Geffen Gift to UCLA Raising Estate Issues

By AMANDA BRONSTAD
Staff Reporter

Maybe it's mortality.

For David Geffen, 59 years old and worth upwards of $3 billion, a $200 million donation to the UCLA School of Medicine might just be a way to start planning how his vast estate will be divvied up.

The co-founder of DreamWorks SKG has donated to several local causes in years past including to UCLA but never as generously as in the most recent gift. And he still has plenty to give away.

"David may have looked at what he's done and said, 'Even if I reach 120 years old, I'm never going to spend this kind of money," said Carol Savoie, director of private client advisory services at Deloitte & Touche in L.A. "Sometimes it's not a question of why, but why not?"

With a net worth estimated at $3.9 billion and no children standing to inherit, Geffen's ability to shell out a $200 million gift comes quite easily.

Motivations and implications can be more complicated.

"Most donors have multiple objectives: They want to do something for charity and for their family, and maybe they want strings attached," said Steve Trytten, partner in tax and estate planning at Anglin Flewelling Rasmussen Campbell & Trytten LLP in Pasadena. "I can only speculate that David Geffen had only one of those three objectives. He wanted to do something for UCLA. He didn't have his own agenda, he didn't have family, and maybe he knew the (UC) Board (of Regents) comfortably enough that the strings he would want would happen anyhow."

Major events

Often, a wealthy donor makes a large contribution before or after a significant "income event," such as a stock option exercise or asset sale, that will significantly boost his adjusted gross income for the year.

"He could have a huge income year and needs a deduction," said Savoie, who does not know Geffen but spoke about the gift in general terms. "If he closes some sort of a deal where there's a large amount of income, he'd be looking for deductions. If that were true, this would be a good year to make a charitable contribution."

It's not known whether there has been a major income event for Geffen the majority of his holdings are not in publicly traded companies.

Geffen and his staff are tight-lipped about the gift, but it may be that the timing was finally right for the entertainment mogul to leave an indelible mark on the community. And UCLA, in the midst of a billion-dollar capital campaign, was waiting in the wings.

"(Donors) need somebody to turn them on about something they think they'll have a substantial impact on," said Todd Morgan, chairman of Bel Air Investment Advisors LLC. "And if you've got a lot of money, you want to make a big impact. It sounds like David Geffen has succeeded in that."

The $200 million Geffen gave to UCLA was unrestricted, an unusual but preferred type of gift and what Gerald Levey, provost for medical services and dean of the now re-named David Geffen School of Medicine at UCLA, had requested.

For Geffen, there are some financial benefits.

For one thing, he gets more tax breaks from his donations because he does not have children to consider, Trytten said. Gifts to family members in excess of $10,000 are taxed, donations are not.

Wealthier donors can deduct charitable contributions in an amount up to half their adjusted gross income, Trytten said. If contributions exceed half the adjusted gross income, the deductions can be can spread over five years.

There is no way to know with any certainty Geffen's annual income.

A source familiar with the Geffen donation said that the $200 million would be distributed during a period of several years, the most common method of distribution among wealthy donors, rather than in a lump sum.

One of the more common methods of giving is donating marketable securities that have appreciated since the donor acquired them. For purposes of a deduction, the contribution is valued at the full amount of the security at the time of the donation, but the giver does not realize the capital gains on the donated shares.

Cash is less favorable because it is donated after-tax, but cash donations also are much simpler transactions.

Andy Spahn, president of Geffen's personal foundation, declined to talk about specifics of the donation, including whether it was made in stock or cash.

Long history

Geffen's ties to UCLA are long-standing. In addition to being the benefactor of the Geffen Playhouse at UCLA, he served on the UC Board of Regents for seven years during the 1980s.

"When you see large gifts like that, you usually assume they're on the board or a friend of the board or some kind of relationship exists," Trytten said. "When a high net-worth client joins the board, there's an implied understanding that they'll donate or they'll bring in donors."

UCLA is in the midst of a capital campaign seeking to reach $2.4 billion by 2005. The medical school is expected to receive about $1.2 billion by June 2002.

During the past several years, Geffen has given smaller gifts to entities including AIDS Project Los Angeles, Gay Men's Health Crisis, the University of Southern California's School of Cinema-Television, St. Jude Children's Research Hospital, the Los Angeles Gay and Lesbian Center and the Jewish Federation Council.

For Geffen, Savoie said, the timing may finally have been right to make a big splash in the community.

For reprint and licensing requests for this article, CLICK HERE.