the secret to understanding planned giving

33
The Secret to Understanding Planned Giving

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A super quick introduction to planned giving concepts

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Page 1: The secret to understanding planned giving

The Secret to Understanding

Planned Giving

Page 2: The secret to understanding planned giving

All slides are taken from this

book.

Available from Amazon.com

Full Color version available at

www.createspace.com/4707238

Page 3: The secret to understanding planned giving

Isn’t planned giving super-complicated?

Page 4: The secret to understanding planned giving

Gift planning can do two things. Fundraisers should use it for two reasons. Financial advisors should use it for two reasons.

Page 5: The secret to understanding planned giving

Gift planning can do two things

• Lower taxes

• Trade gift for income

Page 6: The secret to understanding planned giving

If gift planning can only do two things, how can it

get so complicated?

Page 7: The secret to understanding planned giving

Trade for Income

Charity-Backed CGA

Immediate fixed $ payments for

life/lives Immediate CGA

Delayed fixed $ payments for

life/lives Deferred CGA

Donor Asset-Backed

CRT

Fixed $ payments for life or years

CRAT

Fixed % payments for life or years

CRUT

Capped at yearly income

NICRUT

With IOUs if income below fixed payment

NIMCRUT

Capped until event occurs

Flip-CRUT

Pool of Different Donors’ Assets

PIF

Page 8: The secret to understanding planned giving

Trade for Income

Charity-Backed CGA

Immediate fixed $ payments for

life/lives Immediate CGA

Delayed fixed $ payments for

life/lives Deferred CGA

Donor Asset-Backed

CRT

Fixed $ payments for life or years

CRAT

Fixed % payments for life or years

CRUT

Capped at yearly income

NICRUT

With IOUs if income below fixed payment

NIMCRUT

Capped until event occurs

Flip-CRUT

Pool of Different Donors’ Assets

PIF

Page 9: The secret to understanding planned giving

Lower Taxes

Capital Gains Taxes

Give appreciated

property

To charity in exchange for

income CRAT, CRUT, CGA, PIF

To charity

Income Taxes

Donor’s

Deduction for current gift

Deduction for committing to future transfer to charity

PF, DAF, Grantor CLT, Remainder Deed

Deduction for current gift in exchange for income

CRAT, CRUT, CGA, PIF

Heirs’ (retirement account

charitable beneficiary)

Estate Taxes

Give to charity at death Will, CRT, CGA,

Remainder Deed

Fixed payments from

assets to charity, excess growth to heirs estate tax free

Non-Grantor CLT

Page 10: The secret to understanding planned giving

Lower Taxes

Capital Gains Taxes

Give appreciated

property

To charity in exchange for

income CRAT, CRUT, CGA, PIF

To charity

Income Taxes

Donor’s

Deduction for current gift

Deduction for committing to future transfer to charity

PF, DAF, Grantor CLT, Remainder Deed

Deduction for current gift in exchange for income

CRAT, CRUT, CGA, PIF

Heirs’ (retirement account

charitable beneficiary)

Estate Taxes

Give to charity at death Will, CRT, CGA,

Remainder Deed

Fixed payments from

assets to charity, excess growth to heirs estate tax free

Non-Grantor CLT

Page 11: The secret to understanding planned giving

Lower Taxes

Capital Gains Taxes

Give appreciated

property

To charity in exchange

for income CRAT, CRUT,

CGA, PIF

To charity

Income Taxes

Donor’s

Deduction for current gift

Deduction for committing to future transfer to charity

PF, DAF, Grantor CLT, Remainder Deed

Deduction for current gift in exchange for income

CRAT, CRUT, CGA, PIF

Heirs’ (retirement account

charitable beneficiary)

Estate Taxes

Give to charity at

death Will, CRT,

CGA, Remainder

Deed

Fixed payments

from assets to charity,

excess growth to

heirs estate tax free

Non-Grantor CLT

Trade for Income

Charity-Backed CGA

Immediate fixed $ payments for

life/lives Immediate CGA

Delayed fixed $ payments for

life/lives Deferred CGA

Donor Asset-Backed

CRT

Fixed $ payments for life or years

CRAT

Fixed % payments for life

or years CRUT

Capped at yearly income NICRUT

With IOUs if income below fixed payment

NIMCRUT

Capped until event occurs

Flip-CRUT

Pool of Different Donors’ Assets

PIF

Yes, it can get complicated.

But, it still only does two things.

Page 12: The secret to understanding planned giving

Gift planning can do two things

• Lower taxes

• Trade gift for income

Fundraisers should use it for two reasons

• If you are asking for cash, you are asking small

• A donor says the magical phrase, “I wish I could do more, but …”

Page 13: The secret to understanding planned giving

If you are asking for cash, you are asking

small

Page 14: The secret to understanding planned giving

Wealth is not held in cash. It is held in assets.

If you are asking from the cash bucket, you are asking from the small bucket.

Page 15: The secret to understanding planned giving

99%

1% Financial assets held by families (U.S. Census 2007)

Other financial assets (stocks, bonds, retirement accounts, life insurance, mutual funds)

Cash: Checking, savings, money market deposit accounts, and similar

Page 16: The secret to understanding planned giving

The magical phrase:

“I wish I could do more, but …”

Page 17: The secret to understanding planned giving

The magical phrase, “I wish I could do more, but …”

• I have to save for retirement • I am on a fixed income • I don’t have the cash right

now • Everything is tied up in the

business/farm • Maybe I’ll leave a gift in my

will • I only have so much money

and I might live a really long time

• Etc., etc., etc.…

Page 18: The secret to understanding planned giving

The magical phrase:

“I wish I could do more, but …”

The magical response:

“What if there was a way you could do both?

Would you like to hear about that?”

Page 19: The secret to understanding planned giving

A simple way to ask from the big bucket…

Page 20: The secret to understanding planned giving

Donor Charity $100k Cash

Donor Charity

Income tax deduction ($100,000 x 39.6%)

$39,600 +

Avoid capital gains tax ($90,000 x 23.8%)

$21,240

Income tax deduction ($100,000 x 39.6%)

$39,600

$100k Stock

Page 21: The secret to understanding planned giving

Donor Charity $100k low basis stock

$100k cash

immediately buy identical stock (100% basis)

The charitable swap

No “wash sale” rule because this is gain property, not loss

property

Page 22: The secret to understanding planned giving

Donor Charity $100k low basis stock

$100k cash

immediately buy identical stock (100% basis)

A FREE tax benefit you lose every time you give cash

Page 23: The secret to understanding planned giving

Donor

Charities

$100k cash

The charitable swap for charities that want only cash

Donor Advised

Fund

$

$

$

$100k low basis stock

immediately buy identical stock (100% basis)

Page 24: The secret to understanding planned giving

Gift planning can do two things

• Lower taxes

• Trade gift for income

Financial advisors should use it for two reasons • To provide dramatic benefit to

highly desirable clients

• To increase (multi-generational) assets under management

Page 25: The secret to understanding planned giving

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

$2.0 million <$3.5 million

$3.5 million <$5.0 million

$5.0 million <$10.0 million

$10.0 million <$20.0 million

$20.0 million ormore

Estates including charitable planning by estate size

(IRS Statistics of Income 2008)

Page 26: The secret to understanding planned giving

Selling and reinvesting a highly appreciated non-income producing asset

Simple Sale

$1,000,000 asset $1,000,000 gain (if zero basis)

$288,000 tax (23.8% fed + 5% state)

$722,000 left to invest

Charitable Remainder Trust

$1,000,000 asset $1,000,000 gain (if zero basis)

$0 tax (CRT pays no tax)

$1,000,000 left to invest & $100,000+ tax deduction

Page 27: The secret to understanding planned giving

Tax-free growth environments • Growth inside a

donor advised fund is tax free

• Growth inside a charitable remainder trust is tax free (only distributions are taxed)

• Growth inside a private foundation is tax limited (either 2% or 1% rate)

Page 28: The secret to understanding planned giving

Multi-generational management

Inheritance • Small pools after

division by 1/n children and estate tax

Private Foundation/DAF

• Individual relationships with each heir

• High maintenance / personal losses

• Big pool with no division and no estate tax

• Preexisting position as pool manager

• Low maintenance/ charitable organization losses

Page 29: The secret to understanding planned giving

Gift planning can do two things. Fundraisers should use it for two reasons. Financial advisors should use it for two reasons.

Page 30: The secret to understanding planned giving

The secret to understanding

planned giving

Page 31: The secret to understanding planned giving

Help me

HERE

convince my bosses that continuing to build and post these slide sets is not a waste of time. If you work for a nonprofit or advise donors and you reviewed these slides, please let me know by clicking

Page 32: The secret to understanding planned giving

If you clicked on the link to let me know you reviewed these slides…

Thank You!

Page 33: The secret to understanding planned giving

This slide set is from the curriculum for the Graduate Certificate in Charitable Financial Planning at Texas Tech University, home to the nation’s largest graduate program in personal financial planning. To find out more about the online Graduate Certificate in Charitable Financial Planning go to www.EncourageGenerosity.com To find out more about the M.S. or Ph.D. in personal financial planning at Texas Tech University, go to www.depts.ttu.edu/pfp/

Graduate Studies in

Charitable Financial Planning at Texas Tech University