Split-Interest Agreements

What are "split-interest" ("planned giving") agreements?

Split-interest agreements, also known as planned giving, are contributions that assign the legal rights to certain assets to an NFP and other beneficiaries. Typically, the terms of these contributions do not allow the donor to revoke the gift and therefore they are considered unconditional pledges. The most common type of spilt-interest agreement stipulates that the donor will receive a fixed payment (often expressed as a percentage of the initial contribution) every year for a period of time, either a fixed number of years or the remaining life of the donor.

For example, I give $100,000 to the NFP-A but stipulate that they must pay me 7.5% interest each year for the remainder of my life. NFP-A will have full use of the $100,000 but will have to pay me $7,500 each year. When I die the stipulation expires and the organization no longer has to make any interest payments.

This article contributed by Calibre CPA Group (www.calibrecpa.com)