A story building for donors which came in two, long-term arrangements gives - annuities of charitable donation and donor funds - emerged from the bankruptcy court.
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Andrew Councill for the New York Timescreditors takeKenneth M. Misken, who represented the Committee of creditors of the bankruptcy of the National Heritage Foundation.The National Heritage Foundation, 9 000 - donor invested 25 million dollars in value have been erased under a restructuring plan approved on 16 October by the bankruptcy court Federal District is Virginia, in Alexandria. Money from the Fund was used in part to make lump sum payments of 107 people with pension charitable foundation, which filed for protection in bankruptcy in January.
People working in charities and Philanthropy experts say that the National Heritage Foundation is a flap, rather than a sign of a basic problem in the sector. But even this rare event raises the possibility that in the weakness of the economy, of similar cases could follow.
However, the outcome of the case highlights a legal reality that some donors prefer when they contribute to such funds: once given, the money belongs to the Organization of reception and it is not always clear what it can do with the funds.
"In approving the use of donor funds to pay creditors, the Court found that they were the property of the estate in bankruptcy," said Kenneth M. Misken, a lawyer with McGuireWoods in McLean, Virginia, representing the Committee of seven members of the creditors who negotiated the plan.
On the other hand, charitable gift annuities are a responsibility, because in exchange for a donation, non-profit promises to pay a fixed amount of money each year for the donor and perhaps the surviving spouse for the rest of his life.
Richard l. Fox, a lawyer with Dilworth Paxson in Philadelphia and author of "charitable giving: taxation, planning, and strategies" (Thomson Reuters, 2008), said the conclusion of the Court was unfair to donors, adding, "I don't think any ever proposed donor if charity does something screw up its finances that the donor funds will be invaded.
Of course, many other funds donor contributors suffered recently, then that account values collapsed. When this occurs, or a fund goes bust, the recipient charity organizations lose and the intention of the donor is upset.
Jane Wilton, General Counsel of the New York Community Trust, one of the largest community foundations in the country, the organization said discourage donors who regularly add money to the accounts and to make grants, rather than money to accumulate, take market risks. Many funds donor, contributors may recommend a variety of approaches to investment.
To configure an account to fund the donor, contributors donate irrevocably to the charity which offers the program - which may be affiliated with a University, the religious organization or financial institution - and can claim a deduction of the income tax. After the donation, contributors can make recommendations which charities should receive subsidies on the account, and charity sponsor typically honor their wishes. But it is not required to.
Maurice and Theresa Townsley of Monterey, California, donated money and assets totaling $ 1.2 million to an account with the foundation of the National Heritage. They later learned that the Foundation has committed most of their donations as security for a bank loan before the bankruptcy. With the approval of the Court, the Foundation has applied these funds to repay the loan in September.
The Townsleys, which has not responded to requests repeated comments and eight other donors have each filed another case, accusing the Foundation to mislead their donations to make. The Court has not yet ruled on this issue. When the filing of the Foundation for the protection of the bankruptcy, approximately 200 people with the donor funds in accounts filed claims; all were rejected except for the nine false assertion.
The Foundation describes itself as providing various support services for donors and on its website (www.nhf.org), said that it "has become the standard Fund donor." However, Kim Wright-Violich, President of the Charity Fund, Schwab said, the Foundation has a long history of clashes with the Internal Revenue Service and the practices which was subsequently banned by the 2006 Pension Protection Act.
Jan h. Ridgely, vice President of the Foundation and the daughter of its founder and Chief Executive, j. t. Houk II, said what happened to the donors was "tragic and inevitable," caused by a judgment of $ 6.2 million awarded to a Texas family who became then a creditor. The Board of directors includes his mother, Marian and her brother, John t. Houk III.
With shrunken endowments, charities seek to strengthen strongly giving marketing gift annuities, focusing on the flow of income they offer. Most of the charities of base their payments on the suggested maximum rate the American Council on gift (available at www.acga-web.org) pension. These are lower than those of the annuities of commercial insurance companies because the factor of annuity gift in the hypothesis that, when the donor dies charity receive about 50 per cent of the initial value of the amount transferred.
Many people holding these assets is retired. For example, the Federation of the UJA of New York has approximately 900 pensioners whose average age is 78, said William Samers, Vice President of the Organization to give and planned allocations. But it warned the donors in purchases of annuity gift that these investments are not a certainty. They are backed by the assets of the charity, and if the Endowment Fund dries, or the Organization stops, payments will stop. In a case of bankruptcy, the owner of the pension becomes an unsecured creditor.
"More Articles by giving" a version of this article appeared in print on November 12, 2009 page F2 of the New York Edition.View the original article here
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