From the Blog: Gift Annuity Contracts Filed with State Regulators and the Legacy IRA Act

As we’ve discussed in other blog posts, it is now possible to use a qualified charitable distribution (QCD) from an IRA to fund a charitable gift annuity (CGA). Among the specific requirements set forth in Section 307 of the Consolidated Appropriations Act, 2023 (“the Act”) is that the “income interest” of such an annuity be non-assignable. Our interpretation of the Act is that the income interest in a CGA may not be assigned to anyone, including the issuing charity.

Since the Act does not specifically include the “or assignable to the charity” language with respect to a QCD funding a CGA, a cautious approach would be for the charity to modify its annuity agreement to remove that assignability to charity language.

Read the blog post . . .

New York Maximum Immediate Annuity Rates Remain Higher Than ACGA Rates for Q1 2023

Despite the increase in American Council on Gift Annuities (ACGA) rates that went into effect on January 1, 2023, New York 1-life maximum rates are higher for gift annuities funded in Q1 2023 than their corresponding 1-life ACGA rates at all male and female ages. Even better, our testing of 2-life immediate payment annuity rates over a range of age combinations suggests that all NY 2-life maximum rates are greater than their ACGA rate counterparts. We also haven’t found a case where the New York maximum rate for a 1-life deferred annuity is lower than the ACGA suggested maximum deferred rate, although it can come close.

While the conflict between New York and ACGA maximum rates has largely receded, we are still able to find New York 2-life maximum deferred annuity rates that are lower than the ACGA rate at certain annuitant ages.

Read the blog post . . .

New QCD Options Added to PGM Anywhere Narratives

On February 8, we updated narratives in PGM Anywhere to include a qualified charitable distribution (QCD) option so that you can:

• Describe the benefits of funding a gift annuity or charitable remainder trust to a donor,
• Produce an agreement for a gift annuity funded with a QCD,
• Acknowledge a QCD gift,
• And more.

Complete details are in the February 8, 2023 Release Notes linked to on the PGM Anywhere login screen. Note that before you start using the QCD forms of PGM Anywhere’s gift annuity agreements with a donor in Alabama, Arkansas, California, Maryland, North Dakota, New Jersey, New York, Tennessee, or Washington State, you should submit prototypes of these agreements to the state and have them approved. PGM Anywhere can produce these prototype QCD agreements. We plan to update PGM Anywhere again in a few months so that all presentations can illustrate a QCD funding a gift annuity or charitable remainder trust.

If you need help, contact our Client Services team at support@pgcalc.com or 888-474-2252.

How to Handle a CGA Funded with Capital Loss Property

If your donor is contemplating a gift of securities, and the property has experienced a capital loss, the obvious course of action is tell the donor to sell the property, realize the capital loss, then contribute the cash. This approach will enable the donor to take the charitable deduction and possibly use the realized loss to offset realized gains on the next tax return, reducing the sting of an investment that has underperformed.

But sometimes a donor neglects to tell their fundraiser that the property they want to contribute is worth less than they paid for it, preventing you from advising them on the most tax-efficient gift. Or they may not even realize the stock has suffered a loss until they are trying to complete Form 8283 to substantiate their deduction and finally dig up their cost basis in the stock they gave away.

In this instance, the taxation of the donor’s income cannot be based on the original basis, because it exceeds the market value of the gift. Instead, the donor is limited to accepting the market value of the gift as the basis for calculating the taxation of income. PGM Anywhere is designed to guide you in this area by refusing to accept a basis that exceeds the gift value. Try to enter a higher value, and you will receive a warning message:

Clicking “OK” will automatically populate the cost basis field with the market value.

All is not lost with a capital loss gift, however. There are two small upsides to this scenario. The first is that there is greater tax-free income from the annuity than if the stock had capital gain. In addition, the deduction for the gift is usable up to 50% of the donor’s adjusted gross income (AGI) in the year of the gift, with a five year carryforward, which is more beneficial than the 30% AGI limitation for gifts of appreciated securities.

A more complicated scenario arises when a donor sends you a basket of stocks, some of which have capital gain and others capital losses. Best practice in this scenario is to combine the stocks into one calculation, netting the gains and losses. This will have no impact on the calculation of the deduction, but will result in more favorable tax treatment of the annuity income.

The netting of gains and losses is available to the donor because the charitable gift annuity belongs to the class of gifts known as bargain sales.

If you realize your donor has given property with a loss, don’t despair. The gift will still provide benefits to the donor, not least of which is the opportunity to support an organization they believe in.

Contact PG Calc Client Services at support@pgcalc.com or 888-474-2252 if you have any questions.

Did Your Year-End Go as Smoothly as It Could Have?

As you emerge from all the year-end planned giving activity, it can be a good idea to review what worked well and where things may have fallen short – particularly when it comes to administering your gifts.

Did you make all your year-end annuity payments on time? Did all your 1099-R statements make it to their recipients?

Flawless gift administration is crucial to fulfilling your obligation to your donors and the key to successfully stewarding your relationship with them. And flawless gift administration requires a highly choreographed dance between gift officers and your finance office.

Julia Boerth, PG Calc’s Director of Gift Administration, has created a guide to the roles each partner has in this dance. Download it free now:

Gift Administration: What Is Your Role?

As you look back at what worked and where there may be room for improvement, talk to PG Calc about the best way to avoid stepping on any toes and how we may be able to help with your gift administration.

NYU Shares Praise for Jeffrey Frye from PG Calc’s Client Services Team

“I can honestly say I would not be where I am today were it not for PG Calc and Jeffrey. When I was first starting out, many years ago, Jeffrey was always kind and patient in explaining the ins and outs of the different gift planning vehicles. While I came to the field with a background as a practicing attorney, it was truly the lessons that I learned from Jeffrey and PG Calc that ensured my success in this industry.”

—Meryl R. Cosentino
Assistant Vice President Gift Planning, Trusts & Estates
New York University

Learn more about the New York University.

Learn more about PG Calc’s Client Services.

Jeffrey Frye
Associate Director
for Gift Planning