Outsourcing: Part 3

By Todd Cohen

Deciding whether to outsource planned-giving involves some tough questions, experts say.

Those questions range from assessing the level of giving that donors can afford and the types of gifts the nonprofit can handle to deciding which planned-giving functions to outsource and which to keep in-house.

An effective planned-giving program tends to have donors age 60 and older who can afford to make outright gifts of at least $10,000, including some who can give $500,000 or more, says Sandra Shell, senior vice president and national director of philanthropic planning for Wachovia Charitable Services in Winston-Salem, N.C.

Planned-giving programs typically begin with bequests, expand to include gift annuities and, later, add charitable remainder trusts, she says.

All three types of planned-giving programs can involve complex issues, she says.

Even if a nonprofit limits its program to bequests and gift annuities, for example, it still should assess its potential planned-giving liability, based on its debt-to-asset ratio, which could affect the organization’s ability to secure financing, Shell says.

If the endowment at a nonprofit totals only $100,000, for example, but it issues gift annuities that total $500,000, the liability for future payments to beneficiaries of those annuities could total $250,000 or more.

If a nonprofit opts to outsource its planned-giving program, Shell says, it should look for a vendor with appropriate expertise.

Small-to-medium-sized nonprofits that outsource planned-giving typically look for a single vendor that can provide consulting on potential gifts, and manage the administration of the gifts and investment of the gift assets, she said.

TIAA-CREF Trust Co., subsidiary of New York City-based nonprofit TIAA-CREF, generally handles planned-giving programs for nonprofits with at least $2 million to $3 million in life-income assets, including charitable trusts, charitable life annuities and pooled income funds, says Vic Amato, institutional trust and investment consultant.

“An organization with less than that amount probably would have a manageable number of planned gifts,” he says.

Planned giving services can range from managing investment portfolios and administering gifts to providing tax services and technical support involving estate-planning law, he says.

Administration and tax services, for example, can include issuing checks to donors; “sub-accounting” for individual annuity contracts that are part of a larger gift-annuity pool; tracking performance of the investments; reporting to donors and nonprofits on topics such as asset holdings and transactions; producing financial statements; preparing tax returns; making actuarial calculations; and submitting insurance reports required by the state in which the donor lives.

Other stories in series:

Part 1: Nonprofits farm out planned giving.

Part 2: Planned giving an untapped resource for nonprofits.

Part 4: Managing investment of planned-giving assets involves complex tasks.

Part 5: Some nonprofits use multiple vendors to handle planned giving.

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