Ron Brown at Gift Planning History.org

Americans made charitable gifts of bequests, trusts, annuities, and complex assets long before taxes played a role in their planning. For 300 years after the colonies at Jamestown and Plymouth began, charitable gift planning was not driven by tax considerations. Our modern federal income tax system was enacted in 1913; the estate tax in 1916; and a tax deduction for gifts to qualified charities was first introduced in 1917.

Tax policy is often intended to influence behavior, including the ways Americans make gifts to charity. Today’s donors and professional advisors are properly concerned with the implications of ever-changing income, gift, and estate tax laws.  Since the modern tax system was enacted, “Few, if any, significant gifts are made without a consideration of their tax consequences,” notes The Harvard Manual on Tax Aspects of Charitable Giving.

 There is considerable interest in analyzing the impact that the Tax Cuts and Jobs Act (TCJA) enacted in 2017 is having on charitable giving. Millions of Americans who previously enjoyed a tax deduction by itemizing their gifts have lost that benefit by taking the higher standard deduction.

Private foundations created to address the public good began to appear in America “almost as soon as the U.S. Constitution was adopted.”*

Large private foundations in trust or corporate form became a favorite method of charitable giving among the wealthiest American individuals and families early in the 20th century. Examples include the Carnegie (1905), Rockefeller (1913), and Ford (1936) foundations. Today there are roughly 84,000 foundations filing with the IRS, with about $1 trillion in assets. In 2006, investor Warren Buffett pledged $31 billion to the Bill and Melinda Gates Foundation Trust, a harbinger of mega-gifts and bequests to come via the Giving Pledge.  Even after giving away more than $45 billion since its founding in 2000, the Gates Foundation reported assets of more than $50 billion in 2017.

A new tool for charitable gift planning was introduced in 1914 with the founding of America’s first community foundation in Cleveland, Ohio by attorney Frederick Harris Goff and the Cleveland Trust Company.  The Cleveland Foundation and many subsequent community foundations were organized as trusts; others are in the form of charitable corporations.

By using a variance power (cy pres), public charitable foundations give donors the security of knowing that endowed gifts and bequests whose original purposes become outdated will remain useful to meet the needs of people in a particular geographic area.  There are now more than 400 community foundations in the U.S.

There was a movement to find alternatives to community-based funds in the 1920s.  Local community foundations often had geographic and secular restrictions on the use of endowed gifts under their management.  New York attorney Daniel Remsen created and promoted a Uniform Trust for Public Uses through which he intended to broaden the opportunities for donors to support national and international charities as well as religious nonprofits such as the American Bible Society and other Protestant, Catholic, and Jewish organizations. Remsen’s Uniform Trust template enabled donors to arrange charitable trusts to benefit virtually any qualified charitable organizations.  He included a provision for trusts to pay income to non-charitable beneficiaries for life or a term of years.

Community foundations and Jewish Federations popularized field-of-interest funds and supporting organizations, and were among the first nonprofits to offer donor-advised funds (DAFs) in the 1930s. According to the National Philanthropic Trust, in 2017 there were more than 463,000 individual donor-advised funds in the U.S., with assets totaling $110 billion. Grants from DAFs to qualified charities provided $19 billion in 2017.  Fidelity Charitable alone received about $7.8 billion in gifts in 2018, and granted more than $5.2 billion to charities.

Donor-advised funds are not subject to the payout, transparency, and investment restrictions regulating private foundations.  The TCJA has made DAFs even more popular, since they can be funded when the donor can use a charitable deduction, and the DAF can make grants at a later time.

* The history of foundations is told expertly by David C. Hammack and Helmut K. Anheier in A Versatile American Institution: The Changing Ideals and Realities of Philanthropic Foundations (Washington, DC: Brookings Institution Press, 2013).

The first great wave of life income gifts in America began in 1919, when the American Bible Society ran a gift annuity campaign based on mass advertising in national religious publications. The Society issued 4,615 gift annuity contracts from 1920 to 1930, when the U.S. population was 1/3 of its current size.

Encouraged by the success of ABS and other CGA campaigns, hundreds of churches, colleges, and social welfare organizations started gift annuity programs in the 1920s.  For example, in 1926 the Art Institute of Chicago reported receiving gift annuities funded with $200,000 and $100,000 from Mrs. Anna L. Raymond.  In 1927 a speaker noted America’s widespread embrace of gift annuities:

Today there are very few missionary societies, hospitals and other charitable organizations, colleges and theological seminaries, that are not active in securing sums of money on which annuities are paid.

Under the leadership of Dr. Alfred Williams Anthony (a descendant of Roger Williams, founder of Rhode Island), the Federal Council of Churches strongly encouraged its members to embrace charitable gift planning. In 1925, Anthony created a Committee on Financial and Fiduciary Matters, whose members represented leading national banks, insurance companies, and law firms as well as nonprofit organizations.

Through its Wise Public Giving Series of publications, the Committee encouraged charitable gifts through outright gifts, wills, trusts, annuities, and other methods. For example, in 1927 the Committee published a pamphlet encouraging the use of charitable life income trusts, now known as charitable remainder trusts, entitled Living Trusts: What They Are, What They Serve, Their Advantages.  The pamphlet includes a sample life income trust agreement. Living trusts were said to be “good for those who wish an income for themselves or others without the responsibility of administering property.”

In presentations to the Trust Company Division of the American Bankers Association in 1925 and 1926, Anthony asked the financial community to support nonprofit gift planning programs. In 1926 the Bank of New York and Trust Company published a series of newspaper advertisements encouraging donors to make charitable gifts through their estate plans.  Other BNY&T publications encouraged bankers and trust companies to use a legal document known as the Uniform Trust for Public Uses.¹

The Equitable Life Assurance Society designated December 13–18, 1926, as Bequest Week: “A period in which to educate all its agents—nearly 10,000 in number, scattered all over this country—in soliciting life insurance which should ultimately benefit educational and missionary objects.”    Princeton University and other colleges encouraged members of the graduating classes to take out life insurances policies benefitting their alma mater.

Most importantly, the Committee convened a series of local and national conferences involving trust banks, law firms, insurance underwriters, and charitable organizations.  A conference for financial institutions, held in Atlantic City on March 22–24, 1927, called for emergency action to reduce the risks taken by many nonprofits in their new gift annuity programs. Quite a few nonprofit gift annuity programs employed unsafe practices such as competing for donors by bargaining over high payment rates or making annuity payments from current income rather than setting aside a dedicated reserve fund.

The Conference on Annuities held on April 29, 1927 introduced actuarial principles into gift annuity programs. Those principles revolutionized charitable gift planning.

¹ Bank of New York and Trust Company materials courtesy of BNY Mellon Archives.

A hastily-called national conference for nonprofit organizations on gift annuities was held in Manhattan on April 29, 1927.  An actuary named George Augustus Huggins introduced best practices that have become fundamental in charitable gift planning: statistical measurement of average beneficiary longevity; calculating payment rates by targeting a charitable residuum; and valuing charitable and beneficiary interests using financial projections grounded in investment experience.

Negotiating with donors over open-ended annuity payment rates, and wishful thinking about financial consequences, was replaced by a national consensus over actuarially-determined, responsible payment schedules.

This actuarial revolution in gift planning requires nonprofits to hire and train specialists to explain, promote, and manage complex programs. There is a strong argument that the profession of charitable gift planning began at the 1927 conference, when the Committee on Gift Annuities (now known as the American Council on Gift Annuities, ACGA) was founded to provide a voluntary national process to analyze economic and demographic experience, calculate responsible annuity rates, develop and promote best practices, train nonprofit gift-planning professionals, track federal and state legislation, and conduct research.

Creating suggested maximum payment rate tables for gift annuities is not a one-time event. ACGA has a process of continuous monitoring and feedback from its members. It tracks mortality experience and trends in the charitable residuum. It tracks the volume and characteristics of gifts that are being made. It gathers investment data, and makes informed judgments about future interest rates and stock values. It makes a judgment to impose a rate cap for older gift annuitants, and adjusts rates downward from the cap for 80 to 90-year-old annuitants. It considers the timing of rate changes in light of the practical effects on marketing materials and donor disclosures.

Gift annuities are gifts, not investments. Perhaps ACGA’s most important role is that since 1927 it has maintained a balance between the self-interest of annuitants and the philanthropic motivations of donors in order to ensure that people continue to make gifts for purposes close to their hearts.

About 1,800 gift planners participated in 13 national conferences held by the Committee on Gift Annuities (ACGA) before the Tax Reform Act of 1969.  Its 34th conference will be held in April 2020.

This is the oldest continuing series of training events for the staff of American nonprofit organizations. Pioneering leaders of gift planning with ACGA included Huggins, Charles Baas, Gilbert Darlington, Roland Matthies, Charles Burrall, and Michael Mudry. Conrad Teitell (pictured) presented at every ACGA conference between 1968 and 2016.

Early in the 1920s Mr. J. DuPratt White ‘1890, a trustee of Cornell University, predicted that “in the years to come” Cornell “would receive more money by bequest than from all other sources combined.”

Acting on this insight, Neal Dow Becker ‘1905, a New York lawyer and industrialist, led a groundbreaking bequest program at Cornell University from 1924-1934. Cornell’s program involved nearly 1,000 attorneys and trust officers who encouraged alumni to make gifts in their wills, life insurance policies, trusts, and annuities. Cornell received more than $6 million in planned gifts between 1925-1937 and was aware of another $5-6 million in intended bequests. In the Depression year of 1934 the alumni fund raised $70,000 from about 5,000 gifts, and a bequest of $250,000 was received from the estate of C. Sidney Shepard.

Its bequest slogan was: “Cornell: Greater Still, By Your Will” but the university lumped life income trusts under the umbrella of bequests.  A presentation in 1931 entitled “The Cornell University Bequest Program” noted its encouragement of “turning over funds to the University during the lifetime of the donor, subject to life interest, and this has actually been done in many instances.” For example, in 1934 Cornell received $500,000 from a trust funded in 1925 by Henry H. Westinghouse ‘1875 “from which he received the income during his lifetime.” Life income trust beneficiaries received payments averaging about 5.5%.

Many colleges followed Cornell’s example. Women’s colleges at Barnard, Bryn Mawr, Mount Holyoke, Radcliffe, Smith, Vassar, and Wellesley began large-scale bequest programs in 1932 through the Alumnae Committee of Seven Colleges.  These colleges grew their endowments by significant amounts over the years and gained a strategic advantage against other colleges, including other women’s colleges, who had not begun soliciting estate gifts so early.

The Association of American Colleges (AAC) sponsored a Joint Conference of Colleges, Trust Institutions, Life Insurance and the Bar in Philadelphia on April 24, 1934, attended by more than 300 people. Speakers encouraged gifts through bequests, annuities, life income trusts, and life insurance. William Mather Lewis, President of Lafayette College, opened the conference by saying that “Nothing the Association has done seems so full of promise of financial aid to American colleges” as planned giving.

AAC regularly highlighted successful college planned giving programs. In December 1934 The Bulletin of AAC listed 38 colleges that include bequest forms in their catalogs or other publications.

One of the earliest comprehensive gift planning programs began in 1937 when Stanford University started its long-running R-Plan (named for its founder, State Senator Louis H. Roseberry), including a Cardinal-colored reference binder for donors and professional advisors interested in charitable gift planning.

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.

A two-day Conference on Wills, Annuities, and Special Gifts in 1952 sponsored by the National Council of Churches attracted 387 gift planners to Cincinnati, Ohio, representing local and national church groups, hospitals and retirement homes, colleges, Goodwill Industries, American Friends Service Committee, World Literacy, the YWCA and YMCA. The agenda included a presentation on “Tax Aspects of Giving” by Sydney Prerau, and sessions on marketing and administering charitable trusts, annuities, bequests, retained life estates, and gifts of life insurance. Prerau’s presentation was wide ranging, analyzing the after-tax costs of gifts of cash, stock, and real estate; gifts of life insurance; gift annuities and life income trusts; and lead trusts.

Prerau represented the J.K. Lasser Tax Institute at the 1952 conference. Jacob Kay Lasser had published How Tax Laws Make Giving to Charity Easy (1948) and was co-author of Tax Planning for Foundations and Charitable Giving (1953). Prerau became head of the Tax Institute in 1954, became Conrad Teitell’s mentor in 1959, and made him a partner of the planned giving firm Prerau & Teitell in 1964.  Philip T. Temple, a classmate of Teitell’s at Columbia Law School, joined the firm in 1967. Sydney Prerau died in 1968.

Pioneering legal professionals such as Philip R. Converse, David Donaldson, Norman S. Fink, John Holt Myers, and Jon L. Schumacher launched their careers in charitable gift planning in the 1960s.

Many of today’s national planned gift marketing and consulting firms began in the 1960s. Robert F. Sharpe, Sr. founded his firm in 1963. Richard W. Coughlin hired Andre Donikian to begin R&R Newkirk’s planned giving services in 1967.  Donikian founded Pentera in 1975.  Marc Carmichael succeeded him at Newkirk.

There was a ready audience for Prerau and Teitell’s Taxwise Giving (first published in 1963), Arthur Andersen’s Tax Economics of Charitable Giving (1964), and The Case for Deferred Giving (Council for Advancement and Support of Education, 1966).  James K. Sinclaire, Jr. began Kennedy-Sinclaire’s planned gift publications in the 1960s.

By 1968, a full toolbox was available for gift planners: bequests, life income trusts, pooled income funds, lead trusts, gift annuities, gifts of complex assets, private and public community foundations, donor-advised funds, and supporting organizations. Gift planning was encouraged by the National Council of Churches, the Association of American Colleges, the Committee on Gift Annuities (ACGA), tax attorneys and consultants specializing in gift planning, banks, life insurance and trust companies, alumni associated with many college bequest and trust programs, and a growing number of reference publications.

The Tax Reform Act of 1969 provided the legal framework for much of what gift planners do today.  To reform abuses of loosely regulated charitable trusts and private foundations, the Act mandated many new rules.  For example:

• For charitable remainder trusts to qualify for favorable tax treatment, the Act required the use of new unitrust and annuity trust forms, a 5% minimum payment, and a four-tier system for recognizing taxable income
• Private foundations were compelled to make much larger grant distributions than many had been doing. As a result, the Lilly Endowment was able to provide financial support for a number of gift planning initiatives, including the founding and development of the National Committee on Planned Giving, predecessor of the National Association of Charitable Gift Planners

These and other changes in the law had a powerful impact on the practice of charitable gift planning.  While familiar tools such as charitable remainder trusts and lead trusts, pooled income funds, and gift annuities were in use long before 1969, the new legislation spelled out very specific and wide-ranging new rules for their operation.

These new rules forced a break with previous laws and traditions.  The Tax Reform Act of 1969 was America’s first statement of comprehensive policies on charitable gift planning.  Experienced gift planners were forced to learn a complex new system of legal requirements.  A considerable amount of research and experience would be needed to understand the law, ensure compliance, and realize new gift opportunities.

The Act created an immediate demand for professional training, publications, and networking.  It soon became clear to donors and gift planners that safe harbors for permissible gift arrangements would lead to more and larger gifts, and that the charitable remainder value of planned gifts would be better protected against abuses.

As a result of the Tax Reform Act, many people became attracted to the field of charitable gift planning.  Gift planning councils sprang up across the country.  Another major tax reform in 1986 closed many popular loopholes, making charitable remainder trusts even more attractive, and intensifying the need for a national professional association.  The National Committee on Planned Giving (now NACGP) was founded as a federation of gift planning councils in 1988.

Gift planners continue to find creative gift arrangements within the legal framework set out in 1969.

This is an anniversary worth celebrating!

Why Were Charitable Trust and Foundation Reforms Needed?

It would be wrong to assume that in planning their hearings on a tax reform bill in January of 1969, members of Congress had deeply considered the needs of America’s nonprofits, analyzed all the available fund raising arrangements, and envisioned an ideal system for encouraging planned gifts.

The opposite is true: as hearings began, Congress intended to end certain widely-reported and sensationalized abuses of charitable trusts and foundations.  The first witness called by the U.S. House Ways and Means Committee was Wright Patman (D-Texas), whose opening statement made clear he intended not to create, but to eradicate:

Today, I shall introduce a bill to end a gross inequity which this country and its citizens can no longer afford: The tax-exempt status of the so-called privately controlled charitable foundations, and their propensity for domination of business and accumulation of wealth.

Put most bluntly, philanthropy – one of mankind’s more noble instincts – has been perverted into a vehicle for institutionalized, deliberate evasion of fiscal and moral responsibility to the Nation.

For seven years before 1969, Patman’s Congressional hearings and reports detailed allegations of self-dealing, political corruption, and Communist infiltration (a prominent example was Alger Hiss, forced to resign as president of the Carnegie Endowment for International Peace). Increasing scrutiny by Patman, the U.S. Treasury Department, and the media raised the specter of a ban on charitable trusts and foundations.  New rules were necessary to protect legitimate uses.

The most common abuse of foundations was self-dealing: hiring family members as well-paid staff with no actual responsibilities; making personal loans at no interest that were never repaid; making grants to family and friends for study or travel; using a foundation to acquire a controlling interest in a profit-making company and protect against hostile buyouts; transferring real estate and tangible property to a foundation, but retaining the use and enjoyment of the property.

Foundation abuses were well-known. A popular book entitled How Tax Laws Make Giving to Charity Easy by J.K. Lasser (1948) provided clear advice that could have been a road-map for legislators seeking reforms in 1969:

By giving to a foundation the donor can keep many attributes of his wealth … If [his gifts] consist of shares of stock, he controls them in almost every respect as though he still owns them … Some donors exercise control that goes even further. They appoint relatives as directors of the foundation to insure control by persons closely acquainted with the desires of the donor. Some arrange for the administrators to be family members who receive substantial compensation so that the contributed wealth really yields substantial income … One man who created a Rhode Island foundation later went into a new business. He used the trust to borrow money to buy textile mills that were later sold to his company. Thus, he benefitted materially from the capitalized credit of the foundation he created.

The Blue Book prepared by Congressional staff of the Joint Committee on Internal Revenue Taxation as a General Explanation of the 1969 Tax Reform Act illustrated abuses of loosely regulated life income trust arrangements.  For hundreds of years, most life income trusts had paid their net income to noncharitable beneficiaries, with the remainder used for charitable purposes. By law in the 1960s, annual trust payments were assumed to be 3.5% in computing the charitable deduction, but some trusts were invested in high-yield assets resulting in much greater income for beneficiaries and a depletion of the principal remaining for charity.

Donors could claim charitable deductions even when a charity had only a contingent interest in the trust: for example, a $5,000 annuity to A for life, remainder to her/his children, or to charity if A had no children. Some trusts permitted invasion of trust principal in order to maintain a beneficiary’s standard of living.

A particularly sore point among Congressmen was that in the 1960s the financial benefit from making a gift of appreciated property to a charitable organization could be a bit greater than from selling the property and paying capital gain taxes.

A few donors avoided income taxes through a legally-permitted 100% charitable deduction. Early in the hearings before the Ways and Means Committee, McGeorge Bundy of the Ford Foundation admitted that he had paid no income tax for several years because of his charitable gifts.

America’s First Comprehensive Policies on Charitable Gift Planning

To ensure that the wealthiest Americans could not use charity to avoid paying taxes, Congress would impose new charitable deduction limits of 50% of adjusted gross income (AGI) for outright gifts of cash, 30% for gifts of appreciated property, and 20% for gifts to private foundations, and would enact an Alternative Minimum Tax (AMT).

The Tax Reform Act signed into law by President Richard Nixon on December 30, 1969 contained many other provisions affecting charitable gift planning.

Members of the House and Senate had very little knowledge about the specific techniques of charitable gift planning.  Experienced tax attorneys, including John Meck, John Holt Myers, and Conrad Teitell assisted Congressional staff and the Treasury Department in drafting important parts of the Act and its implementing regulations, ensuring that previously-existing gift arrangements such as charitable remainder trusts, pooled income funds, and gift annuities were addressed appropriately.

To protect the charitable remainder interest for which life income gifts qualified for favorable tax treatment, these gifts were limited to four standardized arrangements: charitable remainder unitrusts, charitable remainder annuity trusts, pooled income funds, and charitable gift annuities. There were newly defined unitrust provisions for net-income and make-up payments. Other life income arrangements no longer qualified for charitable deductions. Charitable lead trusts also were limited to annuity and unitrust arrangements.

Charitable remainder trusts and private foundations became subject to rules against self-dealing, prohibiting certain interactions with disqualified persons, retaining excess business holdings, and participating in jeopardy (high-risk) investments. These reforms continue to protect the public interest today as private foundations, trusts, and donor-advised funds receive mega-gifts and bequests worth billions of dollars.

Under the lax rules governing charitable lead trusts and life-income gifts before 1969, some wealthy donors had evaded gift and estate taxes by naming a third or fourth generation (grandchildren or great-grandchildren) as beneficiaries.  In order to ensure that wealth was taxed as it passed down to each generation, Congress imposed a Generation-Skipping Transfer Tax (GSTT), and required that named beneficiaries must be alive at the time a charitable trust is funded.

Income beneficiaries were prevented from manipulating the tax treatment of trust payouts through a four-tier system (ordinary income, capital gains, tax-free income, and tax-free return of principal).

Lilly Endowment Provided National Leadership in Charitable Gift Planning

The Tax Reform Act of 1969 compelled many foundations to increase their grants by imposing a mandatory distribution requirement: private foundations (as well as charitable remainder trusts) were required to pay out a minimum of 5% annually.

As was common for foundations that were closely tied to the wealth generated by a family corporation, the Lilly Endowment in Indianapolis invested primarily in low-yielding Eli Lilly and Company stock.  Of great importance for the field of charitable gift planning, the Act resulted in the Lilly Endowment tripling the amount of its annual grants.

As a result of Lilly’s interest in gift planning, and thanks to the leadership and advocacy of Charles Johnson, its Vice President for Development, between 1978-1983 Lilly provided major grants to support planned giving programs among colleges in Indiana, theological seminaries, historically black colleges and universities, the Girl Scouts, and community foundations.  Lilly provided funding to develop the Certified Fund Raising Executive (CFRE) program and to publish an influential report on The Costs and Benefits of Deferred Giving (1982).

Perhaps most important for the profession of charitable gift planning, between 1987-1992 Lilly provided six grants totaling $412,500 to create and support the National Committee on Planned Giving (now NACGP).  Lilly also provided a start-up grant of $4 million in 1987 for the Center on Philanthropy in Indianapolis, which became the administrative sponsor for NCPG.

Impacts of the Tax Reform Act of 1969

In an important article in 1970, two expert attorneys helped clarify the new law, while admitting that more guidance was needed:

This article is only the beginning of a new body of thought on the subject of charitable contributions.  Proposed regulations on the new provisions will issue shortly to give us the official view of much of the Act that is open to interpretation … many of the answers blithely assumed in this article may turn out to be less than correct.¹

A front-page article in the Wall Street Journal on December 29, 1971 reported the frustration felt by donors two years after the massive Act became law:

The sheer complexity of the new rules on “split-interest” trusts has caused some taxpayers to throw up their hands.  Where a guy might have said, all the income to my wife, remainder to Harvard, today he’s liable to say, oh, the hell with it.  He leaves it all to his wife and gives Harvard $5,000 and Harvard never knows what it has missed.

Taken as a whole, the Act represented an experiment in reforming existing methods of giving, with unknown outcomes.  Planners were uncertain about how to comply with the new safe harbors, and how the rules for gift forms, taxation, valuation, self-dealing, and timing should interact.

Recognizing the complexities, in Revenue Ruling 72-395 the IRS issued sample provisions to be included in the governing instruments of qualified charitable remainder trusts. The IRS would issue a model set of unitrust and annuity trust agreements much later, in 1989 and 1990.  Gift planners criticized the templates as incomplete.

Uncertainty over the implications of the Act, especially before enabling regulations were written by the Treasury Department, contributed to a slowdown in new charitable remainder trust and pooled income fund gifts in 1970-1971, compared with planned gifts received in the 1960s.  Several years passed, while gift planners worked diligently to master the technical details, publish reference materials, amend existing gift arrangements for compliance, adopt and inform donors about new gift forms, and add or train specialized staff at nonprofit organizations.

Once people understood the new opportunities, a great wave of interest in gift planning swept across the United States. In 1972, planned giving increased dramatically to pre-1969 levels. The Survey of Voluntary Support of Education 1971-72 noted the country’s reaction to the Act:

Deferred gifts, which had declined substantially in the previous three years, rose 70% to a new record . . . Total support in the form of annuity trusts, life income contracts, insurance policies, and other forms of deferred giving amounted to $51.2 million in 1971-72 . . . This amount constituted 6.4% of total support received from individuals, the highest percentage figure since 1967-68.

Testimony given at the House and Senate hearings in 1969 had shown the need for more information about the nonprofit sector of the American economy.  Nonprofits wanted to be better prepared for Congressional oversight and public accountability, to clarify their roles for themselves and for policymakers, and to stimulate more generous giving.  That led to the creation of the Commission on Private Philanthropy and Public Needs (better known as the Filer Commission) in 1973, which spawned 86 research projects over the next two years and a final  report on Giving in America: Towards a Stronger Voluntary Sector (1975).

In 1974 the Northwest Area Foundation in Minneapolis gave grants to help 18 colleges and universities begin planned giving programs. A second round of grants in 1977 funded 11 more programs.  In 1985, the foundation reported combined total results of 7,010 planned gifts with a face value of $237 million. A number of new leaders of the planned giving profession began their careers as a function of these new programs and others funded by the Lilly Endowment.

A pressing need for more and better professional training and support led to the founding of local and regional planned giving councils between 1971-1986. In January 1986, Charles Johnson of the Lilly Endowment listed ten existing councils; there were several others not known to him.  In July, 2019 more than 8,000 people belonged to 97 gift planning councils affiliated with NACGP.  There are roughly 3,000 individual members of NACGP.

Our profession of charitable gift planning, and the people served by thousands of nonprofit organizations over the last 50 years, are deeply indebted to the Tax Reform Act of 1969.

Happy anniversary!

¹ “Charitable Contributions and Bequests by Individuals: The Impact of the Tax Reform Act” (New York: Fordham Law Review, Vol 39 Issue 2, 1970), John Holt Myers and James W. Quiggle.