I got one of those questions that throws off most planned giving professionals: Can our donor give us a chunk of funds and “advise” on the investment of the gift? (this was a donor who already had committed his entire multi-million dollar estate to the charity but was now getting fancy, thinking that he was a great stock picker – which he is but not something the charity wants to deal with).
You are thinking – please no! That is what I was thinking.
So, doing my due diligence, I figured that if a donor is the co-trustee of a charitable remainder trust (“CRT”), he could manage the funds. And, most of the trust income could be sent to the charity (as one of the income beneficiaries on a term of years CRT) – donor clearly didn’t want income anymore. Letter rulings allow a charity as an income beneficiary of a CRT, as long as a living taxpayer is also receiving more than a “di minimis” payment (ie..someone is paying some taxes!). The lowest above “di minimis” payment in the letter rulings was 5% of the CRT’s payout. What a cool idea I thought. A bit complex but would give this donor 20 years to invest funds and 95% of the CRT’s required payments would go to the charity towards his existing endowment.
But, I also wanted to confirm that letting a donor have say over an investment account was a big time “no-no”, so I went to the web. Incredibly, I found out that there is a relatively recent letter ruling that ALLOWED a donor to be the investment manager over his donated funds, in a segregated account, under a handful of limitations and caveats. If you are interested, click through to the below Planned Giving Design Center news story from 2004 (the letter ruling is still valid to whatever extent letter rulings are legally):
You learn something new everyday!