1. Leading Age – June 12, 2013
Diana Jamison
William Altavilla
William McMorran
Planned Giving Risk
Management for CFOs

2. JTMH/JTM/ESC
JTMH founded in 1963 & opened Canterbury Woods
In 1965, Episcopal Senior Communities (ESC) was formed
Canterbury Woods transferred
5 more CCRC communities were added; St. Paul’s Towers, Los Gatos
Meadows, Spring Lake Village, San Francisco Towers, Webster House
6 affordable communities; Oak Center Towers, Presidio Gates, Jennings
Court, and Lytton Garden Communities
2002 ESC formed Episcopal Senior Communities Foundation
Primary purpose is to raise funds for ESC communities
Administer those funds for the needs of the communities & its residents

4. JTM/Episcopal Senior Communities
6 Continuing Care Retirement Communities, with the
following accommodations
1,025 Independent Living
95 Assisted Living
10 Memory Support
376 Skilled Nursing
Affordable Housing accommodations
626 Independent Living
50 Assisted Living
Home and Community Based Services Programs
Senior Produce Markets, Senior Resources, Senior Center Without
Walls, Affordable Housing Programs
Servicing over 11,000 seniors in 6 counties
With over 700 volunteers

5. Episcopal Senior Communities
Foundation (ESCF)
Created in 2002
Outright gifts in FY 2013 = $1,150,776
77 CGA contracts = $2,693,946
11 CRT agreements = $3,261,566
Second annual Celtic Cup net proceeds of $101,000
golf tournament with 27 foursomes
Fashion show luncheon featuring Eileen Fisher designs
Supports resident assistance and our outreach
programs

6. Wills and Estates
Since 2000 we have had approximately 50 gifts from
Wills and/or Estates
Totaling over $2,000,000
With an average gift amount of $43,000
Purpose of gifts range from General Community
Funds to Capital projects

7. Managing CGA Risk
CA department of Insurance regulations
Establish Reserve fund with investment restriction
Large cap equities, government backed bonds
 10/90 until 2005
 After 2005 DOI amended to 50/50
ESCF’s Investment Policy is 30/70
Average 60.4% of original gift at maturity
Net amount $869K
Average gift size $37K

8. Protecting CGA Risk Exposure
Follow ACGA rates
Rates designed to result in residuum of ≥ 50%
Minimizes/relieves need for actuaries
PPA Disclosures
To be provided to prospective donor in advance of gift
Contain information about the gift annuity & issuing charity
Monitor market values/exposure quarterly
CFO review
Investment Committee
Market new gifts steadily
Ensure that staff and operations meet all regulatory
requirements

9. Protecting CRT Risk Exposure
Focus on Unitrusts over Annuity trusts
Use outside counsel for legal documents
Avoid generic fill-in forms
Document needs to support the plan
Make sure that donor uses own advisors
Ensure that donors requirements are met
Document everything

10. Summary of Risk
Management
Basic story and outreach is compelling
Focus on “plain vanilla” gifts
Most accepted are cash and securities
Avoid “hard-to-sell”
Do them well
Good system in place
Donors are satisfied
Good stewardship
Protect the Foundation’s multiple liabilities
Board fiduciary responsibilities
Legal responsibilities
Tax reporting requirements
Timely distribution of information

11. Core Principals
• Donative Intent
• Primacy of Donor(s) needs
• Timeliness of Response
Responsible stewardship

12. Defining Risk
Legal Issues with Estates
Inurement / Undue influence
Tax/Audit
Investment Risk
Fiduciary Oversight
Environmental
Pushing the Envelope

13. Legal Issues with Estates
Irrevocable pledges against the estate
Do you always request special notice?
Where is the progress/distribution tracked?
Are you willing to go to court?

14. Inurement & Undue Influence
A benefit to the donor or the Community?
Donor’s ability to make decision?
Appropriate safeguards?

15. Tax and Audit Risks
Make sure that donors receive accurate 1099s and
K-1s ASAP – Save time and calls
File all reports timely
What will the auditors ask?
What will the auditors say?

16. Investment Risk - CRTs
You are not at risk the same as with CGAs
CRUTs should never exhaust themselves
Hard to manage CRUT donor expectations
CRATs can and DO exhaust themselves

17. CRUTs vs. CRATS
CRUT pays a fixed percentage, re-calculated
annually. This offers inflation protection
CRUT payout must allow a 10% charitable
deduction
CRAT pay a fixed amount based on initial gift value.
CRAT payout must have less than 5% chance of
exhaustion

18. The Perfect CRUT Story*
Resident donated appreciated bonds =
$100K to an 8% CRUT in 1990
One year she received 8% of $92,000
One year she received 8% of $154,000
At her death in 2009, gift was $114,000
*Past performance no indicator of future results and the experience in one case is not representative of all cases

19. CRT Investment
Considerations
Balance income to donors with future value to
Community
Generally a 60/40 allocation is good
Other considerations (high payout or FLIP) may
influence specific gift management

20. Investment Risk - CGAs
Is there a clear investment policy?
Are there state-specific requirements?
Do you meet all your states’ requirements?
It’s your $$ if contract zeroes out

21. How It’s Supposed to Work
ACGA model is 45/50/5
Expected return is 4.25%
Assumption of 1% for investment/admin
Rates project a 50% residuum

22. Sample CGA Results ‘02-’12*
1. 44.59% $27,771
2. 48.89% $51,400
3. 60.47% $37,839
4. 58.5% $13,750
5. 80.08% $50,197
6. 20.41% $19,822**
** Long-term problems now corrected
*Past performance no indicator of future results

23. Impact of Allocation over
Time*
Alloc 3 Yr Return Incep Incep Yr
40/55/5 4.56 8.61 2009
30/70 2.65 3.17 2002
50/50 3.49 4.18 2002
10/90 3.10 3.60 2002
10/90 2.96 3.75 2002
10/90 3.72 3.54 2002
*Past performance no indicator of future results
Returns shown net of fees

24. Refundable Deposits
Can you create new gifts?
Variety of opportunities including:
- Outright gift
- Testamentary Gift
- Gift creating a CGA

25. Devil in the Details
Reality hinges on several factors including:
Initial contract and bond covenants
Formulas for discounting NPV
Depositor interest
Cost of $$

26. Expectancy for Female aged
80
Pick What’s Best!
• SOA Annuity 2000 w/ 1% Decline 11.9
• SOA Annuity 2000 w/o 1% 11.3
• IRA Uniform Table 10.2
• CGA Annuity Table 9.5
• SSA Expectancy w/ 1% Decline 9.3
• SSA Expectancy w/o 1% Decline 8.9
Actuarial Evaluation for 8283????

27. Fiduciary Oversight
Fundraisers and CFOs talk different languages
Board members have high expectations
Keeping up with donors can be difficult
Testing innovative strategies with gift models

28. Pushing the Envelope
Getting gifts at any cost or payout
Encountering environmental problems
Deal making
Losing sight of mission

29. Planned Giving Risk
Megacepts
Donative intent rules all decisions
Donors AND Auditors must be happy
Risk can be minimized
Benefits can be significant