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Ruling affects ND endowment

Marcela Berrios | Friday, March 23, 2007

A Dec. 21 federal ruling authorized Notre Dame – as the trustee of numerous charitable trusts – to invest the donors’ contributions in the University’s endowment, an investment option that will rival the Goliaths of national mutual funds with its diversified portfolio and 14.6 percent rate of return, Assistant Vice President of Development Jean Gorman said Tuesday.

“Not all institutions can outperform mutual funds offered by firms like Fidelity or Vanguard, and we feel that we can,” Gorman said.

Notre Dame had been limited in the past in the investment vehicles available for these trusts – but an Internal Revenue Service (IRS) ruling opened up the possibility of growing the donors’ capital, or trust corpus, on the University’s own endowment.

“We are very excited about this opportunity for Notre Dame,” Gorman said, celebrating the opportunity to expand both the charitable remainder trusts’ corpora and the University endowment at the same time.

A charitable remainder trust, she said, is an income-producing gift that provides an annual payout to one or more income beneficiaries, or charitable organizations, during the donor’s remaining lifespan or any contracted term.

When the contract expires or the donor dies, Gorman said, the University must use the remaining trust corpus for a purpose designated by the donor, or at its own discretion if the donor did not specify how Notre Dame should have disposed the remainder funds.

The growth the initial donation will experience through the duration of the trust – and consequently the proceeds for the beneficiaries – will depend largely on the investment vehicles the trustee utilizes, she said.

“Our endowment has traditionally outperformed the other investment vehicles that we have utilized for these trusts,” Gorman said. “If the trust corpus grows, the University will benefit and so can the income beneficiary.”

The Notre Dame endowment consists of an assortment of financial assets, which includes traditional stocks and bonds in domestic and international markets, ownership equities, real estate and other types of securities rarely available to smaller investors, a press release from the Office of News and Information said.

As a result, University President Father John Jenkins echoed Gorman’s enthusiasm about the ruling, saying the option to invest the trust’s corpus in the Notre Dame endowment could serve as an incentive to increase Planned Giving programs, which are popular in universities, hospitals and museums across the nation.

“This option may be attractive to our benefactors from a financial planning perspective,” Jenkins said in the press release.

Planned Giving contracts between the donors and their appointed trustees are regulated by the United States Congress and the IRS, the National Committee on Planned Giving Web site said.

Gorman said another benefit that may stem from the new financial practice is the potential increase in the portion of the trusts’ capital that may be presented to Notre Dame at the end of the trusts’ lifespan.

“If the corpora of the trusts grow, then a larger remainder amount will be available for Notre Dame,” she said.

Following in the footsteps of Harvard University three years ago, Notre Dame submitted an application to the IRS to get the green light to invest, as a trustee, the trust’s corpus in the University’s own endowment – a privilege also given recently to Stanford University and the Massachusetts Institute of Technology, Gorman said.

“This is a groundbreaking development that has the potential to make an enormous impact on the University’s ambitious goals for students, faculty and programs throughout the campus,” Jenkins said in the release.