Planning Your Gift
Private Letter Ruling ("PLR")
Committee on Development Meeting
June 3, 2005
An article in The New York Times on Sunday May 22, 2005, noted Harvard obtained a special ruling from the Internal Revenue Service allowing donors to establish charitable remainder trusts that participate in the investment return of the Harvard endowment.
If you saw that article, undoubtedly, two thoughts came to mind:
1.) Hamilton's endowment performance over 1, 3, 5 and 10 years has been among the best in the country (99, 94, 96 and 97 percentiles, respectively).
2.) Can Hamilton's charitable remainder trust donors have the same opportunity?
Yes, very soon Hamilton hopes to offer existing and future charitable remainder trust donors the option of having their trusts participate in the investment return of Hamilton's entire endowment. The Times article could have mentioned that Hamilton was among the early not-for-profit organizations to request a Private Letter Ruling from the I.R.S. Ropes & Gray, counsel to Harvard, submitted Hamilton's documents on November 5, 2004.
As of March 31, 2005, Hamilton managed planned gifts totaling $65,710,000, including ten charitable remainder unitrusts, with a market value of $24,294,000, that are invested with a portion of Hamilton's endowment.
Allowing charitable remainder unitrusts, with payments based on annual valuations, to participate in the investment return of the entire endowment could provide significant benefits to Hamilton and to the beneficiary. If endowment performance exceeds the return from current investment options, the increased growth of principal means greater payments to the beneficiary and a larger remainder value for Hamilton. Although not yet finalized, payments to beneficiaries from trusts that participate in the entire endowment investment return may be taxed slightly higher than they are at present.
Providing Hamilton receives the Private Letter Ruling, charitable remainder trusts will be allowed to participate in the investment return of the entire endowment without being tainted by Unrelated Business Income (UBI).