One of the split-interest agreements is a charitable lead trust. This is an arrangement where a donor establishes a trust in which a portion of the trust is distributed to a nonprofit organization for a certain term. At the end of the term, the remainder of the trust assets is paid to the donor or other beneficiary. The nonprofit may or may not hold the trust assets.
Another split-interest agreement is perpetual trusts held by third parties. The book says that this is not exactly a split interest agreement but is accounted for it in a similar way under the not for profit guide. A good way to think of it is if I established a permanent trust at a bank. All the income from that is to go to the not for profit organization of my choice in perpetuity. The present value of expected or anticipated receipts is recorded as a net asset and a contribution revenue that is classified as a permanently restricted net asset. The income received each year is recorded in the net assets as either unrestricted or temporarily restricted investment income. This would be determined by the trust agreement. If the value of the trust principal changes then it would be recorded as an addition or deduction from the permanently restricted net asset class.
The third split interest agreement is Charitable remainder Trusts. This states that a specific dollar amount or percentage of the FAIR VALUE of the trust will be paid to the beneficiary. At the end of the term of the trust, the principle is paid to the institution as unrestricted, or temporarily, or an endowment (permanently) based on the purpose of the trust. Adjustments in the present value of the liability are recorded in the Statement of Activities.
The 4th split interest agreement is Charitable gift annuities. This is very similar to a charitable remainder trust except that there is no formal agreement (no contract signed). The accounting is the same.
The 5th and last split interest agreement is a pooled (life) income fund. Represents when several assets with different agreements are pooled together. All of the income is paid to the donor over their lifetime. When the donor passes away, the assets go to the non-for-profit organization for either unrestricted or restricted purposes. The Assets are accounted for their fair value when the assets enter the pool. Revenue is recognized in the temporarily restricted net asset class. and discounted for the remaining expected life of the donor. The deferred revenue represents the amount of the discount for future interest.
One of the split-interest agreements is a charitable lead trust. This is an arrangement where a donor establishes a trust in which a portion of the trust is distributed to a nonprofit organization for a certain term. At the end of the term, the remainder of the trust assets is paid to the donor or other beneficiary. The nonprofit may or may not hold the trust assets.
ReplyDeleteAnother split-interest agreement is perpetual trusts held by third parties. The book says that this is not exactly a split interest agreement but is accounted for it in a similar way under the not for profit guide. A good way to think of it is if I established a permanent trust at a bank. All the income from that is to go to the not for profit organization of my choice in perpetuity. The present value of expected or anticipated receipts is recorded as a net asset and a contribution revenue that is classified as a permanently restricted net asset. The income received each year is recorded in the net assets as either unrestricted or temporarily restricted investment income. This would be determined by the trust agreement. If the value of the trust principal changes then it would be recorded as an addition or deduction from the permanently restricted net asset class.
ReplyDeleteThe third split interest agreement is Charitable remainder Trusts. This states that a specific dollar amount or percentage of the FAIR VALUE of the trust will be paid to the beneficiary. At the end of the term of the trust, the principle is paid to the institution as unrestricted, or temporarily, or an endowment (permanently) based on the purpose of the trust. Adjustments in the present value of the liability are recorded in the Statement of Activities.
ReplyDeleteThe 4th split interest agreement is Charitable gift annuities. This is very similar to a charitable remainder trust except that there is no formal agreement (no contract signed). The accounting is the same.
ReplyDeleteThe 5th and last split interest agreement is a pooled (life) income fund. Represents when several assets with different agreements are pooled together. All of the income is paid to the donor over their lifetime. When the donor passes away, the assets go to the non-for-profit organization for either unrestricted or restricted purposes. The Assets are accounted for their fair value when the assets enter the pool. Revenue is recognized in the temporarily restricted net asset class. and discounted for the remaining expected life of the donor. The deferred revenue represents the amount of the discount for future interest.
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