Martin Shenkman
Martin Shenkman

CPAs, Charitable Planning, Good Deeds and Marketing

Eight tips on how to reach out to local charities and encourage and facilitate donations during economically tough times.

October 5, 2009
by Martin Shenkman, CPA, MBA

Charities are struggling. Green shoots and U-shaped recoveries aside, endowments have been hurt and for many charities donations are down substantially. For many CPAs, non-compliance special engagements are down. Here’s a solution for these dilemmas: Practitioners should reach out to local charities and offer to speak to their boards and donors on how to encourage and facilitate donations during economically tough times. This provides a great opportunity for exposure to new clients, will likely have some positive impact on fundraising for the charities involved, and whatever the result, it will give you that “feel good” benefit of having made a contribution to an important cause.

One key to enhancing donations is to help prospective donors understand that there are many ways to give and if a donor is having a tough time financially, there are options other than not giving. Practitioners have the skills to educate donors about these. Many charities — especially smaller local charities — desperately need this help. Line up a charity, prepare a handout and annotate it for your notes.

Tips on Targeting Donor Audience

Tailor the following tips, designed for a lay-donor audience, to the charitable cause involved and the target donor audience:

  1. Make a Mark with Insurance. Suppose a young prospective donor wants to help promote their charitable cause and get themselves noticed for business reasons. They can arrange for the charity to buy a permanent life insurance policy on their lives and pay the premium. For a donor in their 30s a $100,000 policy, a pretty big commitment for most charities, might cost net of tax under $500/year. During lean times, this type of commitment can inspire other donors and inspire the charity to advance the position of the donor. Caution donors that if they merely name a charity as beneficiary of a policy, rather than owner as well, there will be no charitable deduction since it is an incomplete interest. IRC Sec.170(f)(3)(A).
  2. Harvest Stock Market Gains. While most investors and prospective donors are still licking recession investment wounds, the fact is that some markets are up 50 percent from their lows. Even though portfolios may be down, many donors have appreciated equities that can be cherry-picked for donation to their favorite charities. If the donations are made to a charitable remainder trust (“CRT”), gain will be distributed out to the donor as part of the CRT tier system. IRC Sec. 664(b).
  3. Defer, don’t cancel. Simple, but often not considered. Say a donor has traditionally donated $5,000-per-year to a charity. They’re uncomfortable in light of the decline in their portfolio and investment earnings making that gift this year. Defer it. Pay $2,500 this year and next year. Alternatively, pay $1,000 this year and commit to $2,000 next year and the following year. If business picks up the donor could pay it all next year. This maintains the donor at the same giving level as prior years. This can be important for maintaining the confidence of the donor base. For example, many charities have honorary societies for those donating over a certain level. Perhaps deferred commitments should be permitted to maintain that participation through the economic crisis so the charity will continue to appear viable to other donors.
  4. If Cash Short — Donate Stuff Instead. Conspicuous consumption is no longer “in.” If a donor doesn’t have the cash to continue prior giving levels or to make a desired gift, they can often donate tangible property, such as art, jewelry or other valuables to the charity. Donor’s looking for the chic, can downscale to the benefit of a needy charity. A local charity may be able to use the property in its offices or operations. If not, auction houses are equipped to handle the entire donation process from taking physical custody of the tangibles, appraising and selling them, and then remitting the net proceeds to the charity. Be sure to caution prospective donors as to the income tax restrictions on their deduction if the donation cannot be used in the charity’s exempt functions.
  5. CLATs to Help the Charity and Secure the Kids. Many wealthy donors have watched their hard working kids lose jobs or be downsized and worry that their kids will never attain the standard of living they enjoy. Combine current economic conditions, the desire to shore up a child’s future finances and help a charity at the same time for a winning strategy. In a charitable lead annuity trust (CLAT) the parent, for example, can donate stock to a charitable trust. For sample documents see Rev. Procs. 2007-45 and 2007-46. The named charity can receive an annuity payment each year for the duration of the trust. These payments to the charity can be structured to reduce the present value of the gift to the named heirs to near zero. The named heirs receive the trust assets when the trust terminates. CLATs are a great strategy in a low interest rate environment because the amount that must be donated to the charity is lower than in a high interest rate environment. With asset values low appreciation over the decade’s long terms that are typical for CLATs should grow substantial assets for the heirs. For donor-parents worried about their children being able to save for retirement, time the duration of the CLAT to the child’s attaining retirement age, say 65, and a charitable giving technique doubles as a retirement plan for the donor’s child. Thus, a CLAT can eliminate gift taxes (and no one seems to believe that the estate tax will be eliminated in light of current deficit projections), provide a retirement benefit for a child hammered by recession, and meet a prospective donor’s goals of helping a favorite charity.
  6. Give to Get. If a prospective donor’s cash-flow has been squeezed from the decline in interest rates and stock market performance, they can structure gifts using charitable gift annuities (CGAs) or charitable remainder trusts (CRTs) to both benefit their favorite cause and simultaneously provide themselves with a pretty assured cash flow. Although CGAs are generally sound, in light of some of the bad press, explain to prospective donors how they can verify the security of a particular charities CGAs by confirming the status with state regulatory agencies, inquiring as to whether the issuing charity conforms with the American Council on Gift Annuities guidelines for CGAs, and into the general financial soundness of the charity. CRTs can pay an annuity or unitrust amount (fixed percentage of the asset values each year). For easy to value assets, such as securities, if the prospective donor is worried that inflation resulting from bailouts and stimulus payments might trigger significant inflation, structuring the CRT payment as a unitrust will provide an inflation hedge (as asset values inside the trust increase, so too will payments each year to the donor). For a sample charitable remainder unitrust (CRUT) for a donor’s lifetime see Rev. Proc. 2005-52. If the donor’s economic situation recovers in later years, they can always donate some or all of the annuity payment they receive to the charity.
  7. Safe Cash-Flow — Donate Unneeded Life Insurance. A prospective donor may own life insurance policies that are no longer needed as a result of the estate tax exclusion increasing in 2009 to $3.5 million. Some clients may have purchased insurance to provide liquidity for a closely held business, or cover estate tax on its value. The recession may have reduced the value of the business, encouraged the children to pursue other lines of endeavor, etc. If there are unneeded polices, donating them to charity can save the clients the annual premium costs, simplify their financial situation, and garner them a valuable income tax charitable contribution deduction. Caution donors to confirm in advance with counsel for the charity that there are no legal impediments to the charity accepting the policy (the charity must have an insurable interest).
  8. Give of Yourself. The best and most personal way to give is for “donors” to give of their time and energy. This includes practitioners like yourself giving presentations and tax guidance. Although there is no deduction for a contribution of time, it can provide great personal rewards. Reg. 1.170A-1(g).


There are a myriad of creative ways to continue or even enhance charitable giving during tough economic times. Creative planning can help charities through tough times, enable you as a practitioner to provide a unique contribution through your special expertise, and perhaps even provide a new and rewarding practice development opportunity.

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Martin M. Shenkman, CPA, MBA, PFS, JD, is an attorney in Paramus, New Jersey and New York City. His practice concentrates on estate planning and administration, tax planning, and corporate law. He was listed in Worth magazine’s top 100 attorneys in 2007 and CPA magazines Top 50 IRS practitioners in 2008. He is a source for numerous financial publications including The Wall Street Journal,Fortune,Money and The New York Times. He has published 36 books and 700-plus articles. His most recent book is: Life Cycle Planning for the CPA Practice (AICPA). He is admitted to the bar in New York, New Jersey and Washington, D.C. He is a CPA in New Jersey, Michigan and New York. Shenkman is a speaker at the AICPA Sophisticated Tax Conference, November 16-17, New York City.