crt

Finally, Planned Giving Gets into the Presidential Campaign!

Just when I thought that I wouldn’t have any topics to blog on until after the election, Planned Giving jumps to the forefront of the presidential election campaign!

I am going to provide the link to the article about Mitt Romney’s use of a charitable remainder unitrust (CRUT) found on Bloomberg.com this week but I have to preface the link with a few comments:  this is the worst reporting on the charitable arena that I have even seen.  Complete garbage.  The article starts out by calling charitable remainder unitrusts “a popular tax shelter” – implying that is abusive – at least that is the clear message readers get.

Of course, that is complete insanity for anyone with knowledge of this field.  Yes, there were a handful of abusive planners who tried to take advantage of some holes in the law – which were promptly closed by the late 1990’s.

And, to destroy any credibility of the writer and editor, their prime source in the article is none other than Jonathan Blattmachr –  the well-known planned giving outlaw who created the abusive practices that Congress had to shut down.  Sure, if you interview a mafioso, he’ll tell you that killing and stealing is just a part of a day work (for him, but not for me!).  Seriously, this guy has no credibility to be talking about an alleged scheme –  if he was being truly honest for this article, he would explain why Mitt’s CRUT was NOT one of his own abuses (see end of blog post for my own analysis).

Trust me – whoever is reading – only a handful of planners ever did the stuff that Blattmachr came up with that was abusive.  And, from the bits and pieces of info that they found for the article, I can tell already that Mitt’s CRUT was not one of the abusive schemes that involved CRUTs.  The fact that it still has funds in it – after multiple and prolonged recessions – is all the testimony we need.  Hundreds, if not thousands, of charitable remainder trusts have not fared so well.

Ok, so here is the link:  http://www.bloomberg.com/news/2012-10-29/romney-avoids-taxes-via-loophole-cutting-mormon-donations.html

I know it is just politics and writers looking to dig up dirt before their guy loses a close election.  This one just seems insanely incorrect in its accusations.  In fact, the article posits that Mitt’s CRUT only projected a charitable remainder of 8% of its initial principal at the time of its funding.  Excuse me – the writer didn’t actually have the full funding amount or date of funding!    Based on what they do have (end of 2011 principal of $421,201 and a 2011 payment to the Romney’s of $36,696), we can guess that the CRUT rate was probably 8%, max 9%.

Little lesson in planned giving history:  the abusive trusts that Blatt-idiot was promoting in the 1990s were paying up to 80% of their principal to their donors.  8% or 9% CRUTs?  Not only was that a standard (even a low rate for those days), but it even completely acceptable for CRUTs created today.

In other words, the writer was bluffing when he wrote that Mitt’s CRUT had only an 8% charitable remainder projection (2% lower than today’s legal requirement).  He doesn’t have that information and can only be guessing.  Anyway, it was clearly legal at the time and not an abusive Blatt-trust that Congress set out to close down.

Even though I love the idea that planned giving is making some headlines, I have to admit that this was a difficult piece to get on paper.  I think a video of me ranting and raving about how bad this reporting was might have done a better job.

Good news for the Romneys – no one is paying attention to this story.  Too complex.

And, maybe good news for the planned giving world: we might have a President who a planned giving donor!  Who knows, maybe we’ll get the IRA rollover back and maybe it will include an option to roll into a CRT or CGA?

If you are interested in reading another writer’s disgust about this article and a different perspective on tax planning, check out this post from Taxgirl on Forbes:   http://www.forbes.com/sites/kellyphillipserb/2012/10/30/why-romneys-tax-avoidance-strategies-dont-deserve-criticism/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+taxgirlfeed+%28taxgirl+for+Forbes%29

Learn something new everyday – Donor investing donated funds? Possible?

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):

http://www.pgdc.com/pgdc/news-story/2004/11/08/donor-permitted-manage-contributed-assets

You learn something new everyday!