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The Metamorphosis of Charitable Gift Annuities
Perhaps the single greatest source of argument and concern for a charity’s financial development operation is the issue of planned giving. It is a division ripe with potential but difficult to cultivate, due in large part to the expense associated with the establishment of a planned giving operation. In addition, planned giving operations and the gifts that comprise them, all require a level of patience difficult to justify for charities trying to deliver service to their constituents today.
While a CGA or bequest is a fantastic donation, it is unfortunately one that does not provide positive impact to the cash flow of the issuing charity until the death of the donor. Thus, it is impossible for an organization to appropriately budget revenue streams from these gifts until their program is well established and the volume of planned gifts is such that a relevant history can be anticipated and, more importantly, incorporated into budgetary considerations. Add to this the stress of financial performance by the banking institution managing the donated funds, not to mention the longevity risk of donors living longer than expected lives, and it is no wonder most development professionals feel they need a bullet proof vest when the topic comes up at each month’s Board of Director’s meeting.
Metamor has revolutionized the process. We have taken the concept of Charitable Gift Annuities and transformed the way business is done – retaining all of the benefits to the donor while eliminating the investment risks to the issuing charities.
In short, the Metamor model creates immediate income streams for social profit organizations, secures the transaction and future payments to the donor, and provides for an additional stream of income to the charity upon the death of the donor(s), through a Legacy Refund option.
Truth in advertising is always appreciated. At Metamor, we think a Charitable Gift Annuity should actually be a commercial income annuity with a leading life insurance company – not just a pooled income fund managed by an advisor. Our proprietary business model accomplishes just that, while maintaining the integrity of the donation, following the guidelines established by the American Council on Gift Annuities (ACGA) and meeting with the approval of the IRS, through two Private Letter Rulings.
The Metamor Model
Once a gift has been secured by the charity, and an agreed upon annuity payment has been discerned using ACGA guidelines and PG Calc, or similar planned giving software, a call will be placed to Metamor Charitable Funding by the issuing charity. Instead of turning over a donor’s entire financial gift to a banking institution to manage in their pooled income fund, Metamor will broker a life only commercial income annuity purchase with a highly rated life insurance company, on the behalf of the charity. Metamor will place the agreed upon fixed annuity payment between donor and charity, at a cost that is typically 20-30% less than the total value of the gift, freeing the additional proceeds for immediate use by the charity, as designated by the donor.
The tax deductibility of the donation remains the same, as the gift adheres to ACGA guidelines and appropriate mortality tables. Payments are made from the life insurance company directly to the charity or the donor (if requested by the issuing charity, for their administrative convenience). Upon the death of the donor, an additional lump sum payment, or Legacy Refund, representing the difference between the donation proceeds used to purchase the annuity (the premium paid to the life insurance company) and the lifetime benefits (paid to the donor), will be sent to the issuing charity as a single lump sum. If a donor has outlived their projected life expectancy and there is no surplus available, a refund will not be paid to the charity.
Leveling the playing field for all charities
Not only is the Metamor model advantageous to existing programs, it is the catalyst for small to medium sized public benefit corporations to enter the world of planned giving. No longer does a respective Board of Director’s need to weigh the risk and reward of establishing a planned giving arm and the time necessary to realize accountable revenue from such an endeavor. Stressful nights and an eye on stock market performance are no longer necessary by the development staff – allowing them to focus their efforts on cultivation of new donors. CGA’s can be solicited by the development staff of any 501c3 (subject to State regulations), allowing Metamor to serve as the transaction facilitators on their behalf.
Costs
Our services are completely free to the issuing charity, offering yet another distinct advantage to the Metamor model over existing pooled income fund models, who charge annual management fees, regardless of their performance. Metamor is paid a one time commission by the life insurance company, allowing the charity to further leverage the gift they have received into vital mission driven services.
It is important to note that all life companies pay Metamor the same commission, so there is no advantage to placing donation proceeds with one company over another. Metamor has one goal in the transaction - securing the lowest possible annuity price for the issuing charity with the highest rated life insurance company.
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