a CRUT in 1989

the company made partial redemption offers to the

proposed to gift a 20 percent undivided interest in

charities. IRS ruled that the nonvoting common stock

their unitrust payment to the charitable remainder

was not applicable to Section 306 because it lacked

beneficiary to fund the charity’s building project. IRS

any legally binding redemption mechanism and

ruled that the gift of the taxpayers’ unitrust income

retained all characteristics of true common stock,

interest qualifies for both income and gift tax char-

allowing Taxpayer to claim the full charitable deduc-

itable deductions and will be valued as the present

tion. PLR 9046004

value of 20 percent of the annual unitrust payments

In a divorce, Husband, president and majority share-

for their joint lives, and will not disqualify the trust’s

holder of Corporation, transferred 39 percent of his

CRUT status or trigger recognition of unrealized

stock to Ex-Wife under a divorce decree, and imme-

capital gains.

diately thereafter, the Corporation redeemed all of

10. PLR 9611047

Ex-Wife’s shares as also mandated by the decree, via

a.

Taxpayers plan to contribute Corporation A common

promissory note with Husband providing guaranty

stock to Foundation B (a private foundation they

and collateral. IRS ruled that the transaction should

control), which will distribute the stock to Charity

be treated as a transfer of stock from Husband to Ex-

C (an independent public charity) within 30 days,

Wife, followed by her redemption - making Ex-Wife

after which Corporation A is expected to redeem

responsible for the tax consequences of the redemp-

the stock from Charity C at fair market value. IRS

tion, not Husband.

ruled that taxpayers will receive full fair market value charitable deductions (subject to 30 percent AGI limitation), Foundation B will qualify for favorable

THE JOURNAL OF GIFT PLANNING SPECIAL EDITION OCTOBER 2025

73

tax treatment, and the subsequent redemption will be treated as occurring between Corporation A and Charity C rather than the original donors.

11. PLR 200230004 a.

Married grantors A and B plan to contribute 495 of 500 shares of Corporation X (where A is president and sole shareholder) to their CRUT, with Corporation X potentially redeeming the stock from the trust at FMV after at least one year, subject to safeguards to avoid immediate redemption obligations. IRS ruled that the trust will not have unrelated business taxable income (UBTI) from the stock ownership, dividends will be excluded from UBTI, any redemption at FMV will not constitute self-dealing, and redemptions will be treated as transactions between the corporation and trust and will not result in capital gain in the sale/redemption for the Grantors.

46 Obviously, Sec. 170(f)(8), enacted in 1993 for all non-cash gifts, and Sec. 170(f)(18), enacted in 2006 for DAFs, are designed to prevent abuses such as occurred in Blake. ■

Cover illustration: Scott Johnson, Studio F60

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