Many types of planned gifts feature a combination of charitable and non-charitable elements. Even though most of the time non-charitable beneficiaries retain their interests until an arrangement terminates, occasionally one of them will want to surrender some or all his or her interest in order to accelerate the arrangement’s charitable impact. In particular, this can be the case with the following types of gifts:

  • Charitable gift annuities (immediate, deferred, and flexible)
  • Charitable remainder annuity trusts and unitrusts
  • Pooled income fund contributions
  • Retained life estates in personal residences and farms
  • In relatively rare instances, charitable lead annuity trusts

When a non-charitable interest is surrendered, the beneficiary is usually – although not always – entitled to claim an income tax charitable deduction. Moreover, the amount of the deduction is usually – although again, not always – equal to the present value of the interest in question. If the amount of the deduction exceeds $5,000, the donor of the non-charitable interest must substantiate the deduction with a formal “qualified” appraisal, i.e., one that meets various IRS requirements.

Over the course of more than a decade, Evergreen consultant Bill Zook has prepared many dozens of qualified appraisals. For a reasonable fee, he reviews applicable documentation, performs the associated present value calculations, and presents the results in a written appraisal. Typically, he also partially completes an IRS Form 8283 to accompany the appraisal, although a donor or his or her tax preparer is always free to prepare the form for Bill to sign.

Finally, because an appraisal is used by a donor to substantiate the income tax deduction he or she claims as a taxpayer, the cost of the appraisal is properly borne by the donor (or initially by the donor’s tax advisor, who then invoices the donor for the cost), rather than by the charity. That being said, sometimes a charity will obtain and pay for the appraisal as a gesture of appreciation for the donor’s gift. In that case, the charity is effectively providing the donor with a benefit, and the charity should consult its own advisors as to the tax implications of the gesture.

Note: Evergreen’s appraisals confirm the present value of the interest in question, not the deduction. It is up to the donor or his or her tax advisor to determine whether to claim a deduction for the full present value or something less. In addition, the fee for an appraisal can often be minimized if Evergreen is contacted before a surrender is made.

I worked very closely with Bill Zook for over 15 years during the time we were building Planned Giving Services and subsequently after the company was sold to PG Calc. He was a significant contributor to the success of the company. He is clearly in the top tier of technical experts in the field of planned giving, and he is very good in helping donors design gift plans that are beneficial both to them and to the charities they wish to support. Because of his extensive work with different types and sizes of charities, he knows how to help any charity implement and operate a planned giving program appropriate for its situation. He is a careful writer, a good listener, and has the highest ethical standards. Whoever hires him for gift planning consulting will not be disappointed.”

Frank Minton, Ph.D. Prominent teacher, author, consultant, and leader in the planned giving profession