FundSvcs Community

questions I have: -- Should charities have a written policy that includes 1) explicitly telling donors beforehand that there may be losses during the brief holding period between receipt and liquidation, and 2) what is ultimately usable by the charity (net of loss/gain and commission) will not be the same gift crediting amount as provided in their gift acknowledgement letter? -- For stock-funded gift annuities and CRTs, the same question as above. If the mean price of the stock on day of transfer turns out to be a few thousand more than the net sales proceeds (including broker commission charges), does the charity make up the difference with cash to have the stated gift amount (based on mean price on date of gift) match the actual funding amount of the CGA/CRT? If not, the charity would be under-funding the life-income vehicle from the start. This may be OK, albeit undesirable for sure, for an individual gift annuity because the transaction losses will be "absorbed" by the CGA pool, but for a CRT it's not clear to me if the charity should make the gift "whole" by supplementing with cash....or would the custodial bank mark the losses taken during the float period as losses to the trust (assuming that the trust enactment date precedes or is at least coincides with the stock transfer date). PS. Our current policies and procedures do not allow for a donor's direct transfer of stock to our bank that manages our life-income assets... we need to receive the stock, take gains/losses, pay broker fees, transfer net proceeds to our life-income bank. Not great. Thanks, Tom Tom Yates Temple University 215-926-2545 tyates@temple.edu

Tom, there shouldn't be a brief holding period. At Duke and NC State, as well as with most of my clients, the stock is sold the moment it hits the account. I encourage you to read my white paper on gifts of securities at the download site that addresses this as well as ensuring there's no difference between the legal value of the stock and what goes to the fund the donor gives to. John John H. Taylor Principal, John H. Taylor Consulting 2604 Sevier St. Durham, NC 27705 johntaylorconsulting@gmail.com 919.816.5903 (cell/text) Serving the Advancement Community Since 1987 On Mon, Aug 12, 2019 at 1:09 PM Tom Yates <tyates@temple.edu> wrote: > questions I have: > > -- Should charities have a written policy that includes 1) explicitly > telling donors beforehand that there may be losses during the brief holding > period between receipt and liquidation, and 2) what is ultimately usable by > the charity (net of loss/gain and commission) will not be the same gift > crediting amount as provided in their gift acknowledgement letter? > > -- For stock-funded gift annuities and CRTs, the same question as above. > If the mean price of the stock on day of transfer turns out to be a few > thousand more than the net sales proceeds (including broker commission > charges), does the charity make up the difference with cash to have the > stated gift amount (based on mean price on date of gift) match the actual > funding amount of the CGA/CRT? If not, the charity would be under-funding > the life-income vehicle from the start. > > This may be OK, albeit undesirable for sure, for an individual gift > annuity because the transaction losses will be "absorbed" by the CGA pool, > but for a CRT it's not clear to me if the charity should make the gift > "whole" by supplementing with cash....or would the custodial bank mark the > losses taken during the float period as losses to the trust (assuming that > the trust enactment date precedes or is at least coincides with the stock > transfer date). > > PS. Our current policies and procedures do not allow for a donor's direct > transfer of stock to our bank that manages our life-income assets... we > need to receive the stock, take gains/losses, pay broker fees, transfer net > proceeds to our life-income bank. Not great. > > Thanks, > Tom > > Tom Yates > Temple University > 215-926-2545 > tyates@temple.edu >

Thanks John. We don't have a "holding period" per se -- we just don't have a mechanism for selling immediately upon receiving... liquidation happens the next trading day. Are you saying that the standard for all charities is to have a standing order to sell immediately (I mean, within minutes or seconds) upon receipt of donated securities? >> Tom

Yes - that is what I am saying. We had something like that in place at Duke back in the 1990s and most of my clients today have this. Some will have a dollar limit above which the broker must get "permission." However, normally if you inform the broker in advance to expect X number of shares of Y stock they know to sell regardless. The key is having a close relationship with your broker. If they receive something they were not expecting (per your advance notification), then they should contact you first. But my paper explains how to generally avoid that. John John H. Taylor Principal, John H. Taylor Consulting 2604 Sevier St. Durham, NC 27705 johntaylorconsulting@gmail.com 919.816.5903 (cell/text) Serving the Advancement Community Since 1987 On Mon, Aug 12, 2019 at 1:30 PM Tom Yates <tyates@temple.edu> wrote: > Thanks John. We don't have a "holding period" per se -- we just don't > have a mechanism for selling immediately upon receiving... liquidation > happens the next trading day. > > Are you saying that the standard for all charities is to have a standing > order to sell immediately (I mean, within minutes or seconds) upon receipt > of donated securities? >> Tom >