Demystifying Planned Giving

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Slide deck for my talk on "Demystifying Planned Giving" give to the Support Center for
Nonprofit Management on February 17, 2011.

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Demystifying Planned Giving

  1. 1. Demystifying Planned Giving Support Center for Nonprofit Management Delivered by Tony Martignetti, Esq. Martignetti Planned Giving Advisors February 17, 2011
  2. 2. Our Objective <ul><li>You’ll be comfortable enough with Planned Giving that you can open a conversation about a planned gift with one good prospect </li></ul>
  3. 3. Where We’re Headed <ul><li>• What is Planned Giving </li></ul><ul><li>• Why have a Planned Giving program </li></ul><ul><li>• Who can benefit from it </li></ul><ul><li>• Who are the best prospects </li></ul><ul><li>• How is Planned Giving done </li></ul><ul><li>• Continuing Ed. </li></ul>
  4. 4. What is Planned Giving <ul><li>A method of charitable giving that involves the donor’s consideration of their retirement plan and family estate plan, and </li></ul><ul><li>Usually (not always) accrues cash to a nonprofit at the donor’s death </li></ul>
  5. 5. Why Have A Planned Giving Program <ul><li>• Individual giving dominates fundraising </li></ul><ul><li>• Helps you build endowment </li></ul><ul><li>• Complement to Major Giving </li></ul><ul><li>• Complement to Annual Giving </li></ul><ul><li>• It’s not only for the wealthy </li></ul><ul><li>• Helps you through recessions </li></ul>
  6. 6. Where We Are <ul><li>√ What </li></ul><ul><li>√ Why </li></ul><ul><li>• Who can benefit from Planned Giving </li></ul><ul><li>• Who are the best prospects </li></ul><ul><li>• How is Planned Giving done </li></ul><ul><li>• Continuing Ed. </li></ul>
  7. 7. Who Can Benefit From Planned Giving: Nonprofits with . . . <ul><li>• Individual donors </li></ul><ul><li>• Longevity </li></ul><ul><li>at least a 10 year history </li></ul><ul><li>• Depth </li></ul><ul><li>more than the founder + 1 or 2 </li></ul><ul><li>• Long-term view of fundraising </li></ul>
  8. 8. Who Can Benefit From Planned Giving: Nonprofits with . . . <ul><li>• Need to build endowment </li></ul><ul><li>• Board support for the program </li></ul><ul><li>• Budget--IF you go beyond basics </li></ul><ul><li> expertise, promotion, cultivation, stewardship, software </li></ul><ul><li>• ANY type of mission </li></ul>
  9. 9. Who Are The Best Prospects for Planned Giving <ul><li>• They love your work </li></ul><ul><li>• Age and giving history are meaningful </li></ul><ul><li>55 and over (consider your budget) </li></ul><ul><li>consistent donors </li></ul><ul><li>ignore gift size </li></ul><ul><li>• Women in philanthropy, especially Planned Giving </li></ul>
  10. 10. Who Are The Best Prospects for Planned Giving <ul><li>• Single, widowed, heirless </li></ul><ul><li>• Look to your board for leadership </li></ul><ul><li>• Review your Major Donor list </li></ul><ul><li>• Review your Annual Fund donors </li></ul>
  11. 11. Looking at Prospects, Avoid Sexism <ul><li>“ A few female friends and I have let it be known to some of the nonprofit organizations we support financially that we would like to explore planned giving options that include their charity. None of the three organizations I mentioned this to have followed up with me...my women friends have had similar experiences. And each time I share the story at a fundraising training I collect another example of a woman who has dropped hints, left messages, sent emails or boldly said something about estate planning & planned giving and they've been ignored or forgotten. </li></ul><ul><li>“ The age group I'm referring to is mid-40's to mid-60's. We have disposable income now but will have more to share later. Some of us don't have children to leave our assets to and others of us simply want to leave a legacy gift in addition to anything we'll do for our families.” </li></ul>
  12. 12. Where We Are <ul><li>√ What </li></ul><ul><li>√ Why </li></ul><ul><li>√ Who benefits </li></ul><ul><li>√ Who are the prospects </li></ul><ul><li>• How is Planned Giving done </li></ul><ul><li>• Continuing Ed. </li></ul>
  13. 13. How is Planned Giving Done <ul><ul><li>• Revocable gifts (your donor can take it back) </li></ul></ul><ul><ul><li>-- very valuable to your program </li></ul></ul><ul><ul><li>Charitable bequests </li></ul></ul><ul><ul><li>Living trusts </li></ul></ul><ul><ul><li>Beneficiary designations </li></ul></ul><ul><ul><li>Life insurance </li></ul></ul><ul><ul><li>Other </li></ul></ul><ul><ul><li>Stewardship critical </li></ul></ul>
  14. 14. Charitable Bequests <ul><li>• Simple </li></ul><ul><li>• Unlikely to be revealed </li></ul><ul><li>• Popular </li></ul><ul><li>• Property or cash </li></ul><ul><li>• Ordinary people </li></ul><ul><li>• Revocable </li></ul><ul><li>• Tax deduction to the estate? </li></ul>
  15. 15. Living Trusts <ul><li>• Cash or property </li></ul><ul><li>• Easiest trust </li></ul><ul><li>• No deductions </li></ul><ul><li>• Tell no one </li></ul><ul><li>• Easy transfer to you </li></ul><ul><li>• Received at death </li></ul><ul><li>• Revocable </li></ul>
  16. 16. Life Insurance Beneficiary <ul><li>• Simple </li></ul><ul><li>• Donor’s excess policy </li></ul><ul><li>• No tax advantage for the donor </li></ul><ul><li>• You receive the death benefit </li></ul>
  17. 17. Other Beneficiary Designations <ul><li>• Life Insurance </li></ul><ul><li>• Retirement plans </li></ul><ul><li>-- IRA, 401(k), 403(b), Small Employer Pension (SEP), SIMPLE IRA </li></ul><ul><li>• Commercial annuities </li></ul><ul><li>• Bank and brokerage accounts </li></ul><ul><li>• Any asset with a beneficiary designation </li></ul>
  18. 18. Marketing Revocable Gifts <ul><li>• Publicize your Tax ID number </li></ul><ul><li>• Direct mail for large numbers </li></ul><ul><li>• Meetings </li></ul><ul><li>• Publications </li></ul><ul><li>• Other mail pieces </li></ul><ul><li>• Website </li></ul><ul><li>• Mention during events, especially bequests </li></ul>
  19. 19. Where We Are <ul><li>√ What √ Why √ Who benefits √ Prospects </li></ul><ul><li>• How is Planned Giving done </li></ul><ul><li>Revocable gifts </li></ul><ul><li> Irrevocable gifts </li></ul><ul><li>pay life income </li></ul>
  20. 20. Irrevocable Gifts That Pay Life Income Donor donor’s death Nonprofit lifetime income cash, stock, real estate planned gift
  21. 21. The Life Income Gifts (aka love those acronyms) <ul><ul><li>• Charitable Remainder Trust (CRT) </li></ul></ul><ul><ul><li>Fixed income--Charitable Remainder Annuity Trust (CRAT) </li></ul></ul><ul><ul><li>Variable income--Charitable Remainder Unitrust (CRUT) </li></ul></ul><ul><ul><li>• Charitable Gift Annuity (CGA) </li></ul></ul><ul><ul><li>• Pooled Income Fund (PIF) </li></ul></ul>
  22. 22. Charitable Remainder Annuity Trust <ul><ul><li>• Fixed income for life (or max 20 years) to the donor or any other “income beneficiaries” </li></ul></ul><ul><ul><li>• Based on a fixed percentage of trust assets valued once, at the beginning </li></ul></ul><ul><ul><li>-- must pay at least 5% </li></ul></ul><ul><ul><li>• Charitable income tax deduction for present value of estimated remainder to nonprofit </li></ul></ul><ul><ul><li>-- based on gift size, life expectancy, payout rate and IRS rates </li></ul></ul><ul><ul><li>• At death of income beneficiaries, remainder is a gift to nonprofit(s) & trust closes </li></ul></ul>
  23. 23. Charitable Remainder Unitrust <ul><ul><li>• Variable income for life (or max 20 years) to the donor or any other “income beneficiaries” </li></ul></ul><ul><ul><li>• Based on a fixed percentage of trust assets revalued every year </li></ul></ul><ul><ul><li>-- must pay at least 5% </li></ul></ul><ul><ul><li>• Charitable income tax deduction for present value of estimated remainder to nonprofit </li></ul></ul><ul><ul><li>-- based on gift size, life expectancy, payout rate and IRS rates </li></ul></ul><ul><ul><li>• At death of income beneficiaries, remainder is a gift to nonprofit(s) & trust closes </li></ul></ul>
  24. 24. Charitable Gift Annuity <ul><ul><li>• Fixed income for life to the donor and another, or any 2 “annuitants” </li></ul></ul><ul><ul><li>• Donor can put off receiving income--Deferred Gift Annuity </li></ul></ul><ul><ul><li>• Based on a fixed percentage of the initial gift </li></ul></ul><ul><ul><li>-- income rates are suggested by American Council on Gift Annuities (ACGA) </li></ul></ul><ul><ul><li>• Charitable income tax deduction for present value of estimated remainder to nonprofit </li></ul></ul><ul><ul><li>-- based on gift size, life expectancy, income rate and IRS rates </li></ul></ul><ul><ul><li>• At death of annuitants, remainder is a gift to one nonprofit </li></ul></ul><ul><ul><li>• Substantial web of state regulation, especially in New York </li></ul></ul>
  25. 25. Irrevocable Gifts That Pay Life Income Donor donor’s death Nonprofit lifetime income cash, stock, real estate planned gift
  26. 26. Pooled Income Fund <ul><ul><li>• Variable income for life to the donor and another, or any 2 income beneficiaries </li></ul></ul><ul><ul><li>• Income beneficiaries earn their pro rata share of the entire fund--everyone’s gifts are pooled </li></ul></ul><ul><ul><li>• Income paid to beneficiaries only at the changing rate at which it is earned each year </li></ul></ul><ul><ul><li>• At death of income beneficiaries, what remains in their portion of the fund is a gift to one nonprofit </li></ul></ul><ul><ul><li>• Typically lower gift minimums than Charitable Gift Annuities </li></ul></ul><ul><ul><li>• Not a popular gift, due to variable rate of income </li></ul></ul>
  27. 27. Why Would a Donor Make a Life Income Gift <ul><li>• They love your work </li></ul><ul><li>• A chance to make their gift of a lifetime </li></ul><ul><li>• Income for life </li></ul><ul><li>• Tax deduction </li></ul><ul><li>• Low yield stock can be replaced </li></ul><ul><li>• Avoid or reduce capital gain </li></ul><ul><li>• Tax-favorable income </li></ul>
  28. 28. Marketing Irrevocable Gifts That Pay Life Income <ul><li>• Face to face meetings </li></ul><ul><li>• Seminars </li></ul><ul><li>• Publications </li></ul><ul><li>• Website </li></ul><ul><li>• Testimonials </li></ul><ul><li>• Emphasize what’s on previous slide </li></ul>
  29. 29. Where We Are <ul><li>√ What √ Why √ Who benefits √ Who </li></ul><ul><li>• How is Planned Giving done </li></ul><ul><li> √ Revocable gifts </li></ul><ul><li> • Irrevocable gifts </li></ul><ul><li> √ pay life income </li></ul><ul><li> • don’t pay life income </li></ul>
  30. 30. Irrevocable Gifts That Don’t Pay Life Income <ul><ul><li>• Charitable IRA rollover </li></ul></ul><ul><ul><li>• Retained Life Estate </li></ul></ul><ul><ul><li>• Bequests that are legally binding </li></ul></ul><ul><ul><li>• Life insurance ownership </li></ul></ul><ul><ul><li>• Charitable Lead Trust (CLT) </li></ul></ul>
  31. 31. Charitable IRA Rollover <ul><li>• This year only </li></ul><ul><li>• Donors over 70 1/2 </li></ul><ul><li>• Up to $100,000/person, multiple charities </li></ul><ul><ul><li>--Double for couples </li></ul></ul><ul><li>• Really, it’s a “qualified charitable distribution” </li></ul><ul><li>• Refer donor to IRA custodian for form </li></ul>
  32. 32. Retained Life Estate <ul><li>• Not just primary residence </li></ul><ul><li>• Expiration, then transfer by deed to nonprofit </li></ul><ul><li>• Wave bye-bye “remainder interest” </li></ul><ul><li>• Yet retain “life interest” </li></ul><ul><li>• Or, a/k/a Life Estate </li></ul><ul><li>• Report upfront, immediate deduction </li></ul><ul><li>• Keeps donor paying taxes, maintenance, insurance, repairs </li></ul>
  33. 33. Bequests That Are Legally Binding <ul><li>• Bequests can be made irrevocable with a testamentary contract </li></ul><ul><li>• Not often seen, but valuable </li></ul><ul><li>• Your relationship with your donor determines whether you approach this </li></ul><ul><li>• No income tax deduction </li></ul>
  34. 34. Life Insurance Ownership--Nonprofit Owns Policy <ul><li>• New policy </li></ul><ul><li>--donor deducts premiums </li></ul><ul><li>• Existing policy </li></ul><ul><li>--donor deducts approx. cash surrender value & premiums </li></ul><ul><li>• An increase in net assets for nonprofit </li></ul><ul><li>--your CFO loves you </li></ul><ul><li>• Best practice: premiums paid to nonprofit </li></ul>
  35. 35. Premiums On Life Insurance Paid To Nonprofit <ul><li>• Make sure they’re being paid </li></ul><ul><li>• Many chances to say “thank you” & show growth </li></ul><ul><li>• Addition to your Annual Fund or Annual Appeal </li></ul><ul><li>• Closer relationship with the donor </li></ul><ul><li>• Donor gets a higher deduction </li></ul><ul><li>--50% v. 30% of adjusted gross income (AGI) </li></ul>
  36. 36. Charitable Lead Trust Donor income Nonprofit close of trust cash, stock, real estate Lead Trust Heirs
  37. 37. Charitable Lead Trusts Fixed or Variable Income To Nonprofit <ul><li>Charitable Lead Annuity Trust (CLAT) </li></ul><ul><li>• Donor cannot add to it </li></ul><ul><li>• Fixed percentage for income to nonprofit </li></ul><ul><li>• Fixed dollar amount of income each year </li></ul><ul><li>Charitable Lead Unitrust (CLUT) </li></ul><ul><li>• Donor can add freely & revalued every year </li></ul><ul><li>• Fixed percentage for income to nonprofit </li></ul><ul><li>• Variable dollar amount of income each year due to revaluation </li></ul>
  38. 38. Where We Are <ul><li>√ What √ Why √ Who benefits √ Who </li></ul><ul><li>√ How is Planned Giving done </li></ul><ul><li> √ Revocable gifts </li></ul><ul><li> -- remember, they’re valuable </li></ul><ul><li> √ Irrevocable gifts </li></ul><ul><li> √ pay life income </li></ul><ul><li> √ don’t pay life income </li></ul><ul><li> • Stewardship </li></ul>
  39. 39. Stewardship Through Your Recognition Society • Thank ALL your planned gift donors • Call it something iconic and meaningful • Don’t ask for proof of bequests • Special preferences that won’t break you • Special invitations • An annual lunch, reception or trip
  40. 40. How Do You Talk About It <ul><li>• Sensitive </li></ul><ul><li>• Genuine care </li></ul><ul><li>• Active listening </li></ul><ul><li>• Factual </li></ul><ul><li>• Open the door to the conversation </li></ul><ul><li>• Older donors are ready to talk about how their estate can help you </li></ul>
  41. 41. Our Objective <ul><li>You’ll be comfortable enough with Planned Giving that you can open a conversation about a planned gift with one good prospect </li></ul>
  42. 42. We Have Seen . . . <ul><li>√ What is Planned Giving </li></ul><ul><li>√ Why have a Planned Giving program </li></ul><ul><li>√ Who can benefit from it </li></ul><ul><li>√ Who are the best prospects </li></ul><ul><li>√ How is Planned Giving done </li></ul><ul><li>• Continuing Ed. </li></ul>
  43. 43. Continuing Ed. <ul><li>• Tony Martignetti Nonprofit Radio, The Martignetti Report , blog, LinkedIn, Twitter, Facebook, YouTube </li></ul><ul><li>-http://www.mpgadv.com or scan: </li></ul><ul><li>-slides on blog now: “Support Center” </li></ul><ul><li>• Leave your card to join my em list </li></ul><ul><li>• American Council on Gift Annuities (acga-web.org) </li></ul><ul><li>• Book: Planned Giving Simplified , Robert Sharpe, Sr., published by Wiley </li></ul>
  44. 44. PLEASE, PLEASE <ul><li>• Do your online evaluation TODAY </li></ul><ul><li>• Everything is fresh in your mind </li></ul><ul><li>• It really, really helps me to have your immediate impressions </li></ul><ul><li>• I’d appreciate your LinkedIn recommendation--let’s connect </li></ul>

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