Five Ways to Maximize Your PRI

What is a PRI? A PRI is a Program Related Investment. It is a type of storied Social Impact Fund you have been reading about lately that has taken the charitable community by storm.

Forbes is forecasting that social impact funding will be a $3 trillion market. Goldman Sachs is investing $75 million in new social impact funding programs they support. Morgan Stanley recently announced that they would like to attract $10 billion in new client funding for their Social Impact Fund.

A PRI, essentially is a philanthropic loan that was pioneered by Benjamin Franklin and is now used widely by some of the wealthiest, most iconic family names in American history. PRIs are very powerful estate planning and gifting tools available to anyone who wants to maximize the impact their personal and charitable portfolios can have on a community. They do differ from Mission Related Investments and even some types of Social Impact Funds, depending upon the returns you are expecting.

As for the PRI component, the Obama Administration is actively encouraging philanthropists and nonprofits alike to use PRIs more to invest in both for-profit and non-profit ventures that can have a measurable public benefit for those who receive their help.

Even though one of Ben Franklin’s favorite investing tools has been around for a long time now, there are a number of emerging uses for PRIs (if that is the vehicle you ultimately choose to use to leverage your portfolio) that can help you and your trusted advisors dramatically maximize the impact your philanthropy can have on your charities of choice. Here are five emerging trends worth knowing:

1. Capitalize projects at a 1% to 2% interest rate over a defined period of time, potentially get that loan back at the end of that term if it is properly managed using any kind of a fiduciary assurance process. Under the right circumstances, you can then possibly give it away again if the gift is structured properly from the outset, thus helping you meet your 5% threshold annually in the process while doing great good to for the charities you wish to support.

2. Pool your charitable assets in a preeminent charitable fund of your choosing where only the interest generated off of your assets are granted to the charities of choice you wish to support, in the quarter after which the interest is earned. You principal is never directly risked on the charity.

3. Monetize a fully paid up and irrevocably gifted life insurance policy for a university or hospital foundation, for example, so that the charity can use the value of this deferred gift now, as opposed to 10-, 15-, or 20-years from now when the insured passes.

4. Transform vital programs by using charitable assets to develop, expand and more measurably impact those audiences your charity of choice has pledged to serve.

5. Leverage your private family foundation’s charitable impact while preserving and protecting your hard-earned principal by guaranteeing a charitable loan to a qualified charity’s project or mission. You can preserve your principal while meeting your charitable requirements.

These PRI strategies can easily be fully compliant with federal and state tax law, if you structure them properly with your experts, and which can be assured by the select community foundation you might consider using to manage and custody these assets on behalf of the donor and monitors the charities, which benefit from your philanthropy.