Who Issued the Earliest Gift Annuity: Yale or the American Bible Society?

A recent article in the New York Times* claimed that the American Bible Society issued America’s first charitable gift annuity in 1843. When I pointed out to its author that in 1831, Yale issued an annuity to John Trumbull in exchange for his best paintings of the American Revolution, he asserted two things in an email to me: 1) his article is about the first gift annuity program at the Bible Society, not the first annuity contract; and 2) Trumbull’s gift was not really a gift annuity because it was funded with assets that were “completely illiquid” and was not “an actual gift that generated an annuity.” He asserted that “While a pile of paintings certainly has value, it’s far more difficult to ascertain than a gift of straight cash or securities.”

Do those claims hold up? Let’s look at the historical record.

Yale, Trumbull, and his attorney Peter Jay all believed that Trumbull was making a gift with investment value through a legal arrangement that would provide him with a life annuity and leave behind a donation that would continue to benefit Yale financially.

During the business negotiations leading to his annuity contract with Yale, Trumbull wrote to Harvard President Josiah Quincy describing the terms of his gift:

“I have Conveyed my original paintings of Subjects of the Revolution, with others, to the President and Fellows of Yale College—burthened with payment of an annuity to me during my Life:–and afterward the income which may be derived from the Exhibition of them to be applied forever to the Education of poor Scholars …” [Letter from Trumbull dated September 16, 1831]

In their annuity contract, Yale and Trumbull agreed that the college would first apply the income from exhibiting his paintings towards underwriting his annuity payments, then use exhibition income to provide financial aid to Yale students:

[Trumbull’s paintings] “shall be exhibited, and the profits of such exhibition shall be received by the parties of the second part [Yale], and applied in the first place toward the payment of the said annuity during the life of the said John Trumbull, and the whole of such profits after his death … shall be perpetually appropriated toward defraying the expense of educating poor scholars in Yale College …” [Contract dated December 19, 1831]   

What was the value of Trumbull’s paintings of important events of the American Revolution? The author correctly points out that the value of art is “difficult to ascertain,” but Yale and Trumbull did agree on a stated value of $20,000. That valuation was the basis for a 5% annuity payment to Trumbull, or $1,000 per year for his life, payable in quarterly installments.

Trumbull’s attorney was Peter Augustus Jay, son of Chief Justice John Jay. Peter Jay drafted the contracts that led both sides to agree to risky and legally-binding financial commitments. Note that John Jay was President of the American Bible Society from 1821 until his death in 1829, and that Peter Jay served as Chair of the Bible Society’s Legacy Committee.

Peter Jay’s experience with the Yale annuity must have given the Bible Society some comfort when it issued its first annuity contract in 1843. The actual Bible Society contract with Joseph Keith was lost or destroyed many years ago, but from 1843 until well into the 1920s, the Bible Society used the distinctive terminology Peter Jay invented for the Yale contract in 1831: annuity bonds.

It is not the case that the Bible Society foresaw the future success of a gift annuity program when it issued an annuity contract to Keith in 1843. In fact the Board of the Society soon had second thoughts about the financial and legal risks of annuities. When a new gift annuity was proposed three years later, the Board voted on June 4, 1846 “to decline the present proposal and all others of like character.”

The American Bible Society’s willingness to issue gift annuities was ended in 1846. It would be revived some years later. In the 1920s it would become by far the most successful and influential gift annuity program in the U.S.

Yale’s gift annuity with John Trumbull, the “chief visual recorder of the American Revolution,” was one of a kind, not a program. But the Bible Society’s gift annuity in 1843 also was not a program.

I have asked the author to correct the record in the New York Times. I hope readers will agree that Yale “underwrote the first such charitable annuity” in 1831. The story is well-documented in my book A History of Charitable Gift Planning: How Gift Annuities Shaped American Philanthropy (Amazon, 2017).

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* Paul Sullivan, “Weighing Pandemic Risks When Donating to Colleges,” New York Times, September 4, 2020