Legacy Giving Impact Report by Reed College

Legacy Giving

Impact Report

This tradition of generosity reaches back to Reed’s roots— the college itself was established through a bequest from the estates of Simeon and Amanda Reed in 1908.

A ME SSAGE FRO M K AT HY Before we all retreated to our homes and jammies, I attended a conference in real time—the kind where real people sit in actual breakout rooms and discuss business trends face-to-face. At this conference, the “hot new trend” among charitable gift planners was recognition that most people make gifts of cash and publicly traded stock to charities but that those same people hold most of their wealth in non-cash, non-stock assets (see page 1). The takeaway was that gift planners should be suggesting to their donors the possibility of making charitable gifts of assets other than cash and stock. And I thought, hot new trend? Hmm. I work at Reed, and for the past fifteen years, Reedies have been challenging me with gifts of every asset under the sun. Nothing hot, new, or trendy about it. So I am dedicating this issue to those Reedies and to their creative gift ideas—the ones we have accepted and the ones we haven’t. Here are a few of my favorites:

• • • • • •

Swanky condominiums Not-so-swanky condominiums Mineral interests Royalty rights Burial plots A silo full of wheat

• 400 Anatolian kilims from a Reedie to fund a Flying Carpet Scholarship that includes, if necessary, additional funds to pay for travel to and from campus • 47,505 shares of a privately held nude mouse company • Bags of gold, both currency and collectible (but we declined the bag of uncut gems) • Commercial warehouses • A strip mall • Orange groves • Fourplexes, triplexes, apartment complexes • Family homes, beach homes, rental homes

Typically, anything that is not a gift of cash or publicly traded stock ends up on my desk, and there is nothing hot, new, or trendy about that either. (Cash and publicly traded stock also end up on my desk, especially when they are funding a charitable trust, annuity, or other structured gift, but that, too, is for another letter.) So, if you’ve been thinking about what to do with the family burial plots, or anything else burning a hole in the old illiquid asset list, then give me a call. You will add to the many reasons that I consider mine to be the best job on the planet. There are many ways to #lovereed.

We have also received countless estates, many of which included the donor’s house and all its contents. It is amazing how many bags of gold teeth I have encountered over the years. (Yes, there is a market for them.) There are some things that we have had to decline, with regret: a rural ’50s diner, but only because we would have had to run it for a period of time; a miniature Shetland pony; and all of the contents of one deceased alumnus’s apartment, which turned out to be 3,000 adult magazines, but that is for another letter.

Kathy Saitas Advancement Counsel and Senior Director of Gift Planning

T HE E L IOT SO C IE T Y The Eliot Society is a group of committed supporters who have informed Reed that they have named the college as a beneficiary in their will, trust, or retirement account or who have made a life income gift to the college. This tradition of generosity reaches back to Reed’s roots—the college itself was established through a bequest from the estates of Simeon and Amanda Reed in 1908. The Eliot Society is named for Thomas Lamb Eliot, who first suggested to Simeon and Amanda that they use their financial resources to found an institution of learning in Portland. Eliot chaired the five-member board of trustees that organized Reed College and set it on course to become the preeminent liberal arts and sciences college it is today. Over 600 alumni, parents, and friends of Reed are members of the Eliot Society. Members are honored guests at college events and receive periodic information from the college about charitable planning or tax and estate law changes. By becoming a member of the Eliot Society, you make a commitment to the college that reflects your aspirations for Reed’s future, just as Simeon and Amanda Reed did when they made plans for the college in their will.

CREATIVE MINDS; CREATIVE GIFTS Natural curiosity, analytical thinking, and creativity are hallmarks of the Reed community. This last distinguishing trait—creativity—is especially evident in the careers of Reed alumni, whether they pursue mathematics, lab sciences, music composition, or studio art. So it’s no surprise that Reedies also engage in creative philanthropy. Most philanthropic gifts are funded through readily accessible cash and stock, but most American wealth is held in non-cash, non-stock assets. A recent Federal Reserve Survey of Consumer Finances (2016) reports that the vast majority of wealth held by US households with a net worth in excess of $1 million is held in retirement funds, real estate, and business interests. Donors may have much more power to support the institutions they care about if they extend their focus beyond gifts of cash. While the philanthropic landscape is beginning to change across the US to align type of giving with type of wealth, Reedies are leading the way with creative gifts—gifts that are good for them and good for Reed. A 2019 client analysis by TIAA/Kaspick shows that Reed has been punching above its weight when it comes to creative funding approaches, particularly in the world of charitable remainder trusts. In a peer group that includes many higher-resourced institutions like Williams and Bowdoin, Reed ranks in the top five on a number of measures. One such measure is life income gifts—a creative approach that uses a donation to structure a gift that, in turn, makes payments to the donor or designee for a term of years (typically a lifetime). The life income gift remainder is distributed to the charitable institution at the end of its term. In total life income gifts established over the last five years, Reed ranked third among its peers. In life income gifts funded by real estate or other non-cash, non-stock assets, Reed ranked fourth. Importantly, these gifts will have a significant impact when they eventually come to the college. Reed ranks fifth among its peers in terms of the projected gift to Reed expressed as a percentage of its current value (present value ratio). And, in terms of life income gift program growth over time (flow ratio), Reed ranks first, which demonstrates that Reed is an industry leader in this type of philanthropy. Behind all these figures are Reedies who were inspired to put creative thinking to work on their finances. In the following pages, we invite you to learn more about Reed alumni who took a look at their financial landscape and their ability to support Reed and reimagined both.

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T H RE E RE A L-LI F E RE E DIE S PU T T IN G C RE AT IVE T HIN KIN G TO W O RK I N T H E IR PHIL AN T HRO PY

Property Management Burden Converted to Trust Income Stream

Situation: A Reed graduate inherited two small condo buildings in a desirable beach town in California. Although she lived at a distance, she managed the buildings personally to supplement her retirement income. Managing the properties became more challenging over time; the drive got harder—as did keeping the units rented and maintaining the property. Solution: By transferring the properties to a Charitable Remainder Trust, she was able to relieve herself of management responsibilities but still receive an income stream for life from the trust. What’s more, the income stream is higher than what she was receiving when she managed the properties. Not only is this good for her, but when the trust terminates, the remaining assets will come to Reed to support the canyon, a source of inspiration for many. Bonus: She created a significant charitable deduction that she could take in the current year and carry any unused portion forward for the next five years.

Appreciated Assets Unlocked Without Tax Damage

Situation: A Reedie had a number of family members and friends for whom he wanted to provide supplemental income—including himself and his wife, a differently abled sister, his children, his executor, a few friends, and a small business owner. His power to provide this support lay in appreciated stock, but selling the shares would have wreaked havoc on his own tax situation and ultimately on his ability to provide the very support that was motivating the sale. Solution: He established seven charitable remainder trusts over the course of 12 years. Each trust provided a family member or close friend with an income stream. All were funded with appreciated stock. He paid no capital gains tax, received a generous charitable deduction, and now provides an income for life to those he would like to help. When each trust terminates, its remainder will be used to establish and later augment an endowed scholarship fund at Reed. Bonus: The income from these trusts covers the donor’s monthly retirement-home fees.

Dick Lingelser ’55 graduated from Reed with a degree in economics. In addition to his regular Annual Fund support and matching support from his longtime employer, he and his wife, Linda, have led the way in creative giving by establishing seven charitable remainder trusts. Here are his reasons:

DICK & LINDA

WH Y I HAV E INV EST E D I N C H A RI TA B LE RE MA I N DE R T RU ST S

Commercial Warehouse Becomes Source of Intergenerational Income

Situation: A Reedie who was president of a biotech company sold the company but retained ownership of the commercial warehouse where the business was located. When the company sold, the buyer moved operations out of state, leaving the warehouse unrented and putting the Reedie in the undesirable position of becoming a commercial property manager. Solution: Rather than actively or passively managing the property, this Reedie decided to transfer the commercial warehouse into a Charitable Remainder Trust and, in doing so, create a robust income stream benefiting her and her children. She avoided the property management role but retained the income stream she would have received from managing the property. At the end of the trust term, assets remaining in the trust will come to Reed to support the college’s areas of greatest need. Bonus: The property had appreciated since she purchased it; by transferring it to a Charitable Remainder Trust, she did not have to pay capital gains tax. She created a significant charitable deduction that she could take in the current year and carry any unused portion forward for the next five years. In these examples, donors provided life income for themselves and their beneficiaries totaling over $300,000 just last year. These beneficiaries will continue to receive income for their lifetimes, and the net present value of the future gift Reed is expected to receive is over $10 million. This is a powerful win-win. Support for Reed that has come from life income gift remainders over the last ten years has totaled over $28 million. The majority of these funds (67%) were directed to support Reed’s robust financial aid program. The second largest use of funds (15%) was the general endowment, while other uses included professorships, research funds, the renovation of the sports center and chemistry labs, technological innovation, and the establishment of the computer science and environmental studies programs. In all these cases, creative thinking helped donors maximize their potential to support the college.

Are you feeling creative? If you would like to receive a gift planning consultation, please contact Kathy Saitas at 503-777-7759 or giftplanning@reed.edu.

• Returning to Reed the benefit I received from the George F. Baker Scholarship for tuition, room and board, and books. This totaled $5,080 for four years, a sum I did not have in 1951. • Avoiding capital gains. • Securing a tax deduction. • Receiving income, limited to 5% so that the principal might grow.

• Providing some income to my sons, sister, and nephew. • Providing life income for my wife, Linda. • Acquainting our executors, approximately our children’s ages, with charitable remainder trusts for their own use and to help them better understand administering our estate. • Aiding other charitable organizations as partial beneficiaries.

ELIOT SOCIETY DONOR PROFILE: THE STOCKMANS

FRO M PRO BL E M TO SO L U T IO N IN O N E AC RO N YM: C RT Peter Stockman ’77 and his wife, Terry, found themselves in the type of dilemma some of us long for. They were on the brink of a windfall, but they were also poised for a hefty tax bill that could come with it. Earlier in his career, Peter had worked at Accenture, a consulting firm separated from former accounting and consulting giant Andersen Worldwide. “I was a small potatoes partner there,” says Peter, who received founder shares when Accenture went public. At the time, the share value was de minimis. “I never expected them to appreciate, but they had appreciated substantially.” In fact, the shares had come to represent a significant portion of the Stockmans’ net worth. Peter and Terry became concerned that they had too much value tied up in this one company. “You shouldn’t get sentimental about a large holding of shares in a company you have worked for,” says Peter. “You should resist the urge to hold on to these things and just do the right personal finance thing, which is to diversify.” Cashing out to diversify would come at a steep price if they sold all their shares. “We would have spent huge amounts of money in capital gains tax,” says Peter. In diversifying their new wealth, they would lose a large part of it. To solve this problem, Peter and Terry got creative. They had been making gifts to Reed for many years and, through conversations with the college, discovered that by establishing a Charitable Remainder Trust (CRT) with Reed, they could reimagine their situation on their own terms. In transferring a portion of their zero-cost-basis shares to the CRT, they would avoid paying capital gains tax on these shares and generate a healthy charitable deduction carry-forward, shielding ordinary income over six years. Plus, they would receive an income stream from the trust for the rest of their lives. Best of all, when the remaining trust assets eventually came to Reed, they would be larger than the cash gifts Peter and Terry believed they could give in their lifetime.

Peter and Terry Stockman live in New York City. Peter graduated from Reed in 1977 and has served on the Board of Trustees since 2008.

“It was a no-brainer,” says Peter. “This is a method of diversifying in a very tax-efficient way. We got both an immediate tax benefit and a subsequent tax benefit with a charitable tax deduction carry-forward. And the annual payments provide a base level of income that we can rely on.” As of last year, the trust had appreciated by 50% since its inception, which generates increased annual income for the Stockmans as well as an increased future gift to Reed. The projected value of the remainder gift to the college is four times the value of their original gift to create the trust. “The great thing is that it’s essentially a gift multiplier to Reed,” says Peter. “It’s certainly more money than we could give the college in cash.” Ultimately, the couple wants to see the college thrive. “It always struck me,” says Terry, “that Reed has the right values in terms of academics and seriousness. The students have something substantial underneath the surface that’s easy to underestimate.” Reflecting on his own experience, Peter says, “What Reed did for me and for a lot of people is to produce graduates with the conviction that they can master any subject in a very short amount of time. You can really dig into a subject, maybe a very narrow slice of a subject, and when you do, you’ve got it mastered. And for what Terry and I did for a living, which is strategy consulting, it’s a huge plus that you can go into a client that you’ve never met before, a situation that you’ve never encountered before, and be confident that you’ll get your arms around the data, you’ll get your arms around the issues, and understand the situation in a way that will yield real insights for your clients.”

Tina Stauffer ’22

DEEPEN YOUR ENGAGEMENT

Are you interested in deepening your engagement with Reed by • updating your gift or making a gift to Reed in your will or trust; • creating a named endowed fund; • making a gift that generates lifetime payments to you or your loved ones; • donating real estate while retaining the right of residency or receiving income payments; • volunteering either on campus or from your home? We can help! Contact Kathy Saitas in the office of gift planning. 503-777-7759 giftplanning@reed.edu reed.edu/legacygiving

“Growing up, I knew I loved challenging projects and classes, which is why I chose Reed. I have come a long way from my high school graduating class of 11. Without the help of donors, none of this would have been possible.”

Ryan Dooley ’22 “I would like to express my utmost gratitude for the support of Reed donors. Their kindness is the reason I have had the chance to fall in love with Reed.”

Kacey Ottenbacher ’21 Isabelle Sinclair ’22 “My time at Reed is one of the best gifts I’ve ever received. Thank you for making this possible!”

“Gifts to Reed help me achieve my goals and strive for success. I am studying the functions of proteins and the necessary regulatory steps required to produce them . . . and I am loving every moment of it.”

“The true meaning of life is to plant trees under whose shade you do not expect to sit.”

— Nelson Henderson