Tag Archives: private letting ruling

Avoid Planned Giving Schemes

Avoid courtesy of Thomas Hawk on Flickr.
This is related to my post two weeks ago, “It’s Planned Giving, Not Product Giving.” I said some financial product salespeople don’t have your program’s best interests at heart when they offer to “help.”

Occasionally, those offering specious help come bearing innovative, cutting-edge programs. Most of the ones I’ve seen have life insurance at their core.

Their hallmark is a paper or slide with a score of arrows connecting six or eight boxes. There’s a box for the donor and one each for your charity, the life insurance policy, the trust that owns the policy, the trustees of the trust and the AAA-rated company selling the policy. Arrows are shooting in and out of boxes and around corners.

They’re always convoluted. I ask three times how the programs work, and I can’t regurgitate the explanations 30 minutes later.

A lot of times the plans’ advocates aren’t salespeople, but well-meaning board members or committed donors.

I’ve been in Planned Giving since 1997, as a program director and consultant. I’ve never passed on one of these as something to offer donors. They might be appropriate for huge charities with highly mature programs, though I’m skeptical.

How do you protect your charity and your donors–without sounding ungracious–when offered what I’m describing? Ask two questions.

  1. What other nonprofits are executing the program?
  2. Is there a private letter ruling from the IRS?

I confidently predict the answers you’ll hear.

  1. A and B are looking at it.” – That’s meaningless. You’re looking at it too. In their next pitch meeting, you’ll be “C.”
  2. No” – Without IRS’s imprimatur, I recommend you pass on the ground-breaking innovation.

I don’t feel like a curmudgeon, though you may think I sound like one. In 15 years I’ve seen a lot of bad practices seeking refuge under the Planned Giving umbrella.

Protect your charity from dubious ideas that don’t add value for donors.