Question

Hello, this question relates to not-for-profit accounting. In what way(s) does a non-profit benefit from a split-interest agreement?

Answer 1

1. Split-interest agreements are contributions that assign the legal rights to certain assets to a Not-For-Profit and other beneficiaries or to simply say contributions that are to be shared by the nonprofit organization and other beneficiaries.
2. A split-interest agreement is created when a donor contributes assets directly to a nonprofit organization or places them in a trust for the benefit of the nonprofit organization, but for which the organization is not the sole beneficiary. The terms of these contributions do not allow the donor to revoke the gift and therefore they are considered unconditional pledges.
3. Split-interest agreements are either revocable or irrevocable. Revocable split-interest agreements are not recognized as contributions, while the benefits to be received by the organization related to irrevocable split-interest agreements are generally recorded as contributions. The accounting treatment varies for irrevocable split-interest agreements, depending on the type of split-interest arrangement created and whether the organization or a third party is trustee.
4. The most common type of spilt-interest agreement stipulates that the donor will receive a fixed payment every year for a period of time, either a fixed number of years or the remaining life of the donor. Common types of split-interest agreements are charitable lead trusts, charitable remainder trusts, charitable gift annuities and pooled (life) income funds.