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Participating in the Notre Dame Endowment
Plan for Notre Dame’s future. And for your own.
In 2004, the University began to explore the possibility of investing trust assets in a manner to earn the net rate of return of the endowment. Doing so required the approval of the Internal Revenue Service (IRS). On December 21, 2006, Notre Dame received a favorable ruling from the IRS and, thereby, became one of only a handful of schools, including Harvard, MIT, and Stanford, to be able to offer such a program.
The IRS ruling is a groundbreaking development that has enormous potential—for both the University and its benefactors.
How does it work?
By establishing a charitable remainder trust, the donor or individuals designated by the donor will receive payments for life or for a specified number of years. Trust assets that remain following the end of the term or the death of the beneficiary(s) will pass to Notre Dame, where they will be used at the donor’s behest.
To earn the same rate of return as the Notre Dame endowment, donors must establish a charitable remainder trust with a minimum gift of $100,000. Notre Dame must be the trustee and sole remainder beneficiary of this trust.
What is the benefit for me?
The Notre Dame endowment has realized a 14.8 percent annualized rate of return over the past 10 fiscal years—a substantial out-performance of various market indices. Qualifying trusts participating with Notre Dame have the potential for significant growth. Under the advise of the Notre Dame Investment Office, the endowment currently invests, and is expected to continue to invest, in a highly diversified mix of assets, including traditional stocks and bonds in domestic and foreign markets, as well as marketable alternatives, venture capital and other private equity, real estate, energy, and commodities.
Access to such types of investments is often limited and is rarely available to the average investor or mutual fund manager.
The IRS has ruled that charitable remainder trusts designating Notre Dame as the 100% remainder beneficiary may purchase units in the endowment pool, which would provide the trusts with the exact same net rate of return as the endowment. The appeal of this approach is simple: eligible trusts can now, for the first time, have an investment performance equal to that of the Notre Dame endowment, which has been in the top 1% of all college and university endowments over the past 10 years. The annualized net rate of return on the endowment in that period was 14.8%. However, please note that past performance is no guarantee of future investment results.
Consider, for example, if Jane establishes a traditional 5% payout charitable remainder unitrust with $100,000 prior to the IRS ruling (assuming an estimated 8% rate of return on the trust assets), she would receive an estimated $290,000 in lifetime payments. If her trust assets are invested in a manner that enables the trust to earn a 12% rate of return, Jane could receive roughly $650,000 in lifetime payments.
What is the benefit for Notre Dame?
The assets remaining in a charitable remainder unitrust after the specified term or death of the beneficiary(s) will be passed to Notre Dame.
Let’s return to Jane for a moment. Her 5% payout charitable remainder unitrust, earning 8% on the trust assets, will provide Notre Dame with an estimated $275,000 gift at the end of her life.
But a qualified charitable remainder trust invested in a manner to earn a 12% net rate of return could translate into a more than $1 million gift to Notre Dame.
Example
| Jane Farley, age 50, contributes $100,000 to a charitable remainder unitrust (5% annual payout, paid quarterly). |  |
| **Financial market returns fluctuate and cannot be guaranteed. After adjusting for quarterly payments, the returns illustrated above are 8.15% and 12.23%. | |
Can existing charitable remainder trusts be transferred?
Some existing trusts can be transferred. Notre Dame must be the sole remainder beneficiary and the language in the trust agreement must allow both for a change of trustee and for an entity, such as a university, to serve as trustee.
The bottom line is that this program may allow you to have a bigger impact on Notre Dame and on the students who depend on your gifts for scholarships, new campus facilities, improved academic opportunities, and much, much more.
For more information about gift planning vehicals please visit our gift planning page.
For more information on endowment gift options, please contact: Janet Jessup Office of Gift Planning jjessup@nd.edu (574) 631-6368
Notre Dame is an educational institution and does not provide tax, legal, or financial advice. Any document or information provided to you by our staff is intended to be educational and informational. Notre Dame strongly encourages all of our donors to seek counsel from their own legal and financial advisers. Please know that any information or documents shared by the development staff cannot be used to avoid tax-related penalties.
Donor Finds Multitude of Benefits in New Endowment Option
As a senior director of Goldman, Sachs & Co., Bob Conway ’66 knows a good deal when he sees one. And, as a graduate and longtime Notre Dame Trustee, he is always looking for ways to help his alma mater.
In 2004, Bob learned that Harvard University had received a ruling from the IRS that would permit charitable remainder trusts to be invested in units of the university’s endowment. Knowing the outstanding historical performance of the Notre Dame endowment, Bob was pleased to learn that Notre Dame planned to pursue a similar ruling.
“One of the compelling elements for me was the possibility that the money would be managed by Scott Malpass and his team, as opposed to being placed in a bunch of mutual funds and government securities,” Bob recalls. “Given the University’s investment record, I know they can manage the money better than I can.”
In the past, Notre Dame invested charitable remainder trusts in mutual funds. With the recent IRS ruling, such trusts can be invested in a manner to earn the net rate of return of the Notre Dame endowment. Qualifying charitable remainder trusts can take advantage of diversification and investment opportunities not typically available to the average investor or mutual fund manager.
In Bob’s case, he used appreciated real estate to fund his trust. He was able to defer capital gains taxes and benefit from an immediate charitable deduction.
“It was the combination of the knowledge and good work of Notre Dame’s gift planning staff, the allure of having assets managed by the ND Investment Office, the availability of a substantial charitable deduction, the opportunity to defer capital gains tax, and a significant income stream,” he says. “All of those factors made this an easy decision for me.”
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