6.3 Gift Management

6.3.1 Introduction #

The University of Tennessee Foundation (UTFI), in light of its mission and responsibilities to maximize private giving to the University of Tennessee (UT), to qualify at all times as an organization to which deductible contributions may be made pursuant to Sections 170, 642, 2055, and 2522 of the Internal Revenue Code, and to operate in an open and transparent manner, establishes the following Gift Management Policy.

The purpose of this policy is to maximize the value and impact of every gift to UTFI for the benefit of UT or UTFI by ensuring each gift complies with donor intent, applicable laws, regulations and standards of gift acceptance, management, and stewardship.

6.3.2 Endowment Funds #

Endowments are established by those who wish to make a permanent commitment to support UT or UTFI. Endowment gifts may establish or be added to an endowment fund.

Endowments Funded Through Current Gifts and Pledges #

An endowment may be funded through outright gifts or by a written pledge payable over a period not to exceed five years.

A written gift agreement is required in order to establish a new endowed fund. For more information on gift agreements see Policy 6.1 Gift Acceptance.
The minimum gift required to establish an endowment depends on the type and purpose of the endowment created.
1. The current UTFI Schedule of Minimum Endowment Levels is available on the UTFI web site.
2. Minimum endowment levels are subject to change by action of the UTFI Board.
If the endowment minimum is not reached within the time frame set forth in the gift agreement or, in the absence of such a time frame, then within ten years from the effective date of the gift agreement, UTFI has the option to transfer the balance of the fund to:
1. An existing endowment fund with a complementary purpose, or
2. Another UTFI fund specified by the donor and/or appropriate UT authority (i.e., dean, chancellor or president). Endowment funds cannot be converted to spendable funds, but must remain in an endowment.

Endowments Funded Through Deferred Gifts #

An endowment may be funded through deferred gifts such as bequests, charitable remainder trusts, charitable gift annuities and other similar instruments.

The value of the gift at the time the proceeds are received by UTFI must meet the then-current required endowment minimums for the donor-designated purpose.
1. The current UTFI Schedule of Minimum Endowment Levels is available on the UTFI web site.
2. Minimum endowment levels are subject to change by action of the UTFI Board.
Donors wishing to provide for UTFI through their estate plans or other deferred gifts may use a Tiered Fund Agreement to designate different levels of use for the fund depending on totals funds received (e.g., faculty support then professorship then chair as the required minimums are met).

Consolidated Investment Pool #

Except when circumstances require or warrant separate investment, gifts for endowment funds will be co-mingled with and invested in the UT Consolidated Investment Pool.

6.3.3 Current and Plant Funds #

Current (non-endowed) funds provide support on an “as requested” basis for current spending. Plant (non-endowed) funds provide support on an “as requested” basis for the construction of buildings, classrooms, laboratories or other physical space.

University beneficiaries may spend current gift funds through a UT account set up to parallel the UTFI account where the funds are actually deposited. Pursuant to Article II, Section 2(c) of the Affiliation and Services Agreement between UT and UTFI, UTFI will review expenditures from the UT parallel account for compliance with the gift agreement or other restrictions on use of the funds and, on June 30 of each year, transfer funds from UTFI to the university to cover complying expenditures from the University parallel account.

6.3.4 Accounting Treatment of Gifts #

For accounting and administrative purposes, gifts are classified into two categories: without donor restriction and with donor restriction. The Financial Accounting Standards Board governs the revenue recognition of gifts as follows:

Without Donor Restriction #

Gifts on which the donor has not placed restrictions as to the purpose of the funds, leaving the UTFI to determine the appropriate use of the funds.

Generally accepted accounting principles (GAAP) require these gifts be accounted for as revenue in the Without Donor Restriction Fund.

With Donor Restriction #

Gifts that have donor-imposed restrictions. UTFI can use or expend the donation as specified, and the restriction is satisfied either by the passage of time or by actions of UTFI.

GAAP requires these gifts to be accounted for as revenue in the With Donor Restriction Fund.

All expenses are recognized in the without donor restriction fund.

To ensure appropriate accounting treatment and administration of the gift in accordance with the gift agreement, UTFI will, along with the appropriate development office and/or UT Office of Treasurer, maintain a copy of the gift agreement.

6.3.5 Investments #

The investment of all gift fund types – endowed, current and plant – shall be handled in accordance with Policy 8.1 Endowment Investment and Spending and Policy 8.2 Short Term Investment.

6.3.6 Endowment Earnings and Distributions #

Earnings in excess of the amount distributed, and losses, are allocated to the endowment account on a quarterly basis.

For fully funded endowments, upon request by the donor expressed in the gift agreement, UTFI will allow reinvestment of 100% of net earnings (after payment of any management fees) into principal for a period not to exceed ten years from the date the fund is established and must be documented in the agreement.
For endowments funded through pledges, no transfers will be made from the Earnings Account to the University until the minimum funding level is reached for that type of endowment through gifts.
- Reinvestment into principal cannot be applied to meet the minimum gift amount required for that type of endowment.

Distributions to endowment earnings accounts are posted quarterly.

The amount distributed is governed by Policy 8.1 Endowment Investment and Spending.
No transfers will be made from the earnings account to UT until the gifts received meet the minimum funding level for that type of endowment.

6.3.7 Endowment Fees #

UTFI assesses a fee on endowed funds for accounting and development services. Pursuant to the Affiliation and Services Agreement between UT and UTFI, the fee is 100 basis points.

6.3.8 UPMIFA #

UTFI follows the endowment management guidelines set forth in the Uniform Prudent Management of Institutional Funds Act as adopted by the State of Tennessee, TCA §35-10-201, et. seq.

6.3.9 Gift Annuities #

All gift annuity agreements must be reviewed in advance of presentation to the donor(s), by the Assistant Vice President for Planned Giving, who may elect to forward on to UTFI General Counsel and/or BNY Mellon for additional review.

Each gift annuity will be assessed a 4.5% fee upon termination, to offset costs incurred by the Foundation. The fee will be reviewed annually for adjustments as needed.

Pursuant to the January 18, 2008, UTFI Board 6.5 Resolution Establishing a Gift Annuity Program, UTFI maintains a gift annuity reserve fund.

Acting in lieu of a formal Investment Committee, the UTFI Executive Committee shall oversee investment of the gift annuity reserve fund assets.

The full amount of all gift annuity contributions shall be credited to the fund, along with all earnings on assets attributable to the fund.

The CFO is authorized to make disbursements from the fund for the following purposes:

To make annuity payments.
To pay for the costs associated with investing and managing fund assets and administering the gift annuity program.
To make available to UT and UTFI for their charitable purposes the amount of fund assets attributable to a particular annuity obligation upon satisfaction of that obligation.
Disbursements for any other purposes must be approved by the UTFI Board of Directors.

6.3.10 Charitable Trusts #

All trust agreements must be reviewed in advance of presentation to the donor(s), by the Assistant Vice President for Planned Giving, who may elect to forward on to UTFI General Counsel and/or BNY Mellon for additional review.

The Foundation will consider serving as trustee or successor trustee of a charitable trust. The decision to accept the trusteeship or successor trusteeship of a planned gift shall be subject to approval by the Foundation’s President and Chief Executive Officer (CEO) and to the terms and conditions outlined in this policy.

The Foundation may serve as trustee of a charitable remainder trust (unitrust or annuity trust) if it is the sole remainder beneficiary.
The Foundation may serve as trustee of a charitable lead trust if it is the sole income beneficiary.
The Foundation may serve as trustee of a charitable trust described in Code section 4947(a)(1) if it is either the sole income beneficiary or the sole remainder beneficiary.
The President and CEO has the discretion to accept or reject the proposed appointment of the Foundation as trustee of a charitable trust.
The Foundation will not serve as co-trustee of a trust unless the other co-trustee is selected or approved by the Foundation as a third-party fiduciary.
The Foundation will not serve as trustee of a revocable trust for a living donor.
The minimum amount needed to fund a charitable trust of which the Foundation will serve as trustee is $100,000. Trusts initially funded with less than $100,000 will need prior approval by the President and CEO.
Trust investment assets shall be managed under discretionary portfolio management services provided by the trust administrator. The Foundation Executive Committee shall monitor and review the administrator’s investment performance. If a donor wishes to direct or restrict the investment of a charitable remainder trust’s assets, the donor should serve as his or her own trustee or secure the services of another trustee or administrator.
The Foundation will seek guidance from the trust administrator on a preliminary finding of appropriate rates for each trust. The Foundation may as needed make adjustments, with consideration of, among other things, prior and potential support, and other prior, current and future value added by the donor.
Trusts will be reviewed and approved by counsel for the Foundation’s trust administrator.

The following assets may be accepted as funding for a charitable trust, subject to the terms and conditions below:

Gifts of cash or equivalent (check, wire, etc.) for a charitable trust shall be deposited directly into the appropriate trust account.
Marketable securities. Marketable securities (including mutual fund shares) contributed to fund a charitable trust shall be transferred to the appropriate trust account. Donated securities may not be held without prior approval.
Charitable trusts funded by will, or by other testamentary arrangements, is permitted.
Gifts of closely held or restricted stock, partnership interests, or cryptocurrency to fund charitable trusts must receive prior approval from the Executive Committee
Real property. Real property may be accepted into a charitable trust subject to the prior approval of the CEO or Foundation’s Real Estate Committee in accordance with policy 6.4 Real Estate Gift Acceptance. Mortgaged real property will not be accepted. The preferred arrangement to be used when an illiquid or non-income producing asset is contributed to a charitable remainder trust is a net income unitrust with a “flip” provision. A gift of real property will be subject to the following requirements:
- Personal inspection by staff (which may be performed by video if in-person inspection if not practicable)
- Title search
- Minimum of level one environmental audit unless the property is a residence inspected by staff and for which an environmental audit was deemed unneeded;
- Marketability review including estimate of holding costs to be incurred;
- Qualified appraisal obtained by the donor unless overriding factors require this to be obtained after acquisition by the trust;
- Written agreement by the donor to provide additional funds to the trust, if necessary, to provide for ongoing expenses and maintenance of the property until sold;
- Acceptance by the Foundation’s Real Estate Committee if required by policy 6.4 Real Estate Gift Acceptance.
- Depending on marketability review, donor may be required to contribute liquid assets on a timely basis in order to cover holding costs incurred by the trust (this should be documented in a letter of agreement signed by the donor and the Foundation).
- The Foundation will recover post sale, all due diligence, management and other pursuit outlays for real estate gifts before transferring administration to the Foundation’s overall trust administrator.

Charitable trusts will be administered under the following fee policy:

Each charitable trust will be assessed a 4.5% fee upon termination to offset costs incurred by the Foundation (oversight, accounting, gift procurement and ongoing stewardship).
Fees for asset management and trust administration services will be charged to the trusts.
If the Foundation serves directly or hires a third-party fiduciary as its agent, the acting trustee may charge the trust a fee for its services and may pay the fees of any third-party fiduciaries or other professionals from the trust as needed.

The UTFI President and Treasurer are authorized to contract with 3rd party vendors to serve as co-trustee as circumstances warrant to manage/administer charitable trusts on behalf of the Foundation.

Subject to the terms and conditions of the trust instrument, the administrator or CFO is authorized to make disbursements from the trust for the following purposes:

To make payments to income beneficiaries.
To pay for the costs associated with investing and managing trust assets.
In the case of remainder trusts, after the lives of the income beneficiaries (or expiration of the trust term of years), to transfer the remainder of the trust to the Foundation.
In the case of lead trusts, to transfer the remainder of the trust to the creator of the trust (or to other remainder beneficiaries designated in the trust instrument).

6.3.11 Estate Executor #

The Foundation will consider serving as personal representative of an estate that benefits the Foundation. The Foundation will serve only if

the President and CEO approves;
the Foundation (or the University of Tennessee, its campuses or institutes) is the sole beneficiary of the estate or is the sole residuary beneficiary with only modest bequests to others;
the Foundation has the right to resign in favor of an alternate personal representative; and
the Foundation may hire a third-party fiduciary or other professionals as needed to act as its agents, which agents may be paid by the estate.

In addition, each estate will be assessed a 4.5% fee at completion to offset costs incurred by the Foundation (oversight, accounting, gift procurement and ongoing stewardship).

Revised: April 2023

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