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									                         ALABAMA GIVING, the
                STATE BOARD OF ACCOUNTANTS, the
                            Board of Standards
                 Business Law and Corporate Section and
            the Real Property, Probate and Trust Law Section
                     of the ALABAMA STATE BAR


                       Continuing Education Course
                                  2 hours
                   (Including 1 hour Ethics Requirement)

                     To Be Used In Conjunction With
                    The Southeastern Toolkit For Giving

These materials were developed by Greg Hyde, Elizabeth Hutchins and the Alabama Giving
Legal Advisory Committee. For more information visit or call
Elizabeth Dennis at (205) 313-4827.


      A.   Alabama is not a populous or wealthy state, but its residents are charitably
           inclined and compare very favorably with national averages involving charitable
           bequests. See Exhibits “A” and “B”.

      B.   The tax laws contain some powerful incentives to encourage taxpayers to make
           charitable gifts, i.e., income tax deductions and estate tax deductions.

      C.   Most individuals are aware of only the simplest form of charitable giving, such as
           direct transfers when the individual writes checks to charities. There are several
           other more attractive alternatives available whereby the donor can either retain an
           income stream from the gifted property or subsequently control the management
           and disposition of the gifted property. The remainder of this outline will
           summarize these charitable giving alternatives.


      A.   Cash/Marketable Securities. These direct, outright gifts to charity of cash, stocks,
           bonds or mutual fund shares may support the charity’s current programs, establish
           or add to a named endowment, or provide capital improvements. These gifts are
           easy to make and may have favorable tax advantages for the donor.

      B.   More Complex Outright Charitable Gifts. Charities welcome approved gifts of
           real estate, stock in a privately owned company, art work, and other valuable,
           useful or historically significant personal property. Depending upon the type of
           asset and how it will be used by the charity, these charitable gifts may also have
           favorable tax incentives for the donor.

           The value of these gifts is not readily ascertainable. Accordingly, the tax laws
           provide that most of these gifts must be accompanied by a “qualified appraisal” of
           the gifted property and a “qualified appraisal report” must be filed with the
           income tax return in order to claim the income tax benefits associated with such a
           charitable gift.

      C.   Bargain Sales to Charity. A donor may transfer to a charity property subject to a
           mortgage (which the charity assumes) or may sell to the charity a valuable asset
           for less than its fair market value. Such gifts are partly tax deductible charitable
           gifts and partly taxable exchanges.
                 D.  Charitable Lead Trust (CLT). CLT’s pay charities a fixed or variable income for
                     a predetermined period of time, after which the remaining assets of the CLT
                     revert to the donor or, more commonly, to the donor’s other beneficiaries such as
                     children or grandchildren. A CLT may provide an excellent method for
                     transferring assets to children or grandchildren with significantly reduced estate

                 These more substantial gifts may be made in a single transaction during the donor’s
                 lifetime, or in a series of lifetime gifts, or, frequently, made or augmented at the donor’s
                 death. Endowed gifts offer a way to support a favorite charity in perpetuity. The
                 following represent the most popular forms of endowed gifts.

                 A.                DIRECT TO CHARITY. The donor, or his or her family, establish the endowed
                                   fund at the charity which administers and controls the fund pursuant to
                                   instructions provided by the donor. A common example would include a
                                   scholarship fund at a university whereby the donor specified the criteria used in
                                   selecting scholarship recipients.

                                   The charity typically invests the endowed funds and a portion of the earnings are
                                   used to benefit the intended program. The remaining funds are retained by the
                                   charity in order to hopefully grow the fund so that it may expand its benefits over

                 B.                PRIVATE CHARITABLE FOUNDATIONS.

                                   1.               Background. A private foundation is a non-profit corporation or trust that
                                                    is dedicated to religious, charitable, scientific, literary or educational
                                                    purposes. It receives support from one person or a small group of people
                                                    rather than from the general public. A private foundation is most typically
                                                    funded and operated by an individual, a family or an organization such as
                                                    a for-profit corporation. The most common private foundation is a grant-
                                                    making organization which simply supports a variety of charitable causes
                                                    by making gifts or grants to certain operating public charities.

                                   2.               Advantages of Private Foundations.

                                                    (a)                Donor Controlled. The donor may control the entire operation of
                                                                       the foundation, such as the disbursement of grants, the investment
                                                                       of assets, the selection of the governing body, etc.

                                                    (b)                Recognition. A private foundation can create identification and
                                                                       recognition of a family’s community involvement.
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                                                    (c)                Family Involvement. Some donors create a foundation as a means
                                                                       of bringing a family together in the future or as a permanent
                                                                       reminder of the family’s values, beliefs, charitable interests and a
                                                                       desire to perpetuate those interests and viewpoints.

                                                    (d)                Education and Motivation. Family foundations should be a
                                                                       motivating and effective vehicle for teaching the next generation
                                                                       about philanthropy and to encourage the next generation into
                                                                       charitable giving and community involvement.

                                                    (e)                Timing of Charitable Contributions.         Contributions to the
                                                                       foundation can be timed to generate maximum tax advantages,
                                                                       taking into account certain percentage limitations on deductibility
                                                                       for income tax purposes.

                                   3.               Disadvantages of Private Foundations.

                                                    (a)                Deductibility of Contributions. Not as favorable as contributions
                                                                       to a public charity, i.e., 30% of adjusted gross income for gifts of
                                                                       cash to private foundations, but 50% of adjusted gross income for
                                                                       gifts of cash to public charities. Also, gifts of real estate and
                                                                       closely-held stock may be deducted only to the extent of the basis,
                                                                       and not the fair market value, of those assets.

                                                    (b)                Excise Taxes. Private foundations are subject to certain excise tax
                                                                       provisions which, among other things, prohibit self-dealing
                                                                       transactions, excess business holdings, jeopardy investments, etc.
                                                                       One such provision mandates generally that five percent (5%) of
                                                                       the value of the assets of a private foundation be distributed to
                                                                       public charities on an annual basis - otherwise, an excise tax

                                                    (c)                Compliance Requirements and Record Keeping.                Private
                                                                       foundations must keep good records and are required to annually
                                                                       file tax Form 990-PF with the IRS. Like public charities, the tax
                                                                       returns and certain other records of a private foundation must be
                                                                       available for public inspection.

                                                    (d)                Cost Effectiveness. Certain expenses, such as legal and accounting
                                                                       fees, are incurred in establishing a private foundation and annual
                                                                       expenses are incurred thereafter, primarily on accounting fees, to
                                                                       prepare the annual tax return of the private foundation.

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                 C.                COMMUNITY FOUNDATIONS.

                                   1.               Background. A community foundation’s primary purpose is to manage
                                                    and distribute philanthropic capital to a broad range of charitable causes
                                                    and organizations. Typically, a community foundation will administer the
                                                    endowed charitable interest of numerous individuals and entities while
                                                    being able to change with the times and achieve economies through the
                                                    pooling of investments and management. For example, The Community
                                                    Foundation of Greater Birmingham was founded in 1959 and currently has
                                                    assets in excess of One Hundred Twenty Million Dollars ($120,000,000).
                                                    Although the name implies that only local charities are to be benefitted
                                                    with the assets of a community foundation, the use of certain funds
                                                    (discussed later) at community foundations allow for gifts or grants to
                                                    charities well beyond the local community.

                                   2.               Community Foundation Advantages.

                                                    (a)                Knowledge.       Community foundations focus primarily on
                                                                       community needs through their grant making activities. This
                                                                       knowledge is valuable to the donor who wants an objective non-
                                                                       profit evaluation or recommendations for the best possible
                                                                       charitable grantees in a particular field or area.

                                                    (b)                Perpetual Monitoring/Stewardship.        One of the community
                                                                       foundation’s main purposes is to monitor the non-profit
                                                                       organizations receiving grants from its funds to ensure that they are
                                                                       in perpetual compliance with the donor’s original interest.

                                                    (c)                Simplicity.    Unlike establishing and maintaining a private
                                                                       foundation, a fund in a community foundation is very simple to
                                                                       create and operate.

                                                    (d)                Efficiency. Small and large charitable gifts are aggregated for
                                                                       investment purposes to achieve economies. Most community
                                                                       foundations charge an annual administrative fee ranging from 1%
                                                                       to 1.5% of assets for all inclusive services.

                                                    (e)                Tax Advantages of Public Charity Status. Community foundations
                                                                       qualify as public charities by virtue of the fact that they receive
                                                                       “public support” from many donors. Charitable contributions to
                                                                       community foundations, therefore, are eligible for the maximum
                                                                       charitable deduction. For example, gifts of appreciated property,
                                                                       such as publicly traded securities and real estate, are deductible up

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                                                                       to 30% of a donor’s adjusted gross income using the full fair
                                                                       market value of the gifted asset.

                                                    (f)                Recognition of Anonymity. Donors may either receive public
                                                                       recognition or remain completely anonymous.

                                   3.               Community Foundation Disadvantages.

                                                    (a)                Legal Control. Some donors desire legal control over grants
                                                                       and/or investments. While most community foundations follow
                                                                       the vast majority of grant recommendations, only a few allow
                                                                       donors to recommend investment advisors. Therefore, a donor will
                                                                       not have as much control with a fund in a community foundation
                                                                       as he or she would have in establishing a private foundation.

                                                    (b)                Expenses/Fees. Although a fund at a community foundation is less
                                                                       expensive to establish and maintain, a community foundation must
                                                                       assess fees against its funds in order to cover its operating

                                                    (c)                Conflicts. Most community foundations are managed by a Board
                                                                       of Directors and grants are made to public charities based upon
                                                                       recommendations of a distribution committee. A prospective
                                                                       donor may perceive weaknesses in these managers and/or have
                                                                       personal or professional conflicts with some of them.

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                                   4.               Fund Options. The vast majority of permanent funds at community
                                                    foundations have been created through devises and trusts. Donor involved
                                                    fund options are typically created by individuals during their lifetimes as
                                                    an alternative to a private foundation. The following represents some of
                                                    the alternatives regarding fund options.

                                                    (a)                Donor Advised Funds. Donor advised funds are the principal
                                                                       private foundation alternative and they represent the fastest
                                                                       growing area of charitable giving. The donor or other appointed
                                                                       advisors may recommend (i.e., give “advice”) regarding
                                                                       distributions of income or principal from the fund to public
                                                                       charities. Most community foundations will allow the advisor to
                                                                       appoint successor advisors (i.e., children, grandchildren, etc.) for
                                                                       many generations. Individuals, families, non-profit organizations
                                                                       and businesses can create donor advised funds. The community
                                                                       foundation administers all aspects of the grant making, such as due
                                                                       diligence on non-profit agencies, check issuance, investments, etc.

                                                    (b)                Designated Funds. Designated funds benefit one or more specific
                                                                       non-profit organizations. These are usually designed to create a
                                                                       fund endowing a donor’s annual charitable giving or for the
                                                                       creation of a perpetual fund for a particular charity.

                                                    (c)                Field of Interest Funds. These funds make grants in a specific
                                                                       geographical or topical area of interest. A field of interest fund, for
                                                                       example, might have as its purpose “to benefit to health
                                                                       organizations in Jefferson County.”

                                                    (d)                Unrestricted Funds. These funds are the most flexible and allow
                                                                       the management of the community foundation to meet the most
                                                                       pressing community needs at a particular point in time. For
                                                                       example, a community foundation may set aside funds to assist the
                                                                       victims of a natural disaster affecting surrounding communities.

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                                         5.               Alabama Community Foundations.
         Anniston                                                                       Athens                            Birmingham
     Calhoun County                                                                 Limestone Area                   Community Foundation
   Community Foundation                                                          Community Foundation                of Greater Birmingham
      P. O. Box 1826                                                                P. O. Box 1346                 2100 1st Ave. N., Suite 700
    Anniston, AL 36202                                                             Athens, AL 35612                 Birmingham, AL 35203
      (256) 231-5160                                                                                                     (205) 328-8641

   Serving Randolph, Clay,                                                      Serving Limestone county.       Serving Jefferson, Shelby, Blount,
Talladega, Cleburne, Calhoun,                                                                                     Walker and St. Clair counties.
Cherokee, and Etowah counties.
           Brewton                                                                      Decatur                               Dothan
 Greater Brewton Foundation                                                      Community Foundation                Community Foundation
          PO Box 87                                                               of Greater Decatur                  of Southeast Alabama
     Brewton, AL 36427                                                               P. O. Box 669                        P. O. Box 1422
       (251) 867-4881                                                             Decatur, AL 35602                    Dothan, AL 36302
                                                                                    (256) 355-3285                       (334) 671-1059

                                                                             Serving Morgan, South Limestone    Serving Houston, Henry, Geneva,
  Serving Escambia county.
                                                                               and North Lawrence counties.          Dale and Lee counties.
        Huntsville                                                                        Jasper                             Mobile
     Greater Huntsville                                                          Walker Area Community               Community Foundation
   Community Foundation                                                                Foundation                      of South Alabama
      P. O. Box 2264                                                                  P. O. Box 171                      P. O. Box 990
    Huntsville, AL 35804                                                           Jasper, AL 35502                  Mobile, AL 36601-0990
                                                                                     (205) 302-0001                     (251) 438-5591

   Serving Madison county.                                                     Serving Walker, Winston and      Serving Baldwin, Choctaw, Clarke,
                                                                                     Fayette counties.         Conecuh, Escambia, Mobile, Monroe
                                                                                                                    and Washington counties.
        Montgomery                                                                       Selma                            Tuscaloosa
      Central Alabama                                                             Black Belt Community               Community Foundation
   Community Foundation                                                                Foundation                      of West Alabama
  434 N. McDonough Street                                                            P. O. Box 2020                     P. O. Box 2347
   Montgomery, AL 36111                                                             Selma, AL 36702                  Tuscaloosa, AL 35403
       (334) 264-6223                                                                (334) 874-1126                     (205) 345-8440

Serving Montgomery, Autauga                                                   Serving Green, Sumter, Hale,     Serving Tuscaloosa, Sumter, Fayette,
     and Elmore counties.                                                      Lowndes, Dallas, Pickens,         Green, Hale, Lamar, Pickens and
                                                                             Marengo, Perry, Macon, Bullock              Bibb counties.
                                                                                  and Wilcox counties.
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                 D.                SUPPORTING ORGANIZATIONS

                                   1.               Background. A supporting organization is an alternative to a private
                                                    foundation. It is a separate charitable entity with usually significant donor
                                                    or donor family involvement. A supporting organization is not a public
                                                    charity itself, but it is treated as a public charity under the tax laws by
                                                    virtue of its relationship with one or more public charities. Accordingly, a
                                                    supporting organization enjoys all of the tax advantages associated with
                                                    public charities and is not subject to the sometimes strict regulations
                                                    governing private foundations.

                                   2.               Types of Supporting Organizations. There are three (3) types of
                                                    supporting organizations, but two (2) of them are seldomly used by
                                                    individual donors. The most common type of a supporting organization is
                                                    a “Type I” whereby one or more public charities appoint the majority of
                                                    the board members of the supporting organization. The donor, his or her
                                                    family members or his or her other appointees may comprise the minority
                                                    of the board or governing body of the supporting organization.

                                   3.               Advantages of Supporting Organizations.

                                                    (a)                Tax Advantages. As stated earlier, a supporting organization is
                                                                       treated as a public charity for income tax purposes. Accordingly,
                                                                       the limitations or restrictions imposed on private foundations do
                                                                       not apply to supporting organizations. Among other things, this
                                                                       means that higher deduction limits would apply to charitable
                                                                       contributions to supporting organizations, lifetime gifts of real
                                                                       estate or closely-held businesses are more favorable, etc.

                                                    (b)                Donor Control. In exchange for public charity treatment, a donor
                                                                       and his or her family is not permitted to retain control over the
                                                                       activities of a supporting organization. A donor and his or her
                                                                       family may have substantial influence, however, through his or her
                                                                       appointment of a minority of the board members and by selecting
                                                                       “friendly” public charities to appoint the majority of the board
                                                                       members of the supporting organization.

                                                    (c)                Investments. The use of a supporting organization allows a donor
                                                                       and his or her family to have significant involvement in the
                                                                       investment of assets to be used for charitable purposes. A
                                                                       supporting organization can have its own investment policy
                                                                       independent of the charities it supports. Investment control is lost
                                                                       in gifts to public charities and may be lost in gifts to community
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                                                    (d)                Family Involvement. A donor may be able to involve multiple
                                                                       generations of family members in philanthropy through the use of
                                                                       a supporting organization. In this respect, a supporting
                                                                       organization has characteristics similar to a private foundation and
                                                                       a donor advised fund at a community foundation or other public

                                                    (e)                Family Businesses. A supporting organization is ideal for the
                                                                       owner of a family business desiring to continue the business in
                                                                       charitable form after the departure of the owner of the business.
                                                                       The owner’s descendants or key executives may stay very involved
                                                                       in the business through minority representation on the board of the
                                                                       supporting organization. The private foundation rules applying to
                                                                       “excess business holdings” do not apply to supporting
                                                                       organizations, which means that the business would not have to be
                                                                       sold within five years or so if the family business was owned by a
                                                                       private foundation.

                                   4.               Disadvantages of Supporting Organizations.

                                                    (a)                Complexity. It can be burdensome complying with the many rules
                                                                       and tests which must be satisfied in order to qualify as a supporting
                                                                       organization. Moreover, many advisors are not familiar or not
                                                                       comfortable dealing with the many requirements of a supporting
                                                                       organization because their use represents a recent estate and tax
                                                                       planning technique.

                                                    (b)                Limited Grant Making. A supporting organization may only
                                                                       support or make grants to public charities named in the
                                                                       organizational documents of the supporting organization. Unless
                                                                       the supporting organization is affiliated with a community
                                                                       foundation or other “umbrella” public charity (i.e., the United
                                                                       Way), the supporting organization will be limited in the public
                                                                       charities it can support in the future.

                                   5.               Examples of Supporting Organizations.

                                                    (a)                A Supporting Organization Affiliated with a Community
                                                                       Foundation. This example involves a community foundation
                                                                       appointing a majority of the board members of the supporting
                                                                       organization and the donor or his or her family appointing the
                                                                       minority of the board members. Since the community foundation
                                                                       makes grants to many public charities, the supporting organization
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                                                                       can use the community foundation to make grants for virtually any
                                                                       charitable purpose. In addition, the supporting organization can
                                                                       take advantage of the community foundation’s grant making
                                                                       expertise and economies of scale for administration and

                                                    (b)                A Supporting Organization for Favorite Charities. This type of
                                                                       supporting organization would be structured so that the supporting
                                                                       organization is governed by say a five member board of directors.
                                                                       The donor and his or her family would appoint two members of the
                                                                       board, but the donor’s three favorite public charities, say a
                                                                       hospital, a museum and a university, would each appoint one
                                                                       member of the board of directors of the supporting organization.
                                                                       Although the donor and his or her family would not control the
                                                                       board of the supporting organization, it is likely that the named
                                                                       favorite charities would have a history of receiving substantial gifts
                                                                       from the donor and his or her family and, therefore, would feel a
                                                                       certain degree of loyalty to the family and likely would not use
                                                                       their control position to go against the wishes of the donor and his
                                                                       or her family.


                 A.                Gifts Under a Will or Revocable Living Trust. Gifts under a will or living trust
                                   are very common and provide support for a charity after an individual passes
                                   away. These gifts may be changed at any time prior to death as long as the donor
                                   is mentally competent to make the change. Bequests or devises to charity may
                                   designate a specific asset, a fixed sum, or a portion of the donor’s estate, and are
                                   fully deductible for estate tax purposes.

                 B.                Retirement Plan Beneficiary Designations. This type of charitable gift is very
                                   simple, does not need to involve an attorney or accountant, and is usually the best
                                   asset to transfer to charity from a tax standpoint.

                                   A charity may receive assets from a retirement plan without any income taxes or
                                   estate taxes being assessed. However, an individual receiving retirement plan
                                   distributions will pay income taxes on the distributions and estate taxes may be
                                   assessed against the assets if the donor’s estate is large enough.

                                   A donor may designate a portion or the entire balance of his or her retirement
                                   account (IRA, 401(k), Keogh, or other plan) to a charity or charities after his or
                                   her lifetime. Generally, the donor simply needs to obtain the appropriate
                                   beneficiary designation form, complete and sign it and then file a copy of it with
                                   the plan administrator or custodian.
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                 C.                Gifts of Life Insurance. A donor may transfer “ownership” of an existing
                                   insurance policy to a charity and create a current tax benefit. Alternatively, the
                                   donor may retain the ownership of the insurance policy, but designate the charity
                                   as beneficiary of the policy, but since this type of beneficiary designation is
                                   revocable, the donor would not obtain any income tax benefits.

                                   Many individuals currently own insurance policies purchased many years ago
                                   when there was a need to do so, such as providing funds to educate minor
                                   children, pay off a mortgage, support a spouse, etc. These needs may no longer
                                   exist, but the donor has maintained the life insurance and does not necessarily
                                   need it anymore. As a result, the donor typically is not benefitting from this
                                   insurance and does not give up any income or lifetime benefits if the donor
                                   designates a charity to receive the life insurance proceeds upon the death of the

                 D.                Remainder Interest in Personal Residence or Farm. This technique involves a
                                   donor deeding a personal residence, farm or vacation home to charity upon his or
                                   her death, but reserving the right to continue to use or reside on the property for
                                   the donor’s lifetime. The donor will continue to pay for property taxes, insurance
                                   and regular maintenance of the property. Upon the donor’s death, the property
                                   will automatically pass to the named charity pursuant to the terms of the deed.
                                   Although the donor continues to have the lifetime use of the property, the donor
                                   is entitled to an income tax charitable deduction for the year when the deed is
                                   signed conveying the remainder interest to charity. In addition, the donor is also
                                   entitled to an estate tax charitable deduction at death for the value of this property
                                   passing to charity at that time.


                 A.                Charitable Remainder Trusts (CRT). A CRT pays an annual or more frequent
                                   income to the donor (or other beneficiary) for a term of years or a lifetime. The
                                   donor may select a fixed income (annuity trust) or variable income (unitrust)
                                   option. Upon the termination of the CRT, the assets remaining in the CRT pass to
                                   the charities designated in the CRT.

                                   Donors may be entitled to a significant income tax charitable deduction upon the
                                   creation and funding of a CRT. In addition, the assets in a CRT will escape estate
                                   taxation upon the death of the donor because those assets pass to charity at that

                 B.                Charitable Gift Annuities. Through a charitable gift annuity agreement, the
                                   charity promises to pay a donor (or other beneficiary) a fixed annual income for
                                   life in exchange for an immediate transfer of cash or securities from the donor to
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                                   the charity. The donor is entitled to certain income tax benefits upon entering into
                                   such an agreement and estate tax savings may also be achieved. Charitable gift
                                   annuities are ideal for smaller gifts (i.e., under $100,000) which could not warrant
                                   the expenses of creating and maintaining a CRT. There is no cost to establish a
                                   charitable gift annuity and the charity handles all of the tax reporting


                 A.                Beyond family and business, what is most important to you?

                 B.                Five years from now, what do you want your philanthropy to say about you and
                                   your family?

                 C.                How much is enough and how much is surplus during your lifetime? To leave for
                                   your family? To leave for charity?

                 D.                What legacy do you wish to leave behind when you are no longer living?

                 E.                How do you wish to be remembered?

                 F.                What are your values? Have you discussed them with your family? Do you wish
                                   to pass them on?

                 G.                If your financial resources were unlimited, how would you spend your time and
                                   what would you do with your excess financial resources?

                 F.                Who do you want to inherit your assets from you - family? Government?

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                 A.                QUESTION I

                 Lawyer is approached by Client, an elderly lady for whom Lawyer has prepared an estate
                 plan. In the past, Lawyer and Client discussed the possibility of charitable giving as part
                 of her estate planning. Client now informs Lawyer that she wishes to make charitable
                 gifts but has not the slightest idea about which charities might be appropriate donees.
                 Client asks Lawyer to select the donees, saying that she trusts Lawyer's judgment.

                 a.                Can Lawyer make the selection?
                 b.                If so, what criteria should Lawyer use in making the selection?
                 c.                Can Lawyer select the legal aid society or the local bar foundation of which he is
                                   a board member?
                 d.                How would your answers to (a) through (c) differ if Client merely asked for
                                   suggestions of possible donees?

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                 ANSWER I

                 An attorney acting as advisor does not have to confine his or her services to providing
                 legal solutions. Ala. Rules of Prof’l Conduct R. 2.1 (2004)a. When an attorney provides
                 business or other non-legal advice, as in the case here, he must inform the client that the
                 attorney-client privilege may not apply to such advice. The attorney must also be
                 competent to render such advice. In this case, is the attorney competent to make
                 decisions or recommendations about the financial and administrative health and legal
                 compliance of charitable organizations? Attorneys who render non-legal advice will, of
                 course, be held to the relevant professional rules of conduct.

                 Ala. Rules of Prof’l Conduct R. 1.8 (2004)b addresses overreaching and undue influence
                 by the attorney, particularly in cases where an attorney's financial, personal or other
                 interest might affect his ability to exercise good professional judgment. Ala. Rules of
                 Prof’l Conduct R. 1.7(b) (2004)c. It is difficult to see the potential for overreaching in
                 this situation, even were the attorney to be a board member, since fundraising is a board
                 member's duty to the charity. Ala. Rules of Prof’l Conduct R. 1.7 cmt. (2004)d; Ala.

In representing a client, a lawyer shall exercise independent professional judgment and render candid
advice. In rendering advice, a lawyer may refer not only to law but to other considerations such as moral,
economic, social and political factors, that may be relevant to the client's situation. Ala. Rules of Prof’l
Conduct R. 2.1 (2004).
  RULE 1.8 CONFLICT OF INTEREST: PROHIBITED TRANSACTIONS:(a) A lawyer shall not enter into
a business transaction with a client or knowingly acquire an ownership, possessory, security or other
pecuniary interest adverse to a client unless:(1) the transaction and terms on which the lawyer acquires
the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing to the
client in a manner which can be reasonably understood by the client; (2) the client is given a reasonable
opportunity to seek the advice of independent counsel in the transaction; and (3) the client consents in
writing thereto. Ala. Rules of Prof’l Conduct R. 1.8 (2004).
(c) A lawyer shall not prepare an instrument giving the lawyer or a person related to the lawyer any
substantial gift from a client, including a testamentary gift, except where the client is related to the donee.
Ala. Rules of Prof’l Conduct R.1.8(c) (2004).
  RULE 1.7 CONFLICT OF INTEREST: GENERAL RULE: (b) A lawyer shall not represent a client if the
representation of that client may be materially limited by the lawyer's responsibilities to another client or to
a third person, or by the lawyer's own interests, unless: (1) the lawyer reasonably believes the
representation will not be adversely affected; and (2) the client consents after consultation. Ala. Rules of
Prof’l Conduct R. 1.7 (2004).
  Other Conflict SituationsConflicts of interest in contexts other than litigation sometimes may be difficult
to assess.  A lawyer for a corporation or other organization who is also a member of its board of
directors should determine whether the responsibilities of the two roles may conflict. The lawyer may be
called on to advise the corporation in matters involving actions of the directors. Consideration should be
given to the frequency with which such situations may arise, the potential intensity of the conflict, the
effect of the lawyer's resignation from the board, and the possibility of the corporation's obtaining legal
advice from another lawyer in such situations. If there is material risk that the dual role will compromise
the lawyer's independence of professional judgment, the lawyer should not serve as a director.
When the lawyer's other interests are involved, not only must the client consent after consultation, but
also, independent of such consent, the representation must reasonably appear not to be adversely
affected by the lawyer's other interests.
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                 Model Code of Prof’l Responsibility EC 5-3e. However, the attorney must disclose his
                 position to the client.

                 Certain circumstances may create a more direct conflict or context of overreaching.
                 Where the attorney/board member is also compensated for services he performs for the
                 charitable organization, such information must be disclosed to the client/donor and may
                 create a direct conflict, if the compensation is so large it may affect the attorney's
                 judgment. Ala. Rules of Prof’l Conduct R.1.7 cmt. (2004)f. A client's age and mental
                 capacity may lead an attorney to refuse making recommendations, simply because there
                 may be a strong appearance that the attorney has unduly influenced the client, given her
                 fragile mental state. Ala. Rules of Prof’l Conduct R. 1.14 (2004)g.

                 The key here is disclosure, in writing, with a written waiver from the client.

                 B.                QUESTION II

                 Client, who is being advised by an outside financial planner, asks Lawyer whether she
                 should give to Charity X. Lawyer prepared Client's original estate plan and regularly
                 advises Client about new developments affecting Client's estate planning. Lawyer is also
                 retained by Charity X to represent it in an IRS audit. The IRS is looking into Charity X's
                 political and lobbying activities. If Charity X does not ultimately prevail, the charity
                 could lose its recognition as a 501(c)(3) organization.

                 a.                May Lawyer advise his current client about her proposed charitable gift?
                 b.                May Lawyer disclose the information about the IRS audit to Client?
                 c.                Would your answers to (a) or (b) be any different if Lawyer was not yet retained
                                   by Charity X but did hold an initial exploratory consultation with the Charity X.
                 d.                Would your answers to (a) or (b) be any different if Lawyer prepared Client's
                                   estate plan years ago and had no further contact with her until today, after he was
                                   retained by Charity X?
                 e.                Would your answers to (a) or (b) be any different if Lawyer is a board member of
                                   Charity X rather than its counsel?

  A lawyer "should not seek to persuade his client to permit him to invest in an undertaking of his client
nor make improper use of his professional relationship to influence his client to invest in an enterprise in
which the lawyer is interested.” Ala. Model Code of Prof’l Responsibility EC 5-3.
  Id.; See also "[e]xcept with the consent of his client after full disclosure, a lawyer shall not accept
employment if the exercise of his professional judgment on behalf of his client will be or reasonably may
be affected by his own financial, business, property, or personal interests.” Ala. R Prof’l Conduct Rule 1.7
  RULE 1.14 CLIENT UNDER A DISABILITY(a) When a client's ability to make adequately considered
decisions in connection with the representation is impaired, whether because of minority, mental disability
or for some other reason, the lawyer shall, as far as reasonably possible, maintain a normal client-lawyer
relationship with the client. (b) A lawyer may seek the appointment of a guardian or take other protective
action with respect to a client, only when the lawyer reasonably believes that the client cannot adequately
act in the client's own interest. Ala. Rules of Prof’l Conduct R. 1.14 (2004).
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                 ANSWER II

                 This hypothetical involves a situation in which the attorney may compromise client
                 confidences and secrets. Ala. Rules of Prof’l Conduct R. 1.6 (2004); Ala. Model Code of
                 Prof’l Responsibility EC 4-6h. One may argue that although Lawyer must not reveal to
                 Client why he can't recommend Charity, he could advise Client not to make the
                 contribution. Given the ongoing legal relationship between Lawyer and Client, he is
                 duty-bound to steer the client away from the gift to Charity. This view rests on the
                 premise that the representation of the Charity before the IRS is not equivalent to
                 representing the Charity for the purposes of fundraising.

                 A different view sees an irresolvable conflict here, because the Charity's IRS audit does
                 relate to the Client's gift, and the attorney's two clients appear to be in direct conflict.
                 Ala. Rules of Prof’l Conduct R.1.7 (2004)i. Further, if Lawyer is a board member, he
                 will be unable to advise Client, since he has a duty to do no harm to both the Charity and
                 the Client, and their interests pose a conflict that is impossible to resolve. Thus, in this
                 case, Lawyer must advise Client to seek other counsel.

                 Query: Can this issue be avoided by careful drafting of Client's estate planning

  See supra note 2.
  RULE 1.7 CONFLICT OF INTEREST: GENERAL RULE(a) A lawyer shall not represent a client if the
representation of that client will be directly adverse to another client, unless: (1) the lawyer reasonably
believes the representation will not adversely affect the relationship with the other client; and (2) each
client consents after consultation. (b) A lawyer shall not represent a client if the representation of that
client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by
the lawyer's own interests, unless: (1) the lawyer reasonably believes the representation will not be
adversely affected; and (2) the client consents after consultation. When representation of multiple clients
in a single matter is undertaken, the consultation shall include explanation of the implications of the
common representation and the advantages and risks involved. Ala. Rules of Prof’l Conduct R.1.7
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                 C.                QUESTION III

                 Lawyer has a thriving estate planning practice. Over the years, Lawyer has assisted many
                 clients in making gifts to the local Community Foundation. The Community Foundation
                 also refers potential donors to Lawyer for estate planning services. The Foundation now
                 asks Lawyer to serve on its board of directors.

                 a.                If Lawyer is elected to the Community Foundation's board, may she continue to
                                   direct her clients to the Foundation as a vehicle for giving and prepare estate
                                   planning documents for clients which establish funds with the Community
                 b.                May the Community Foundation continue to refer potential donors to Lawyer for
                                   estate planning services?
                 c.                May Lawyer direct clients to another member of her firm, who will then prepare
                                   estate plans involving the Community Foundation?

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                 ANSWER III

                 This hypothetical raises the issue of "quid pro quo" arrangements covered by Ala. Rules
                 of Prof’l Conduct R. 7.3 (2004)j. (From this perspective, the lawyer's role as board
                 member does not materially affect the analysis.) Rule 7.3 provides that a lawyer should
                 not compensate or give anything of value to a person or other entity for recommending
                 his or her services. See also Ala. Rules of Prof’l Conduct R. 7.2(c)k and cmt.l (2004). If
                 there is an arrangement of "you scratch my back, I'll scratch yours," such an arrangement
                 is improper under Rule 7.3. In essence the lawyer, by directing donors to the charity,
                 would be compensating the charity for referring clients to her.

                 There is nothing improper about the Community Foundation recommending the Lawyer
                 to donors for assistance with their charitable giving. If the Lawyer is a board member of
                 the Community Foundation, the lawyer will' have to disclose her relationship to the client
                 and should get the client's agreement to representation in writing. Ala. Rules of Prof’l
                 Conduct R.1.7 cmt. (2004)m. However, if the Lawyer begins to refer clients to the

(a) A lawyer shall not solicit professional employment from a prospective client with whom the lawyer has
no familial or current or prior professional relationship, in person or otherwise, when a significant motive
for the lawyer's doing so is the lawyer's pecuniary gain. A lawyer shall not permit employees or agents of
the lawyer to solicit on the lawyer's behalf. A lawyer shall not enter into an agreement for or charge or
collect a fee for professional employment obtained in violation of this rule. The term "solicit" includes
contact in person, by telephone, telegraph, or facsimile transmission, or by other communication directed
to a specific recipient and includes contact by any written form of communication directed to a specific
recipient and not meeting the requirements of subdivision (b)(2) of this rule. Ala. Rules of Prof’l Conduct
R. 7.3 (2004).
  RULE 7.2 ADVERTISING(c) A lawyer shall not give anything of value to a person for recommending the
lawyer's services, except that a lawyer may pay the reasonable cost of any advertisement or written
communication permitted by this rule and may pay the usual charges of a not-for-profit lawyer referral
service. Ala. Rules of Prof’l Conduct R. 7.2 (2004).
  Paying Others to Recommend a Lawyer:A lawyer is allowed to pay for advertising permitted by this Rule,
but otherwise is not permitted to pay another person for channeling professional work. This restriction
does not prevent an organization or person other than the lawyer from advertising or recommending the
lawyer's services. Thus, a legal aid agency or prepaid legal services plan may pay to advertise legal
services provided under its auspices. Likewise, a lawyer may participate in not-for-profit lawyer referral
programs and pay the usual fees charged by such programs. Paragraph (c) does not prohibit paying
regular compensation to an assistant, such as a secretary, to prepare communications permitted by this
Rule. Ala. Rules of Prof’l Conduct R. 7.2 cmt. (2004).
A lawyer for a corporation or other organization who is also a member of its board of directors should
determine whether the responsibilities of the two roles may conflict. The lawyer may be called on to
advise the corporation in matters involving actions of the directors. Consideration should be given to the
frequency with which such situations may arise, the potential intensity of the conflict, the effect of the
lawyer's resignation from the board, and the possibility of the corporation's obtaining legal advice from
another lawyer in such situations. If there is material risk that the dual role will compromise the lawyer's
independence of professional judgment, the lawyer should not serve as a director. Ala. Rules of Prof’l
Conduct R.1.7 cmt. (2004).
   See supra notes 5, 7 & 9.
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                 Community Foundation while accepting referrals from the Foundation, a quid pro quo
                 arrangement arises.

                 Ala. Rules of Prof’l Conduct R. 8.4 (2004)n does not permit a lawyer to do indirectly
                 what she would be prohibited from doing directly. Therefore, if Lawyer cannot accept
                 referrals from the Community Foundation under Rule 8.4, members of her firm cannot
                 accept such referrals either.

                 Query: How should a lawyer proceed when she is asked by a Charity to draft the donor's
                 documents for a gift, where the Charity is the client and the donor is paying for the legal

                 D.                QUESTION IV

                 Lawyer is approached by an old friend whom he has represented in several matters over
                 the years. Friend knows that Lawyer serves as general counsel for the local Historical
                 Society. Friend wants Lawyer to convince the Historical Society to accept a gift of
                 commercial property of high fair market value but not useful for furthering the Historical
                 Society's exempt purpose. Friend wishes to place a condition on the gift, namely, that
                 Historical Society must never sell the property. How should Lawyer proceed?

  RULE 8.4 MISCONDUCTIt is professional misconduct for a lawyer to:(a) violate or attempt to violate the
Rules of Professional Conduct, knowingly assist or induce another to do so, or do so through the acts of
another;(b) commit a criminal act that reflects adversely on the lawyer's honesty, trustworthiness or
fitness as a lawyer in other respects;(c) engage in conduct involving dishonesty, fraud, deceit or
misrepresentation;(d) engage in conduct that is prejudicial to the administration of justice;(e) state or
imply an ability to influence improperly a government agency or official;(f) knowingly assist a judge or
judicial officer in conduct that is a violation of applicable Canons of Judicial Ethics or other law; or(g)
engage in any other conduct that adversely reflects on his fitness to practice law. Ala. Rules of Prof’l
Conduct R. 8.4 (2004).
          8.4(a)-(c) Identical to Va. Rules of Prof’l. Conduct R. 8.4 (2005); Va. Code of Prof’l Responsibilty
DR 1-102(A)(2) (2005).
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                 ANSWER IV

                 In this hypothetical, Lawyer has two clients. Ala. Rules of Prof’l Conduct R. 2.2 (2004)o. If
                 Friend insists on placing a condition on a gift that will render it useless to the Historical
                 Society, may Lawyer represent both clients and attempt to act as an intermediary in the
                 negotiations? Lawyer may only act as an intermediary if he identifies to Friend that he is
                 representing the Historical Society and is not representing Friend. Ala. Rules of Prof’l
                 Conduct R. 2.2 cmt. (2004)p. He must make clear to Friend that he cannot recommend
                 acceptance of such a gift to the Historical Society, and in attempting to mediate the
                 dispute he must obtain a written waiver from Friend, acknowledging Lawyer's position
                 and the limitation on services.

                 If Lawyer does obtain a written waiver from Friend, he may advise Friend as to the legal
                 consequences to Friend if the condition is removed from the gift and may point out the
                 reasons why the Historical Society would not accept the gift. However, if Friend insists
                 on the gift subject to the condition, an irreconcilable conflict arises.

                 Lawyer should be wary of serving as a intermediary. In the process of mediating the
                 dispute, Lawyer may gain confidential information that would compromise his ability to
                 continue to represent the Historical Society, arguably, by virtue of his knowledge about
                 Friend’s intentions and Historical Society’s lack of need for the property, his position is
                 already compromised.

(a) A lawyer may act as intermediary between clients if: (1) the lawyer consults with each client
concerning the implications of the common representation, including the advantages and risks involved,
and the effect on the attorney-client privileges, and obtains each client's consent to the common
representation; (2) the lawyer reasonably believes that the matter can be resolved on terms compatible
with the clients' best interests, that each client will be able to make adequately informed decisions in the
matter and that there is little risk of material prejudice to the interests of any of the clients if the
contemplated resolution is unsuccessful; and (3) the lawyer reasonably believes that the common
representation can be undertaken impartially and without improper effect on other responsibilities the
lawyer has to any of the clients.(b) While acting as intermediary, the lawyer shall consult with each client
concerning the decisions to be made and the considerations relevant in making them, so that each client
can make adequately informed decisions.(c) A lawyer shall withdraw as intermediary if any of the clients
so requests, or if any of the conditions stated in paragraph (a) is no longer satisfied. Upon withdrawal, the
lawyer shall not continue to represent any of the clients in the matter that was the subject of the
intermediation. Ala. Rules of Prof’l Conduct R. 2.2 (2004).
  Because confusion can arise as to the lawyer's role where each party is not separately represented, it is
important that the lawyer make clear the relationship.The Rule does not apply to a lawyer acting as
arbitrator or mediator between or among parties who are not clients of the lawyer, even where the lawyer
has been appointed with the concurrence of the parties. Ala. Rules of Prof’l Conduct R. 2.2 cmt. (2004).
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                                                                          EXHIBIT A.
                                           Alabama Estate Information
       Quick facts on charitable bequests made through estates
              over $1,000,000 settled in Alabama in 2003
         787 Alabama residents left total estates of nearly $1.9 billion or 1.0% of the
          $200.3 billion total estates left in the U.S.

         141 Alabama residents made charitable bequests (gifts to charity through a
          person’s will) totaling nearly $49 million or 0.32% of the $15.4 billion dollars
          bequeathed to charity.

         The average Alabama estate was $2.4 million, compared to the U.S. average of
          $2.7 million.

         The average of Alabama charitable bequests was nearly $344,000, compared to
          the U.S. average of $1.1 million.

         18% of Alabama estates included a charitable bequest, compared to the U.S.
          average of 18%.

         Of those who left charitable bequests, Alabama residents bequeathed 11% of
          their estates to charity compared to 28% of the estates for the average of those
          in the U.S.

         2.5% of the assets of all estates settled in Alabama were distributed in
          charitable bequests compared to the 7.7% U.S. average.

Please see “Facts on Alabama Estates” for a five-year comparison of the above information.


                 1.       The total amount bequeathed to charity in Alabama does not reflect planned gifts such as charitable remainder trusts, charitable
                          lead trusts, foundations, etc. whose creation often results from estate planning

             2. Estate Tax Legislation
        In 2001, Congress passed legislation that gradually raises the estate tax threshold and ultimately repeals the estate tax in 2010. In 2011, the
        whole tax bill will expire unless Congress votes to renew it. In 2001, estate tax was assessed on those who died leaving a taxable estate of
        more than $675,000. The threshold change dates are listed below:

                                   Year:                                          2002           2004           2006           2009           2010
                                   Estate Tax Exemption:                        $1 million    $1.5 million    $2 million    $3.5 million    Repealed

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                                                                        EXHIBIT B.
           FACTS ON ALABAMA ESTATES (OVER $1,000,000)*
                               IRS Estate Tax Return Information: Five-Year Comparison 1999-2003
                                                                       Year    Alabama’s National Rank    AL Average / U.S. Average
                                                                       2003              34                $2.4 million/$2.7 million
How much are we leaving in estates in
                                                                       2002              11               $2.2 million / $2.1 million
                                                                       2001              25               $1.9 million / $2.0 million
            (Average Size of Gross Estate)                             2000              14               $2.1 million / $2.0 million
                                                                       1999              19               $1.8 million / $1.9 million
                                                                       Year       AL Returns / U.S.      AL Total Bequeathed /
How much are those who leave bequests                                                  Returns           U.S. Total Bequeathed
to charity bequeathing?                                                2003         141 / 13,400          $48.5 million/$15.4 billion
                                                                       2002         115 / 16,272          $64 million / $18.5 billion
(Total Returns with Bequests and Amount                                2001         251 / 18,711         $301 million / $16.6 billion
               Bequeathed)                                             2000         172 / 18,011            $127.3 million / $16.8
                                                                       1999         126 / 17,558         $87.9 million / $16.0 billion
                                                                       Year    Alabama’s National Rank    AL Average / U.S. Average
What is the average amount being                                       2003              50                 $344,000 / $1,147,000
bequeathed to charities?                                               2002              38                 $558,000 / $1,135,000
            (Average Amount Bequeathed)                                2001              12                 $1,200,000 / $886,000
                                                                       2000              24                  $740,000 / $932,000
                                                                       1999              20                  $698,000 / $909,000
                                                                       Year    Alabama’s National Rank    AL Average / U.S. Average
How many of us who leave estates are                                   2003              29                      18% / 18%
making charitable bequests?                                            2002              39                      11% / 16%
        (Average Percentage of Estate Tax                              2001              18                      15% / 17%
          Returns Containing Bequests)                                 2000              28                      15% / 17%
                                                                       1999              43                       9% / 17%
Among those who make bequests, how                                     Year    Alabama’s National Rank    AL Average / U.S. Average
much of their estates are they bequeathing                             2003              50                      11% / 28%
to charities?                                                          2002              49                      14% / 33%
                                                                       2001              14                      33% / 29%
  (Average Percentage of Donors’ Gross                                 2000              22                      28% / 28%
            Estate Bequeathed)                                         1999              26                      25% / 29%
 How much of what we leave in our                                      Year    Alabama’s National Rank    AL Average / U.S. Average
estates are we bequeathing to charities?                               2003              49                      2.5% / 7.7%
                                                                       2002              47                      2.9% / 8.7%
   (Average Percentage of Total Gross
  Estates’ Amounts Reported that were                                  2001               4                     13.0% / 7.7%
Bequeathed as a Percentage of All Estates)                             2000              31                      5.4% / 7.7%
                                                                       1999              32                      5.1% / 8.1%

* A federal estate tax return must be filed when the deceased’s estate exceeds a certain amount; this
amount is determined by the year in which he or she died. For deaths occurring between 1995-97, returns
had to be filed for estates exceeding $600,000; the amount went up to $625,000 in 1998, to $650,000 in
1999, to $675,000 in 2000-2001, and to $1,000,000 in 2002.
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                                                                       A Donor Bill of Rights
PHILANTHROPY is based on voluntary action for the common good. It is a tradition of giving
and sharing that is primary to the quality of life. To assure that philanthropy merits the respect
and trust of the general public, and that donors and prospective donors can have full confidence
in the not-for-profit organizations and causes they are asked to support, we declare that all
donors have these rights:

I. To be informed of the organization’s mission, of the way the organization intends to use
donated resources, and of its capacity to use donations effectively for their intended purposes.

II. To be informed of the identity of those serving on the organization’s governing board, and to
expect the board to exercise prudent judgment in its stewardship responsibilities.

III. To have access to the organization’s most recent financial statements.

IV. To be assured their gifts will be used for the purposes for which they were given.

V. To receive appropriate acknowledgement and recognition.

VI. To be assured that information about their donations is handled with respect and with
confidentiality to the extent provided by law.

VII. To expect that all relationships with individuals representing organizations of interest to
the donor will be professional in nature.

VIII. To be informed whether those seeking donations are volunteers, employees of the
organization or hired solicitors.

IX. To have the opportunity for their names to be deleted from mailing lists that an organization
may intend to share.

X. To feel free to ask questions when making a donation and to receive prompt, truthful and
forthright answers.

DEVELOPED BY                                                                           ENDORSED BY
American Association of Fund Raising Counsel (AAFRC)                                     (In formation)
Association for Healthcare Philanthropy (AHP)                                          Independent Sector
Council for Advancement and Support of Education (CASE)                                National Catholic Development Conference (NCDC)
Association of Fundraising Professionals (AFP)                                         National Committee on Planned Giving (NCPG)
                                                                                       Council for Resource Development (CRD)
                                                                                       United Way of America

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         National Committee on Planned Giving (NCPG)
Mission: The mission of NCPG is to increase the quality and quantity of charitable
planned gifts by serving as the voice and professional resource for the gift planning

About NCPG: The National Committee on Planned Giving® is the professional
association for people whose work includes developing, marketing, and administering
charitable planned gifts. Those people include fund raisers for nonprofit institutions and
consultants and donor advisors working in a variety of for-profit settings.

To learn more visit

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