Recording Charitable Remainder Trusts with outside Trustee - as Proposal in Prospect tab

Claire SunSpiral

Hi all -


We have a Charitable Remainder Trust (with an outside Trustee), which states that we'll receive a fixed amount (say $100) when the donor passes away.  We are not the trustee, so we don't have the trust assets - our Accounting department just recorded a receivable for the present value of the expected amount, adjusted each year for the donor's life expectancy.


We're trying to figure out the best way to record this in RE.  Previously, they had recorded a pledge for $100, but that's not correct.  We don't have a pledge receivable on the accounting books for $100, since we have this other receivable based on present value/ life expectancy.


Here's what I'm thinking:


1) record the full $100 as a "proposal" in the Prospects Tab.

2) record a "gift" (linked to the proposal") for the initial revenue recognized on the gift, and for each annual adjustment to the receivable value, calculated by the accounting department.

3) once we receive the final cash, there will be one final "gift" that will also be linked to the proposal, but otherwise, the cash is received by accounting, not Development, since it's a conversion from a receivable asset to cash - not a new gift at that time.


How does this sound?  Does anyone have a better way?  Should we be using Planned Gifts?  (but if we do, then what happens when we get the final check for $100?).


I'm a newbie to RE - I mostly work in FE - so thanks for your help!


Claire

 

Debra Holcomb

On the Development side, we do not track the adjustments to the CRT value over time as that's up to Finance.  But, every organization is different and what may matter most is what your reporting needs are and what your auditors require.  I would create the proposal so you can track all activity related to the CRT in one place.  If the CRT beneficiary is irrevocable and you have an amount in writing, I would create a pledge on the donor's record.  When the distribution is received, it would be a pledge payment.  Booking it with finance would depend on your policies. What you want to be sure of, is that it's not counted twice as these gifts can take a long time to arrive.  We just received a CRT payment for one that was recorded in RE and booked by our finance team in 2004.  The distribution was entered as a pledge-payment, but there was significantly more than expected which was entered as a one-time gift.  The amount of the pledge will not be reported in our fundraising totals for this year as it was counted in 2004, but the payment above the pledged amount will be counted this year.