Suggested Gift Annuity Rates Remain Unchanged
What do these rates mean for your program?

The Joan Kroc $1,500,000,000 Bequest
There's a lesson in it for all of us

Against the Grain
New gift valuation standards may not be your top priority

Consulting News
New clients, a new campaign & another speaking engagement

Your Feedback
I'm interested in your opinion

“. . . the American Council [on Gift Annuities] foresees stability in its assumptions through April 2005.”

Most non-profits that have a Charitable Gift Annuity program offer their donors the income rates suggested by the American Council on Gift Annuities (ACGA). Are you aware of how these rates are set and what they mean for your program?

The Council's Board of Directors meets every year and, with the advice of actuarial consultants, reviews the suitability of the current rates given the latest data on life expectancy, market returns under an assumed asset allocation for your reserves, projected program expenses and other relevant factors. The ACGA Board then decides to make adjustments to the suggested rates or leave them unchanged.

The American Council on Gift Annuities sets its recommended rates based on the premise that 50% of the face value of a gift annuity will remain for the issuing non-profit at the death of the annuitant/s (the one or two people selected by the donor to receive income for life; one annuitant is usually the donor, often along with their spouse, but it need not be).

At its May 2004 meeting, the ACGA Board let the rates stand, with one exception for New York and New Jersey deferred gift annuities in which the income is deferred for more than 20 years. That is not a very common gift arrangement and the change applies to only a subset of them. If you'd like more detail on this rather arcane change send me a message.

The decision not to change the advised rates for the vast majority of gift annuities means the American Council foresees stability in its assumptions through April 2005. At any time, the Board can meet between scheduled annual meetings when severe changes in its assumptions warrant an interim evaluation.

As an aside, I would note that what has been changing is the IRS-determined Discount Rate. Since April it has increased one point to 4.8% for August. The higher the monthly rate, the larger a donor's charitable income tax deduction for opening a Charitable Gift Annuity. But higher discount rates also mean less tax-free income to annuitants.

The IRS allows a donor to select their discount rate from the current month (in which the annuity contract is signed) or one of the two previous months. I suggest you explain how the chosen discount rate will impact their gift annuity and let the donor decide whether they prefer a higher deduction or more tax-free income.

All in all, the ACGA's “no change” determination means stability in the foreseeable future for your gift annuity program.

“A donor might test your organization by telling you they have included a bequest to you in their will...”

The announcement of this bequest to The Salvation Army, earlier this year, earned them a lot of well deserved press. Not only for the enormity of the gift but, equally important to a development professional, for the stewardship that led to the tremendous gift. Mrs. Kroc tested The Salvation Army with a much smaller gift many years earlier. Satisfied with how that gift was treated, she gave the considerably larger one in her will.

In 1998, Joan Kroc gave The Army $92 million, about six percent of her bequest, to create The Salvation Army Ray and Joan Kroc Corps Community Center in San Diego. I see that comparatively small gift as a test of The Army's stewardship in terms of adhering to the donor's directions for spending, accounting to her, recognizing her according to her wishes, institutional commitment to the new facility, and how well the project furthers the mission.

Are any of your donors testing you with small gifts? You probably don't know. That's why you should acknowledge every gift, regardless of its size, and honor donor preferences on spending. Where feasible, report back to the donor with a testimonial and progress report.

A donor might test your organization by telling you they have included a bequest to you in their will, to see how you handle a planned gift. You should thank your bequest donors for elevating your institution to the status of family or beloved friend, because those are the people who are in the will alongside you. You can best show your gratitude by welcoming the donor to your planned gift recognition society without asking for documentation of their bequest intention. Their word should be sufficient.

Any non-profit would consider nearly $100 million a large gift, but The Salvation Army was given one more than 15 times larger because the donor was satisfied that she and her smaller gift received proper stewardship. The magnitude of the gifts to your non-profit is irrelevant. The point is, what seems like a small gift for your organization may be a precursor to one much larger, if you treat the first one, and its donor, with the respect they deserve.

I spend considerable time exploring stewardship with clients. You might take a fresh look at your office's planned gift stewardship policies.

The National Committee on Planned Giving announced standardized methods for valuing planned gifts this spring. The standards can hold considerable value for robust and mature planned gift programs. They offer guidance on valuing all the life income gifts as well as revocable gifts like bequests and beneficiary designations.

On the other hand, if you have an emerging or smaller program, you need to prioritize your use of the limited time you can devote to planned giving. Evaluation or adoption of the new standards probably should not fall near the top of your priorities.

Focusing your CEO, CFO and trustees on adoption of the new standards will turn their attention from more important activities. A small program or one just getting started might look to the standards on an as-needed basis, but I caution against wholesale adoption before you spend time doing direct marketing and donor visits.

You need to start the activities that get gifts, then deal with how you will value them. Actions such as agreeing on a budget, evaluating your donor data, educating the board, preparing direct marketing materials and website copy and, especially, getting prospect meetings, have to come first.

Policies and procedures have an important role in planned giving. Yet, you don't want your program to start sluggishly as you try to agree to standard policy around hypothetical circumstances for a type of gift with which you have no experience.

The small program needs to prioritize. I would not recommend adoption of NCPG's valuation standards be at the top of the small program's list.

On Monday, September 20 I will speak at the Association of Fundraising Professionals (AFP), Washington D.C. Metro Area Chapter's Fundraising Day. The subject is “Small, Medium or Large, How To Integrate Planned Giving Into Your Program.” Here is the chapter website.

I am pleased and grateful to have a new engagement with The Montfort Academy in Katonah, Westchester County, New York. I look forward to working with the senior administrators to bring a new source of revenue to the Academy. I thank them for their confidence in my ability to help.

At St. Joseph's College in Brooklyn, a current client, we will inaugurate the new Charitable Gift Annuity program with a $250,000 Gift Annuity Campaign. We look forward to an exciting program roll-out with an eye toward expanding the membership of their planned gift recognition society.

I am interested in your opinion of The Martignetti Report. Please send me a message with your comments.

If you know any colleagues who have an interest in Planned Giving, please forward this to them.

Best regards,

Tony Martignetti, Esq.
Planned Giving Consultant

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