April 15, 2004 | Read Time: 3 minutes
To help nonprofit organizations determine the value of charitable annuities and other planned gifts, the National Committee on Planned Giving introduced new gift-valuation standards last week.
The standards, which are designed to help organizations determine the charitable impact in today’s dollars of planned gifts that the groups might not receive for 10 or more years, met resistance from some fund raisers.
Several fund raisers said they worried that charities might find the standards difficult to apply because of their complexity, while one expert expressed concern that the standards might cause charities to inflate the value of planned gifts.
Until now, many charitable organizations have determined the value of a planned gift by referring to an Internal Revenue Service method used to determine a donor’s tax deduction on the gift, said Jeffrey W. Comfort, senior director of planned giving at Georgetown University, in Washington, and a co-author of the valuation standards. However, using the IRS method to value deferred contributions frequently causes charities to understate or inflate how much a gift is worth, he said.
“The IRS methodology makes no attempt to project the future value of funds that will be received by the charity, or to determine the present value of those funds after inflation,” Mr. Comfort said. “Our standards help groups determine the ultimate value — in terms of charitable purchasing power — of the gift to the organization that receives it.”
Charities are not required to follow the standards published by the committee, which represents fund raisers who specialize in raising planned gifts.
After 25 planned-giving experts worked three years to complete the new standards, the committee announced in November that it would take comments on them before distributing them to the public.
Complex Standards
Some planned-giving experts said that the new valuation standards are so complex they might confuse fund raisers, preventing widespread adoption.
Fund raisers have not universally supported the standards, in part because some people misunderstand them, said Craig Wruck, director of client development at Kaspick & Company, in Palo Alto, Calif., which helps charities solicit and administer planned gifts.
Frank Minton, president of Planned Giving Services, a Seattle company that helps charities establish planned-giving programs, expressed concern that the new standards may inflate the value of deferred gifts by using one rate to calculate the investment return charities expect to receive on deferred gifts and another rate to calculate the gift’s value in today’s dollars. The IRS uses the same rate for both.
“Even though the IRS rate might be unrealistically low at the present time,” Mr. Minton said, “at least it is consistent in using the same rate for both purposes.”
Realistic Estimates
Several other gift-planning experts disagreed — saying that applying the new standards would give charities a more realistic estimate of the value of their planned gifts.
Barbara Yeager, director of operations at the National Committee on Planned Giving, in Indianapolis, said that because the IRS discount rate — the rate used to calculate the tax deductibility of most planned gifts — has remained low in recent years, many charitable planned gifts have been undervalued.
She also said she is hopeful that the new standards, which are designed to help organizations figure out what it costs in salaries and other fund-raising expenses to secure planned gifts, will help charity executives recognize the value of planned giving.
“There has been some feeling that as times have been tough in fund raising, something has got to give — and we’ve seen some charities stop investing in planned giving,” she said. “We want to make sure that charities don’t discard the long-term view — which is what planned giving is all about — and go for the more immediate payoff.”
To see an electronic copy of the new valuation standards for charitable planned gifts, visit the committee’s Web site at http://www.ncpg.org. To receive a print version of the standards, call (317) 269-6274, or write to the National Committee on Planned Giving, 233 McCrea Street, Suite 400, Indianapolis, Ind. 46225.
