Irrevocable Charitable Remainder Trusts Aren’t so Irrevocable

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For years, the holy grail of estate giving has been the Charitable Remainder Trust. But this irrevocable trust may not be so irrevocable after all — and that’s not such a bad thing.

The Charitable Remainder Trust (CRT) has long been one of the most exalted tools of planned giving for charities. Quickly, here’s how it works…

  1. The donor puts in an appreciating asset in,
  2. The asset is sold tax free,
  3. The donors takes income out of it for the rest of their life, and
  4. When the donor dies, the money irrevocably goes to charity.

Who wouldn’t be happy with that? It’s a win-win scenario, right?

Well, not so much.

In the past, CRTs would irrevocably go to the charity with which they were set up in the first place. But in recent years, donors have been allowed to design these trusts so that although the asset is irrevocably going to charity, the donor can change their mind on who the charity is.

This means that the gift is irrevocably going to charity — but not necessarily to your charity.

The irrevocable trust you have secured for your organization may not be so irrevocable after all. Click To Tweet

But that’s not necessarily a bad thing.

In fundraising, we must always keep our hearts focused on serving the donor. We’re here to help him or her fulfill the stewardship responsibilities they feel in their heart.

It’s All About the Donor

Keeping this servant attitude in our hearts, we can see how the uncertain outcome of a “revocable” Charitable Remainder Trust is actually in the donor’s best interest.

For example, if you have a 65-year-old donor who knows she’ll probably live another 20 years, she may know that she wants to make a significant gift from her estate, but she doesn’t know for sure if your organization will be the same organization in 20 years.

You may change your vision. You may change your leadership. Unforeseen circumstances may cause you to change profoundly. Knowing this, if your donor does not have the ability to change her mind, she may not give the gift at all. The old school, unchangeable CRT backs your donor into a corner because she cannot change her mind if something major changes your organization, and the result can be that the donor simply chooses to not do an Irrevocable Gift at all.

Staying on Track

The uncertainty of modern CRTs can also help you stay on track as a nonprofit leader. As the CEO, revocable Charitable Remainder Trusts help keep you from getting derailed from your mission, because you know your donors can pull out their gifts if you go far from your original course.

Staying Relationship-Focused

The uncertainty of CRTs also helps to keep your staff focused on relationship building. It’s a huge mistake when charities receive an “irrevocable” gift, and chalk it up as if the money was already in the bank and forget the donor — who’s still got a lot of life yet to live!

Losing our personal care for people and focusing on their money is an absolute tragedy. Click To Tweet

But having an uncertain outcome for CRTs should keep us laser-focused on the desires and needs of donors instead of getting complacent thinking we’ve got the gift in the bag.

No More Missed Opportunities

This donor-centric approach keeps us from losing the heart of fundraising, which is serving donors, and it keeps us from missing out on great opportunities that can come our way.

There are times when a donor sets up their CRT thinking they have 20 years left to live, and 10 years into it, she realizes that she doesn’t need the income from the CRT anymore. If you’ve been keeping your relationship with her strong and vibrant, she can come to you and give the charitable trust asset today rather than waiting until she dies. But, if you haven’t maintained your relationship with her, chances are she will pull out her gift or change the beneficiary to the gift.

If you want to know more about Charitable Remainder Trusts and how The Giving Crowd can help you raise asset-based and planned giving funds, let’s talk.

The call is free, and you don’t have to buy anything to see if we’re the right fit for you.