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Nonprofit Management

Split-Interest Agreements: Accounting for Charitable Remainder Trusts, Gift Annuities and Lead Trusts

Sherman Hsieh
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Split-Interest Agreements: Accounting for Charitable Remainder Trusts, Gift Annuities and Lead Trusts

Last updated: October 11, 2026 · Independent guide · We do not sell rankings or coverage.

A split interest agreement is an irrevocable planned gift in which your organization shares the benefits of donated assets with another beneficiary, usually the donor or a family member. Under ASC 958-30 you record the assets at fair value and a liability for the payments owed to the other beneficiary, recognize the difference as contribution revenue, and revalue the liability every year. The three structures most controllers see are charitable gift annuities, charitable remainder trusts and charitable lead trusts.

The rule and the journal entries

Contribution revenue at inception equals the fair value of assets received minus the liability for payments owed to the other beneficiary (GMA CPA, February 10, 2015). When a third party is trustee, you record only your beneficial interest at fair value, and later remeasurements go to change in value of split-interest agreements (PwC Viewpoint, no date shown).

Account Debit Credit Note
Annuity or trust assets Fair value received Inception, if you hold the assets
Annuity or trust payment obligation Present value of payments Rate and mortality table fixed at inception
Contribution revenue Difference Classified by donor stipulation
Annuity or trust payment obligation Payment amount Each payment
Cash Payment amount From annuity or trust assets
Change in value of split-interest agreements Increase in liability Year-end revaluation; reverse for a decrease
Annuity or trust payment obligation Increase in liability To new actuarial value

At termination you write off the remaining liability to change in value. PG Calc, which sells planned gift software, describes the same cycle (PG Calc, June 11, 2012).

Worked example: one gift annuity, one remainder trust, one lead trust

All figures here are an illustration. The factors stand in for actuarial software output.

Step 1: Charitable gift annuity

A donor aged 75 transfers $100,000 for an annuity of $7,000 a year, remainder restricted to scholarships. At a 5.0% rate and the IRS 2010CM table, your software returns a factor of 8.5. The liability is $7,000 × 8.5 = $59,500, and contribution revenue with donor restrictions is $40,500. Dr Cash $100,000; Cr Annuity obligation $59,500; Cr Contribution revenue $40,500.

During the year you pay $7,000: Dr Annuity obligation $7,000; Cr Cash $7,000. At year end the software values the obligation at $55,900. The balance before revaluation is $52,500, so the liability rises by $3,400. Of that, $2,975 is discount accretion ($59,500 × 5%) and $425 is actuarial. Dr Change in value of split-interest agreements $3,400; Cr Annuity obligation $3,400.

Step 2: Charitable remainder annuity trust, you are trustee

A donor aged 70 funds a trust with $500,000, paying $25,000 a year for life, remainder to you for general purposes. A factor of 11.0 gives a liability of $275,000. Dr Trust investments $500,000; Cr Liability under remainder trust $275,000; Cr Contribution revenue with donor restrictions $225,000. The restriction is time-based until the trust ends.

After the $25,000 payment the balance is $250,000. The year-end valuation is $262,900, so you record Dr Change in value $12,900; Cr Liability $12,900.

Step 3: Charitable lead annuity trust, bank is trustee

A bank trustee will pay your organization $20,000 a year for 10 years, then return the assets to the donor’s family. You record a beneficial interest at fair value, the present value of 10 payments at a 5.0% market rate: $154,435. Dr Beneficial interest in lead trust $154,435; Cr Contribution revenue with donor restrictions $154,435.

When the first $20,000 arrives: Dr Cash $20,000; Cr Beneficial interest $20,000, and release $20,000 from restriction because the time restriction on that payment has lapsed. At year end market rates have risen to 5.5%, and nine payments are worth $139,044. Against a $134,435 balance, record Dr Beneficial interest $4,609; Cr Change in value of split-interest agreements $4,609. Fair value uses the current market rate each year.

If you are trustee of the lead trust, record contribution revenue, the assets held in trust and a liability for the amounts held for the family (GMA CPA, February 10, 2015).

The standard behind it: ASC 958-30

The codification defines a split-interest agreement as one where a donor transfers assets to a trust or similar vehicle and the not-for-profit shares the benefits with other beneficiaries. Revocable agreements are treated as intentions to give, and an organization whose rights are conditional, or whose trustee holds variance power, recognizes nothing until its right becomes unconditional (PwC Viewpoint, no date shown). The full text is in the FASB Codification (free registration).

Discount rate and mortality inputs

Neither FASB nor the AICPA prescribes a discount rate, and your auditor will judge whether the rate is reasonable (PG Calc, June 15, 2022). Common choices are one rate for all gifts or the IRS discount rate used for each gift’s charitable deduction, known as the Section 7520 rate, which is 5.6% for October 2026 (IRS, September 25, 2026).

Unless you elect fair value, keep the rate you chose at inception. A 2002 article on gift liability reports quotes the AICPA guide as saying the discount rate “should not be revised subsequent to the initial booking” (Planned Giving Today, February 2002). If you elect the fair value option under ASC 825-10, you measure the obligation at fair value each year and add the disclosures in ASC 958-30-50-1 (Deloitte DART, no date shown).

For mortality, the IRS tables for valuation dates on or after June 1, 2023 are Table 2010CM (IRS, April 8, 2026). Many charities use the IRS table for GAAP liabilities for consistency with the donor’s deduction, while state reserve calculations use annuity tables such as Annuity 2000 or 2012 IAR (PG Calc GiftWrap help, no date shown).

Net asset classification

Classification follows donor stipulations. Trust remainders carry an implied time restriction, and lead payments are released as they come due. A common rule is to classify split-interest revenue as with donor restrictions unless the donor gave you an immediate, unrestricted right to the assets (GMA CPA, February 10, 2015). Gift annuities are a general obligation rather than a trust, so agree your policy for unrestricted annuities with your auditor. The Indiana University Foundation records split-interest assets by donor restriction until its obligations to annuitants are met (IU Foundation financial statements, October 9, 2025). ASC 958-30-45-7 requires contribution revenue and changes in value to appear as separate line items on the statement of activities or in the notes (PwC Viewpoint, no date shown).

State reserve rules for gift annuities

State reserves are calculated separately from the GAAP liability. California requires a gift annuity registration, a separate trust agreement, segregated reserves and annual and quarterly reports. Washington requires a certificate of exemption and $500,000 in unrestricted net assets (ACGA, state entries updated through June 25, 2025). New York requires 10 years of operation and admitted assets held as segregated funds equal to its reserves plus a surplus of 10% of reserves or $100,000, whichever is greater (N.Y. Insurance Law § 1110, no date shown).

Common mistakes

  • Recording the full gift as contribution revenue and expensing annuity payments, which overstates revenue in the gift year and understates net assets later.
  • Switching each year to the current Section 7520 rate without electing fair value, which creates swings unrelated to experience.
  • Booking the state reserve figure as the GAAP liability. The reserve is a regulatory minimum, not the ASC 958-30 measurement.
  • Leaving the liability open after an annuitant dies.

How to report it

In the financial statements, ASC 958-30-50-1 requires disclosure of the measurement basis for recognized assets and the changes in value recognized (Deloitte DART, no date shown).

On Form 990, annuity and trust obligations usually land on Part X, line 25, other liabilities. Reporting an amount there means answering “Yes” on Part IV, line 11e and listing each liability type on Schedule D, Part X, with column (b) totaling the Part X figure (IRS Form 990 instructions, 2025 tax year; IRS Schedule D instructions, April 30, 2026). If you report a beneficial interest as an other asset on Part X, line 15, Schedule D, Part IX is required when line 15 is 5% or more of total assets.

Where the change in value appears in your audited statements but not as Form 990 revenue, explain the difference on the Schedule D, Part XI or XII reconciliation and in Part XIII.

How accounting and planned giving systems handle it

PG Calc GiftWrap holds the gift-level schedule. Its FASB Liabilities report calculates the present value of payments for gift annuities, remainder trusts, pooled income funds and lead trusts, using one rate or each gift’s IRS rate (PG Calc GiftWrap help, no date shown). It also calculates state gift annuity reserves, issues payments and 1099-R forms, and can create a payment file for upload into general ledger software, but PG Calc publishes no prices (PG Calc, no date shown).

Blackbaud Financial Edge NXT has no documented split-interest module. You post the revaluation from GiftWrap or an actuary as a journal entry batch, which Blackbaud’s free Journal Entry Batch Creator add-in can import from Excel (Blackbaud help, October 8, 2026).

Sage Intacct also relies on journal entries. Recurring journal entry templates can schedule annuity payment entries, with optional automatic reversal, under General Ledger > All > Journal entry templates (Sage Intacct help, October 8, 2026). Restriction dimensions and the release for restriction feature handle net asset classes (RSM, an Intacct implementation partner, March 29, 2022). For broader comparisons, see our nonprofit accounting software guide and Sage Intacct for nonprofits review. Lead trust payments behave much like multi-year pledges, which our pledge management software guide covers.

How we researched this

We used FASB guidance as summarized by PwC and Deloitte, IRS rate, actuarial and Form 990 pages, state gift annuity law, a 2025 audited foundation report, and PG Calc, Blackbaud and Sage Intacct documentation, all checked on October 11, 2026.

Related guides

Frequently asked questions

What is a split interest agreement in nonprofit accounting?

It is an irrevocable gift in which your organization and another beneficiary, often the donor, share the benefits of donated assets. Gift annuities, remainder trusts, lead trusts and pooled income funds are the common forms, all governed by ASC 958-30.

What discount rate should we use for gift annuity liabilities?

GAAP does not prescribe one. Many organizations use the IRS Section 7520 rate used for each gift’s charitable deduction, or one fixed rate for all gifts, and keep it for the life of the gift unless they elect fair value.

Where does a gift annuity liability go on Form 990?

It is normally reported on Part X, line 25 as an other liability. That requires a “Yes” on Part IV, line 11e and a description of the liability on Schedule D, Part X.

Do we record a charitable remainder trust held by a bank?

Yes, if the trust is irrevocable and your right to the remainder is unconditional. You record a beneficial interest at fair value when notified and remeasure it each year. If the trustee has variance power, you record nothing until your right becomes unconditional.

Can Sage Intacct or Financial Edge NXT calculate the liability for us?

Neither documents a built-in actuarial calculation. Most organizations calculate liabilities in PG Calc GiftWrap or through an actuary and post journal entries.

Sources

Sherman Hsieh

CEO & Editor-in-Chief, Business-Software.com
Independent analysis of enterprise software — ERP, CRM and more
Sherman Hsieh is the founder, CEO, and editor-in-chief of Business-Software.com. He leads the site's independent, buyer-focused coverage of ERP, CRM, and other business systems, including vendor-neutral comparisons, pricing analysis, and implementation guidance. Before founding Business-Software.com, Sherman was an executive at Siebel ...

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