Written By: David L. Eldridge, Ph.D., Associate Director of Individual Giving, Swarthmore College, and Carol Blakely Buchser, M.S., Swarthmore College Class of 1967 (in consultation with Renée Atkinson, Director of Gift Planning, Swarthmore College)
The philanthropic partnerships we form via planned gift discussions are grounded in the sensitive topic of mortality as we plan a donor’s final gift. These discussions also involve the complexity of matching donors with a myriad of possible planned gift structures with varied tax and financial implications and requirements. In this case,the creation of Carol’s flip trust accelerated a pre-existing bequest of real estate that she had established years before we began our work together. The transformation from a revocable bequest to an irrevocable life income gift nearly doubled Carol’s impact on Swarthmore’s Changing Lives, Changing the World campaign, expanded her class scholarship’s impact, and added to Carol’s delight in giving. Swarthmore’s donor-centric approach prepared David to follow Carol’s lead from our first meeting.Carol: I was thrilled with David’s news: my tenant stays in the condo until choosing to vacate. It’s a win-win situation! My tenant remains in place as long as she wants, and I get to see how Swarthmore benefits from this endowment, continuing its mission of changing lives, changing the world.
David: When we first met, you were so excited to show me how much your bequeathed property had increased in value! Listening to you talk about how your cancer experience inspired that gift demonstrated deep trust and motivated me to discover ways to turn the additional equity into philanthropy.
Carol: Attending Swarthmore changed my life in so many ways. When I contracted thyroid cancer in 2014, I set up a Living Trust and bequeathed the condominium I purchased in 1977 to Swarthmore. I am thrilled that the condo valuation has increased dramatically over 43 years.
David: I had no idea if it was possible to convert the added equity of Carol’s property into an expanded gift. After some consultation with colleagues, we discovered a solution: a flip trust! You were excited about the strategy, but you had a caveat.
Carol: I am devoted to my long-term tenant, who moved into the property in 2012. She is retired and lives alone but has two grandchildren living nearby whom she cares for. I felt strongly that it would be mean-spirited to inform the tenant that I was giving her a month’s notice to move out.
David: We then wrestled at the office with a new question: would the tenant’s ending the lease constitute a qualified flip event? Some of our external advisors furnished an answer. Since Carol would sell the house after her tenant leaves, we could use the standard flip event of the property sale.
David: We worked hard together with a number of my colleagues and the vendor that manages our trust investments to establish Carol’s trusteeship and to make sure that everyone shared an understanding of how Carol’s flip trust operates. As the current trustee, Carol will continue to receive rent and will pay all property expenses, including those accrued at sale (taxes, advisement, etc.). Swarthmore will then assume trusteeship over the sale proceeds and distribute quarterly trust revenue to Carol.
Carol: The process of setting up the flip trust was a smooth one. I received excellent guidance from the Swarthmore team and the trust investments vendor. I consulted with my trust attorney, and we were able to get all documents completed in short order. I would recommend a flip trust solution.
Planned giving is best conceived as a creative, solution-generating collaboration among donors, gift officers, and external advisors (Carol and David’s team comprised over 15 people and four organizations).