Planned Giving Who, What, Why, When, Where…

Susan D. Edwards, Esq, CPASusan D. Edwards, Esq, CPA

sedwards@wcf-ny.org

Westchester Community FoundationWestchester Community Foundation

(914) 948-5166(914) 948-5166

What is Planned Giving?What is Planned Giving?

“ “Planned giving is the integration of sound Planned giving is the integration of sound personal, financial, and estate planning personal, financial, and estate planning

concepts with the individual donor’s plan concepts with the individual donor’s plan for lifetime or testamentary giving.”for lifetime or testamentary giving.”

- AFP GlossaryAFP Glossary

Donor-centered fundraisingDonor-centered fundraising

Gifts to be received “later”Gifts to be received “later”

When is an organization When is an organization READY for Planned Giving?READY for Planned Giving?

A strong annual giving program A strong annual giving program

Has patience Has patience

Has persistenceHas persistence

Has leadership in place for bothHas leadership in place for both

Donor MotivationsDonor Motivationsfor Making Planned Giftsfor Making Planned Gifts

To help provide future funding for To help provide future funding for

organizationorganization

Ability to restrict fundsAbility to restrict funds

Recognition for a loved oneRecognition for a loved one

Planned Giving ProspectsPlanned Giving Prospects

Age 55 or olderAge 55 or older

Long-time member/supporterLong-time member/supporter

Few or no dependentsFew or no dependents

Unusual generosity for OUR workUnusual generosity for OUR work

Appreciated assetsAppreciated assets

When Donors ConsiderWhen Donors ConsiderMaking Planned GiftsMaking Planned Gifts

Personal timing/circumstances determine needPersonal timing/circumstances determine need Need to create a valid willNeed to create a valid will Need to review and revise a willNeed to review and revise a will Death of a spouseDeath of a spouse Choosing executor, trustee and guardianChoosing executor, trustee and guardian Need for estate liquidityNeed for estate liquidity HealthHealth Value of old policies no longer neededValue of old policies no longer needed

What to do What to do when the Prospect says…when the Prospect says…

I need all the income my assets produce to live I need all the income my assets produce to live onon

I can’t give away capital assets; I intent to pass I can’t give away capital assets; I intent to pass them on to my children and grandchildrenthem on to my children and grandchildren

I must put my kids through college!I must put my kids through college! Your institution is not my only charityYour institution is not my only charity I need all my income. Most of my assets are I need all my income. Most of my assets are

non-income producing real estate so I am cash non-income producing real estate so I am cash poor.poor.

Or when s/he says…Or when s/he says…

I hesitate to part with any assets; I worry about a I hesitate to part with any assets; I worry about a long term illness and having enough to take care long term illness and having enough to take care of myself.of myself.

Our oriental rug collection is our pride and joy, Our oriental rug collection is our pride and joy, but our children don’t want the hassle of caring but our children don’t want the hassle of caring for them and insuring them.for them and insuring them.

This year’s been very bad for me; my tax This year’s been very bad for me; my tax situation is awful and I am going to owe a huge situation is awful and I am going to owe a huge capital gains tax. Maybe some other year.capital gains tax. Maybe some other year.

Timing of GiftsTiming of Gifts

Give it outrightGive it outright

Give it later (after donor is deceased)Give it later (after donor is deceased)

Give the asset now, keep the incomeGive the asset now, keep the income

Give the income now, keep the assetGive the income now, keep the asset

Types of GiftsTypes of Gifts

Cash GiftsCash Gifts

Appreciated AssetsAppreciated Assets

Non-Cash GiftsNon-Cash Gifts

Cash GiftsCash Gifts

Appropriate forAppropriate for: Everyone: Everyone

Tax TreatmentTax Treatment: Fully deductible for : Fully deductible for

itemizers (up to 50% of adjusted gross itemizers (up to 50% of adjusted gross

income). Excess may be carried forward for income). Excess may be carried forward for

five additional years.five additional years.

Potential IssuesPotential Issues: Certain high-income : Certain high-income

taxpayers may have this deduction phased taxpayers may have this deduction phased

out.out.

Appreciated AssetsAppreciated Assets

Appropriate forAppropriate for: People with high appreciated : People with high appreciated securities, real estate or closely held stock.securities, real estate or closely held stock.

Tax TreatmentTax Treatment: Full fair market value of asset is : Full fair market value of asset is deductible (up to 30% of adjusted gross deductible (up to 30% of adjusted gross income). Excess can be carried forward five income). Excess can be carried forward five more years. No capital gains tax paid on more years. No capital gains tax paid on appreciation.appreciation.

Potential IssuesPotential Issues: Gift MUST be made to charity : Gift MUST be made to charity prior to saleprior to sale of asset. of asset.

Other Non Cash GiftsOther Non Cash Gifts

Appropriate forAppropriate for: People wishing to donate real and : People wishing to donate real and personal property.personal property.

Tax TreatmentTax Treatment: Fully deductible up to appraised : Fully deductible up to appraised value (form 8283 filed with return). Items valued at value (form 8283 filed with return). Items valued at over $5000 MUST have an independent appraisal.over $5000 MUST have an independent appraisal.

Potential Issues:Potential Issues: If asset is sold within two years of If asset is sold within two years of receipt by institution, form 8282 must be filed. receipt by institution, form 8282 must be filed. Potential problem for donor if sold under appraised Potential problem for donor if sold under appraised value. value.

Vehicles for Planned GiftsVehicles for Planned Gifts

BequestsBequests Charitable Giving AnnuitiesCharitable Giving Annuities Pooled Income FundsPooled Income Funds Life InsuranceLife Insurance Charitable Remainder TrustsCharitable Remainder Trusts Charitable Lead TrustsCharitable Lead Trusts Retirement AssetsRetirement Assets

BequestsBequests

Appropriate forAppropriate for: Anyone with a will or trust: Anyone with a will or trust Tax TreatmentTax Treatment: Gifts identified are : Gifts identified are

excluded from federal estate and state excluded from federal estate and state inheritance taxes.inheritance taxes.

Potential IssuesPotential Issues: Recipients MUST be : Recipients MUST be qualified charities and gifts fully qualified charities and gifts fully discernable. discernable.

Charitable Gift AnnuitiesCharitable Gift Annuities

Appropriate forAppropriate for: Older individuals wishing “higher : Older individuals wishing “higher rate” of return on investments.rate” of return on investments.

Tax TreatmentTax Treatment: Current charitable deduction : Current charitable deduction received for portion of gift based on life received for portion of gift based on life expectancy of donor. No capital gain on transfer expectancy of donor. No capital gain on transfer of assets.of assets.

Potential IssuesPotential Issues: Gifted asset value must be : Gifted asset value must be segregated. Tax free income ends when donor segregated. Tax free income ends when donor attains life expectancy. attains life expectancy.

Pooled Income FundsPooled Income Funds

Appropriate forAppropriate for: Individuals wanting “higher rate” : Individuals wanting “higher rate” of return on investments but do not have the of return on investments but do not have the assets required for a CGA.assets required for a CGA.

Tax TreatmentTax Treatment: Current income tax deduction : Current income tax deduction received for portion of gift based on life received for portion of gift based on life expectancy of donor. No capital gain on transfer expectancy of donor. No capital gain on transfer of assets.of assets.

Potential IssuesPotential Issues: Limitations on investment : Limitations on investment opportunities.opportunities.

Life InsuranceLife Insurance

Appropriate forAppropriate for: People with existing policies : People with existing policies which are no longer required to meet planning which are no longer required to meet planning needs OR people wishing to take out a new needs OR people wishing to take out a new policy which will result in a significant gift at policy which will result in a significant gift at death.death.

Tax TreatmentTax Treatment: Current deductions provided for : Current deductions provided for “cash surrender value” of existing policies or “cash surrender value” of existing policies or premium payments for new policies.premium payments for new policies.

Potential IssuesPotential Issues: Make sure state recognizes : Make sure state recognizes “charity” as “insurable interest.”“charity” as “insurable interest.”

What is a What is a TrustTrust??

Donor

Bank/Trust Co.

Donor (Trustor) is an individual or organization that gifts—transfers--funds or assets to a

Bank (Trustee) for the benefit of a

Charitable Organization (Beneficiary)

501©(3) org

Charitable Remainder TrustsCharitable Remainder Trusts

Appropriate forAppropriate for: Individuals with large taxable : Individuals with large taxable estates wishing to preserve an income stream to estates wishing to preserve an income stream to someone for life or term of years with remainder someone for life or term of years with remainder of trust passing to organization.of trust passing to organization.

Tax TreatmentTax Treatment: Charitable deduction based on : Charitable deduction based on term of the life interest AND percentage passing term of the life interest AND percentage passing to income beneficiaries.to income beneficiaries.

Potential IssuesPotential Issues: Trusts are considered separate : Trusts are considered separate taxpayers and must be managed and invested taxpayers and must be managed and invested individually.individually.

Charitable Lead TrustsCharitable Lead Trusts

Appropriate forAppropriate for: Individuals who want their : Individuals who want their estate to go to heirs but want to support their estate to go to heirs but want to support their charitable organization with annual income.charitable organization with annual income.

Tax TreatmentTax Treatment: Charitable deduction based on : Charitable deduction based on number of years payments are made to number of years payments are made to organization and whether trust reverts back to organization and whether trust reverts back to donor.donor.

Potential IssuesPotential Issues: Trusts are considered separate : Trusts are considered separate taxpayers and must be managed and invested taxpayers and must be managed and invested individually.individually.

Tax Deferred Tax Deferred or Retirement Assetsor Retirement Assets

Appropriate forAppropriate for: Individuals with IRA’s, Keoghs, : Individuals with IRA’s, Keoghs, pension plans, annuities, etc.pension plans, annuities, etc.

Tax TreatmentTax Treatment: Gift is excluded from estate, : Gift is excluded from estate, inheritance and deferred income tax liabilities.inheritance and deferred income tax liabilities.

Potential IssuesPotential Issues: Favorable tax treatment is : Favorable tax treatment is available ONLY in an estate. Many people are available ONLY in an estate. Many people are unaware that the combination of taxes on tax unaware that the combination of taxes on tax deferred assets may easily exceed 70%deferred assets may easily exceed 70%

Phase-in ProcessPhase-in Process

Planned Giving doesn’t have to happen all Planned Giving doesn’t have to happen all

at once.at once.

It can and should be phased in, step-by-It can and should be phased in, step-by-

step.step.

Phase OnePhase One, the Bequest and , the Bequest and Beneficiary Designation ProgramBeneficiary Designation Program

It requires a thorough understanding and It requires a thorough understanding and implementation of a practical wills and bequests implementation of a practical wills and bequests program for which effective educational efforts .program for which effective educational efforts .

Marketing and public relations programs are Marketing and public relations programs are critical elements. critical elements.

Many times outright gifts of appreciated Many times outright gifts of appreciated securities and real estate are also included. securities and real estate are also included.

For many charitable organizations, it may For many charitable organizations, it may notnot be be necessary, prudent, or affordable to progress necessary, prudent, or affordable to progress beyond this stage of the gift planning process. beyond this stage of the gift planning process.

      Phase Two,Phase Two,the Life Income Gifts Programthe Life Income Gifts Program

This phase assumes an advanced This phase assumes an advanced understanding of gift planning options and understanding of gift planning options and commitment of the resources necessary to move commitment of the resources necessary to move successfully into a fully developed gift planning successfully into a fully developed gift planning program. program.

It builds on the successes achieved in the It builds on the successes achieved in the development of a strong Phase One foundation development of a strong Phase One foundation by continuing educational, marketing and public by continuing educational, marketing and public relations efforts.relations efforts.

Phase ThreePhase Three, the Charitable Gift , the Charitable Gift and Estate Planning and Estate Planning

This is the level at which organizations engage in This is the level at which organizations engage in professional gift planning and counseling with professional gift planning and counseling with prospective donors. prospective donors.

It involves well-trained third parties, such as attorneys, It involves well-trained third parties, such as attorneys, accountants, financial planners and other members of accountants, financial planners and other members of the planning team in the dialogue with prospective the planning team in the dialogue with prospective donors. donors.

It requires the retention of a level of professional It requires the retention of a level of professional expertise and training which many nonprofits may not expertise and training which many nonprofits may not have available on a full time basis. have available on a full time basis.

In many cases, the donor will actually engage the In many cases, the donor will actually engage the services of a professional who will help tailor the gift to services of a professional who will help tailor the gift to insure that it meets the donor's needs and protects the insure that it meets the donor's needs and protects the donor's interests. donor's interests.

If you just remember…If you just remember…

Planned Giving has a place in a Planned Giving has a place in a comprehensive development programcomprehensive development program

It can be simple or very complexIt can be simple or very complex

It’s “big dollars” for established programsIt’s “big dollars” for established programs