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Charitable Estate Planning - final
This document discusses different levels of charitable estate planning and planned giving that nonprofits can encourage donors to engage in. It outlines down home estate planning using basic beneficiary designations, bread and butter estate planning involving wills and trusts completed with lawyer consultation, and lifetime gift planning using more complex charitable vehicles like trusts, donor advised funds, and gift annuities that provide tax benefits. The key is educating donors and finding the right level and methods for different donors depending on their ability to commit resources. Relationship building is also important to avoid donors revoking their plans.
Charitable Estate Planning - final
- 1. Charitable Estate Planning and PlannedGiving GO LEAD Professional Development Series John N. Vaughan – Attorney
- 2. Why expend resourceson charitable estate planning & planned giving? • Estimates show that 91% of Americans’ wealth is held in non-cash assets. • Giving USA 2012 report: – Total US giving: $316.23 billion (up 3.5%) – Total giving by individuals: $228.93 billion (up 3.9%) – Total bequest giving: $23.41 billion (down 7%) • ECFA (Evangelical Council for Financial Accountability): – Cash donations 2012: $11 billion (up 6.4%) – Noncash donations 2012: $3.4 billion (up 4.8%)
- 3. Paradoxes of EstatePlanning and Planned Giving for the Nonprofit • Estate planning/planned giving can accomplish much for the individual, but getting a donor to do estate planning/planned giving is like getting them to go to the dentist • Estate planning/planned giving can help your organization, but you’re one step removed from being able to make it happen • Education is the key to solving the paradox
- 4. 3 Levels ofDonor Engagement and Education • Down Home Estate Planning – Low cost, low expertise, low maintenance • Bread and Butter Estate Planning – Lawyer consultation recommended • Lifetime Gift Planning – Heavy lawyer lifting, high donor commitment
- 5. Down Home EstatePlanning • Why? – It’s easy – Doesn’t require a lawyer • Challenges? – Results can be messy – Revocable giving • Benefits? – Low cost – Low complication – Low thought process – Little third party involvement
- 6. Down Home EstatePlanning Method: Beneficiary designations – Focused on probate avoidance after death – Transfer/pay on death designations • Bank accounts • Investment accounts – Life insurance beneficiary designations – Commercial annuity beneficiary designations – Retirement account beneficiary designations – Beneficiary deed designations
- 7. Bread & ButterEstate Planning • Why? – Basic and straightforward – Known quantity • Challenges? – Revocable giving – Lawyer consultation recommended • Benefits? – Reasonable cost – Reasonably easy to find a lawyer who can help – Real documents and plans – tangible results
- 8. Bread & ButterEstate Planning Method #1: Last Will and Testament A wills and bequests program encourages donors to name your organization in their will – Encourage creation of wills & charitable giving – Build a lawyer referral list – Develop bequest language to be used – Thank everyone who completes a will – Continue to build relationship to avoid revocation
- 9. Bread & ButterEstate Planning Method #2: Revocable Trusts – One notch more complicated, one notch more expensive, but maybe one notch more committed – Choice of trust vs. will is client specific – Trusts are a commitment to a structure, leading clients to feel more committed when they have a trust – Same lawyer referral list and bequest language – Thank everyone who completes a trust – Continue to build relationship to avoid revocation
- 10. Lifetime Gift Planning •Why? – Charitable tax deduction – Bypass/deferral of capital gains tax – Reduction of estate for estate tax and Medicaid purposes • Challenges? – Complex – requires professionals – Requires higher donor commitment • Benefits? – Irrevocable giving – Involves higher donor commitment – Lifetime income, lifetime giving, lifetime fulfillment
- 11. Lifetime Gift Planning CharitableTax Deduction – Contributions to public charities are deductible up to 50% of the donor’s AGI (adjusted gross income). – Charitable deduction that exceeds 50% of the donor’s AGI can be carried forward up to 5 years Bypass/deferral of Capital Gains Tax – Giving tools often operate to bypass or defer capital gains tax on appreciated assets donated Reduction of estate for tax & Medicaid purposes – Irrevocable giving done right shifts assets from being considered taxable under state and federal estate tax laws or considered accessible under state Medicaid laws
- 12. Lifetime Gift Planning CharitableIRA Rollover/Qualified Charitable Distribution – Required minimum distributions (RMD) begin at 70-1/2 – Through 2013, traditional IRA RMD up to $100,000 could be distributed to charity – not yet extended into 2014 – Extender bill to cover 2014-2015 currently in Congress – Gift avoids income tax normally associated with RMD – No additional charitable deduction but no tax on RMD – No DAFs, CRTs, CGAs or private foundations
- 13. Lifetime Gift Planning CharitableTrusts – Charitable remainder trust • Lifetime income to donor, spouse, even children • Immediate partial charitable deduction • Bypass/deferral of capital gain on appreciated assets • Charity receives principal of trust upon death/termination – Charitable lead trust • Income producing asset spins off income to charity • Possible: immediate charitable deduction for income to charity • Return of assets to donor or transfer of asset to donor’s children upon termination of trust • Assists in the transfer of assets to children at a reduced tax value
- 14. Lifetime Gift Planning DonorAdvised Funds – Flexible alternative to private foundations – No income to donor – simply a giving fund with deferred giving & investment/growth options – Flexibility in assets can be donated to a DAF – Flexibility in giving so long as 501(c)(3) – Immediate charitable deduction but no requirement to immediately distribute to charity – Bypass of capital gains upon sale of donated assets
- 15. Lifetime Gift Planning Charitablegift annuities – Lifetime income – Immediate charitable deduction – Capital gains payment over life of gift annuity – Gift to charity upon death of donor Life estate reserved (real estate) – No lifetime income, but donor keeps their property – Transfer of partial interest in real estate results in charitable deduction
- 16. Keep It Simple •Focus on your mission and your donors • Build long-term relationships • Create a plan, a message, and a cycle • Develop your internal processes • Develop your referral network • Thank your donors at every opportunity
- 17. Resources • AG FinancialSolutions – http://www.agfinancial.org -- (417) 520-3216 • Community Foundation of the Ozarks – http://www.cfozarks.org • National Christian Foundation – http://www.nationalchristian.com • Crescendo Interactive – http://www.crescendointeractive.com • Planned Giving Design Center – http://www.pgdc.com • Partnership for Philanthropic Planning – http://www.pppnet.org