Another strong era for American gift planning began in the 1940s, as gift annuity and life income trust programs benefitted from an unparalleled economic boom. In 1944 Pomona College, located in Claremont, CA, became the first college to market life income gifts to a national audience well beyond its alumni. Allen F. Hawley created the “Pomona College Plan,” promoted by a direct-sales-oriented marketing strategy in publications like the Wall Street Journal. His ads stressed financial benefits more than philanthropic motivations, resulting in a continuing stream of income to support Pomona College.
In 1958, Pomona obtained a Private Letter Ruling from the IRS that trusts funded with appreciated assets could invest in tax-exempt bonds and provide tax-free payments to beneficiaries. The promotion of triple tax savings from these trusts (income tax deduction, avoidance of capital gains, and 100% tax-free income) soon proved too good to be true. In Revenue Ruling 60-370 (1960), the IRS revoked its earlier decision and determined that if there is an express or implied agreement to avoid taxation in this way, capital gain from the funding asset would be attributed to the donor when the trust later issued tax-exempt income to beneficiaries. The Pomona College experience was analyzed in an influential book entitled Costs and Benefits of Deferred Giving by Norman S. Fink and Howard C. Metzler (1982), funded by a grant from the Lilly Endowment.
Gift Planning History 