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National Heritage Foundation Responds to Adverse Split Dollar Verdict
National Heritage Foundation Responds to Adverse Split Dollar Verdict
NHF Responds to PR Regarding to Split Dollar Suit
Summary
The National Heritage Foundation has issued a press release in which it responds to a recent $9 million adverse jury award in a case involving a charitable split dollar plan and announces its plans to appeal the verdict.
Full Text:
National Heritage Foundation
DATE: September 17, 2008
SUBJECT: Press Release Regarding Split Dollar Suit
National Heritage Foundation, Inc. was established in 1994. Since its inception, it has helped make numerous charitable projects a success. By establishing a subfoundation at the National Heritage Foundation, a donor can assist their favorite charity or local community need and take part in making a difference.
Between 1997 and 1999 National Heritage Foundation participated in a number of charitable split dollar plans. At that time, these plans were recognized and approved by the IRS, tax planners and tax attorneys alike. In a nutshell, under the plans, a donor could make a donation to a charity, and if the charity used the money to pay premiums on an insurance policy insuring the donor’s life, the charity could split the death benefits with the donor’s chosen beneficiary. In 1999 a law was passed that essentially prohibited the “split benefit” between the charity and the donor’s chosen beneficiary.
In 2005, NHF was sued by a Texas couple in connection with charitable split dollar plans. In 1997, the plaintiffs created Trusts that participated in the split dollar plans. When the law changed, their estate planning attorney, who was the Trustee of their trusts, transferred the ownership of the policies to NHF, in order to benefit a local order of nuns, the charity that the plaintiffs had designated as the cause they wished to support. Under the new law, a private person could no longer be a beneficiary on an insurance policy owned by a charity. Therefore, as owners of the policies, NHF first changed the beneficiary to NHF, and ultimately changed it to the order of nuns selected by the plaintiffs.
In their lawsuit, despite the fact that they had at their disposal the advice and counsel of their estate planning attorney, financial planners and CPA, the plaintiffs claimed they were unaware of the change in law and their Trustee’s transfer of the policies to NHF for the purpose of transferring the beneficiaries in order to eliminate the IRS issues. They further claimed that their donations were not donations, but were only payments made for their insurance premiums. However, from 1997 through 2003, the plaintiffs took charitable deductions on their tax returns and represented to the IRS that the donations were “unrestricted” contributions. Consistent with its charter, at all times, NHF’s primary focus and concern was for charity, and all actions taken by NHF were for that very purpose.
In a split 10-2 verdict, despite significant evidence to the contrary, the jury found in favor of the plaintiffs. NHF respectfully disagrees with the verdict and plans to appeal its findings. NHF is hopeful that the appellate court will address significant legal and factual issues raised in this case that will alter the outcome. While that appeal is pending, NHF remains committed to its core philosophy of supporting charitable endeavors on behalf of its many committed donors.
Sincerely,
John T. Houk, President
800/986-4483
PGDC Editor's Note: To see the plaintiff attorney's press release, go to Law Firm Issues Press Release Regarding Verdict Against National Heritage Foundation.
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