WESTERN REGIONAL PLANNED GIVING CONFERENCE 2015 Conference Primer – May 27, 2015

Marian Finn, JD

Kimberley Valentine, CSPG

Suzanne Zolfo, CFRE

What is Gift Planning? • Gift Planning focuses primarily on planned gift fund raising

which involves a continuous process of cultivation focused on

raising  “ultimate  gifts”  from  individuals.

• Through planned gifts, donors can often make larger gifts than

they believed possible.

• One thing that distinguishes a planned gift from others is that

they are made with assets rather than income sources.

“Maximize  philanthropy  while  minimizing  taxes”

Why is Gift Planning Important? • Gift planning programs range from simple to robust, but not

having a program is leaving significant money on the table.

• Maximizing philanthropy:

• Allows donors to be able to make larger gifts

• Allows larger pool of donors to make a significant gift

• Can become one of the largest revenue sources within an organization’s  fundraising  program

• In times of economic downturn, it is often the bequest program that sustains the organization when other donations fizzle

Why Do People Make Planned Gifts?

• Support Organization

• Create a legacy • Provide for loved ones

• Promote philanthropy

• Capture tax incentives (reduce income taxes;

avoid/minimize capital gain, gift, and estate taxes)

• Generate life income

• Non-cash assets

Your Role as a Fundraiser • Identify: Discover prospects

• Cultivate: Build lasting relationships

• Solicit: Facilitate the giving process

• Steward: Create opportunity for donor appreciation and

recognition

• Educate: Provide tools for appropriate giving strategies

IDENTIFY

The Gift Planning Prospect Who to Look For: • Typical Planned Giving Prospects are 55+, have either no

children and/or spouse, and/or a long history of giving.

How to Look: • Interdepartmental referrals

• Research & Prospect Management

• Self-Identification

• Marketing

• Phone solicitations

EDUCATE

The Basics

• Revocable: The donor may choose to revoke the gift.

vs.

• Irrevocable: The gift is final (typically these gifts provide a

charitable  deduction  or  an  income  stream  during  the  donor’s  lifetime).

Planned Giving Options

Deferred Giving

• Bequest

• Charitable Remainder Trust (CRT)

• Charitable Gift Annuity (CGA)

• One Life/Two Life

• Deferred CGAs (DCGA)

• Flexible Deferred CGAs (FDCGA)

• Commuted CGAs

• Step CGAs

• Charitable Lead Trust (CLT)

• Retained Life Estate (RLE)

• Life Insurance (beneficiary) (LI)

Outright Giving

• IRA Charitable Rollover Gift

• Real Estate Gift

• Outright

• Bargain Sales

• Mineral/Oil Rights

• Gift of Tangible Personal Property

• Business Interests

• Life Insurance (owner) (LI)

Funding Assets • Cash

• Appreciated securities

• Stocks (Publicly Traded, Closely Held)

• Mutual Funds

• Real Estate

• Examples: second home, moving into a retirement home, rental property

• Personal Property

• Examples: artwork, cars, wine, stamp collection

• Life Insurance Policies

• Retirement Plans (IRA)

CULTIVATE

Donor Visits • Ask open-ended conversations—listen for cues.

• Ask the passion question:

• What would you like to accomplish with your money that would be the

most meaningful to you?

• Be mindful of making assumptions

• Take someone with you on a first visit

• Meetings

• Coffee, Lunch, Drinks, Dinner, Charity Events, Home Visits

SOLICIT

Solicitation Protocol: The Four P Strategy • People

• Property

• Priorities

• Plan

People • Family members and other heirs

• Special Needs

• Advisors (Financial, Tax, Estate Planning Attorney)

Property • Appreciated Securities

• Real Property

• Valued Artwork

• Intellectual Property

Priorities • Current Income

• Taxes: Income, Capital Gains, Estate

• Retirement

• Philanthropy/Legacy

Plan • Does the donor have a professional advisor?

• Is there an estate plan?

• When did the donor last update their estate and financial plan?

• Are  there  charitable  provisions  in  the  donor’s  estate  plans?

GIFT VEHICLES Identify  and  educate  to  create  the  “best”  plan  for  your  donor  prospects

Bequest

Donors

Bequest Provision

1

Gift to charity

Estate Plans 2

Charity

Bequests Gift by Will or Living Trust Can Be:

• Fixed Amount/Percentage

• A Specific Asset

• Residue (or percentage)

• Contingent (e.g., only if my nephew predeceases me)

• Testamentary planned gift

Sample Bequest Language

• I give [CHARITY], a non-profit public benefit corporation or

trust, located at Los Angeles, California, [insert here: a dollar

amount; percentage [%] of estate, or description of the

property you intend to bequeath] for its general purposes or

for an agreed upon restricted purpose.

Bequests: Life Insurance Policy • Logistics:

• Designate charity as a beneficiary (revocable).

• Designate charity as the owner and beneficiary (irrevocable).

• Benefits:

• Particularly useful if the original purpose for purchasing the policy is no

longer  relevant  (e.g.  child’s  college  education,  mortgage,  funds  to  cover  estate taxes, money for loved ones)

• Charitable deduction

• Gift Acceptance Policy: • Non-standard gifts like life insurance may be accepted or not, depending

on your gift acceptance policies.

Bequests: Retirement Plan • Logistics:

• Donor completes the beneficiary form

• Benefits: • Asset could be taxed twice (estate and income) if left to an individual

other than a spouse

• Not necessary to meet with an attorney

• Easiest way to leave a bequest

Example: Retirement Plan Benefits

Bequests: Assets paid on death • Logistics:

• Establish a simple account at a bank or trust company.

• Benefits: • They're easy to create.

• There's no limit on how much money you can leave this way.

• Designating a beneficiary for a bank account costs nothing.

• It's easy for the beneficiary to claim the money after the original owner

dies.

• Caveat: • You can't name an alternate beneficiary.

Identifying the Bequest Donor Profile: • 55 years old

• 2 college bound children

• Anticipate their estate to exceed the $5.34M* estate tax

threshold

Goal: • To reduce estate and gift taxes

• To plan ahead and care for their family beyond their lifetimes

• To benefit the charity or charities they love

Charitable Remainder Unitrust • Logistics:

• A gift  to  the  charity  in  which  the  donor’s  funds  are  invested  during  their  lifetime to generate fixed percentage payments to the beneficiary.

• Upon the  donor’s  passing,  the  residual  amount  passes  for  use  to  the  donor’s  charity

• Minimum funding amount is $100,000

• Benefits:

• Trust may grow over time based on the market returns, increasing

income payments.

• Because markets tend to rise over time, a unitrust can provide a hedge

against inflation.

• Bypass capital gain initially (the unitrust is tax-exempt) and have 100% of

the value of the assets be available for reinvestment.

Charitable Remainder Unitrust

Donors

$300,000 1

2

Income Tax

Deduction:

$101,289

5% Unitrust

Total Remainder

Amount to Charity:

$628,133

4

3

$15,000

(variable)

Beneficiaries

Total Payments:

$546,889

Charity

Identifying the CRT Donor Profile: • Age 65

• 2 children out of school

• 1 grandchild

• Total net worth of $7M

Goals: • Income, but concerned with inflation

• Estate tax deductions

• Reduce capital gains liability on their highly appreciated stock

Charitable Gift Annuities • Definition: A gift to the charity in  which  the  donor’s  funds  are  

invested during their lifetime to generate fixed payments to the

annuitant.

• Upon  the  donor’s  passing,  the  residual  amount passes for use

to  the  Donor’s  charity

• Minimum funding amount is $10,000

Age ACGA Rate Age (Two Lives) ACGA Rate

70 5.1% 70/70 4.6%

75 5.8% 75/75 5.0%

80 6.8% 80/80 5.7%

85 7.8% 85/85 6.7%

Charitable Gift Annuity

Donors

1

2 Income Tax

Deduction:

$21,643

$50,000

4 Residuum to

Charity:

$71,824

3

Immediate

Fixed Annual

Payments of $2,850

Total Annuitant

Payments:

$34,200

5.7% Gift

Annuity

Charity

Identifying the CGA Donor Profile: • 80 years old

• 2 middle aged children

• 3 grandchildren

• Retired

• Travelers

• Inherited Coca-Cola stock in 1952 at 50 cents per share; the stock is now valued at over $42 per share

Goals: • Supplement retirement income for travelling and health care

expenses

• Tax-free income

• Tax deduction

Charitable Lead Trust Logistics: • CLT funds are invested to provide income. CLT payments go to the

charity in the form of annual payments to a designated purpose.

• Upon termination of the CLT, the remainder transfers back to the

donor  or  to  the  donor’s  heirs. Benefits: • Alternate, tax-efficient way to provide inheritance for children

• Ideal for reducing transfer taxes and estate taxes

• See philanthropy in motion today

Options: • Annuity Trust: payment amount set

• Unitrust: payment amount variable based on market conditions

Charitable Lead Annuity Trust

Donors

$700,000 1

2

Gift Tax

Deduction:

$443,065

5% Lead Trust

Remainder:

$1,270,006 4

3

Annual payments

of $35,000 for 15

years

Beneficiary

Gift to Charity:

$525,000

Heirs

Charity

Identifying the CLT Donor Profile: • Age 75

• Total Net worth of $10M

• 2 adult children

• 4 grandchildren

Goals: • To provide for children and grandchildren

• To reduce estate taxes

• To see their philanthropy in motion today

Retained Life Estate

Donors

Ages 75, 80

Home valued at $1,500,000 1

Income tax deduction:

$905,747 Gains not taxed:

$1,000,000

Retained

Life Estate

3 Home to charity

Beneficiary

Gift to Charity:

$1,500,000

Charity

Identifying the Life Estate Donor Profile: • Ages 75 and 80

• Primary asset in real estate

• Total Net worth of $10M

• Children not interested in inheriting and maintaining property

Goals: • To establish gift now and return use of home or vacation home

• To reduce estate taxes

• To see their philanthropy in motion today

Outright gifts that sometimes look like planned gifts (or fall  in  our  laps  just  because…) • IRA Charitable Rollover Gift

• Real Estate Gift

• Mineral Rights/Oil Rights

• Gift of Tangible Personal Property

• Business Interests

• Life Insurance (owner)

STEWARD

Stewardship • Recognition of a gift takes many forms

• How you, as the charity, recognize your donors can be almost

as important to the ongoing relationship as the gift itself

• Donor wall or plaques

• Articles

• Newsletters

• Notes

• Visits

• Celebrations

• Small gifts

• Special events

• Introductions to the people who made the relationship important to your

donor – curators, staff, principal stakeholders

MARKETING

Marketing • Donor Education

• Benefits of specific planned gift or legislation

• Self Identification

• Solicitation • Emphasize deferred giving as a way to leave behind a legacy

• A good marketing blast carefully embeds a solicitation within its broader

theme of donor legacy/education.

Marketing is an essential component to gift planning.

Marketing Ideas • Taglines

• Response Boxes

• Websites

• Social Media

• Newsletters

• Seminars

• Brochures

• People

• Recognition Programs

Marketing Reach

Marketing Pieces Distribution Frequency Reach

Newsletter Published 3 times a year ~5000 per issue

Magazine Published 2 times a year

Postcards 3/4 times a year ~6000

Facebook Updates Monthly

Reunion Marketing Coordinated with AF ~800

Portfolio Appraisals Quarterly + Annual Summary 38

Stewardship Events 2 times a year 545

Website

How Do We Do It? Director

Coordinator Assistant Director

Faculty

Marketing

Reunion

Communications

Strategic Vision

Liaison to legal & financial advisors

Administrative

Asset

Manager

Legacy Society

Stewardship

Proposals

Fundraising

Metrics

Donor relations

Gift tracking

Budget

Business Office

Event Planning

Estates

Front Line Fundraising Prospects

Legislation

Program Division of Labor

RESOURCES American Council on Gift Annuities

ACGA-web.org

Planned Giving Design Center PGDC.com

Partnership for Philanthropic Planning of Greater Los Angeles PPP-LA.org

Software providers

Asset management administrators

RELEVANT CONFERENCE SESSIONS CRT: Allyson Simpson – Friday: 8:00 -9:15am

CGA: Ray Rotolo – Thursday: 10:15 – 11:30am

Planned Giving Marketing : Ray Watts & Patience Boudreaux – Thursday: 10:15 – 11:30am

Blended gifts: Marian Finn and Kristen Dugdale – Thursday: 2:00 – 3:15pm

Social Technology and Planned Giving: Erica Chase – Thursday: 3:45 – 5:00pm