Do You Have A Split-Interest Agreement?

January 20, 2010

Split-interest agreements are contributions that are to be shared by the nonprofit organization and other beneficiaries. 

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. 

Common types of split-interest agreements are charitable lead trusts, charitable remainder trusts, charitable gift annuities and pooled (life) income funds. 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.  Read FASB’s accounting codification for more details.

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