this information is for educational purposes only and does not ... · (no california estate or...

This information is for educational purposes only and does not constitute legal or estate planning advice or make you a client.

MARKET UPDATEJerry Braakman

Executive Vice PresidentChief Investment Officer

Managing Director

CASE STUDY

Roland Ho, CSPGSenior Executive Director, Planned Giving

University of California, Irvine

• Dr. and Mr. Lund- 78 and 50 years, respectively

• Primary asset is Dr. Lund’s company

• Dr. Lund is ready to sell the business

Case Study: The Entrepreneur

• Started business with $500,000 investment 25 years ago

• Approximate current sale value is $35 million

• What questions would you ask Dr. and Mr. Lund?

• What solutions might you propose for review?

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FINANCE 101 OVERVIEW

Sharon Buck,CFP , CTFA, EA, ChFC, CLU, CEPA, TEPVice President, Wealth Management

The Donor’s Advisors – THEY will impact your donor’s gifting

What are the Components of Financial Planning?

InvestmentPlanning

TaxPlanning

CharitablePlanning

InsurancePlanning

LiabilityPlanning

EstatePlanning

Walking through theFinancial Planning

process…

Asking the Right Questions

The MOST Important part of the Financial Planning Process…

Lifestyle / Commitments

Heirs

Charitable Giving

RetirementPlanning

Estate &LegacyPlanning

UNDERSTANDING THE CLIENT’S HIERARCHY OF GOALS…(& THEIR CHILDREN)

Financial Planning can:

• Make donors more comfortable with giving (they know where they stand and how much they can afford) – less scared of the future

• They have looked at the impact of family giving and feel comfortable that they are leaving what they want to their children/family

• They have verbalized what they would like to do; and thought about charity/giving. They connected the emotional part of what they want to their finances.

UNDERSTANDING TAXES

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The “Medicare (Obamacare) Surtax” imposes an additional 3.8% surtax on all “net investment income” for taxpayers earning over $200,000 for singles, $250,000 for married.

An additional 0.9% payroll surtax is imposed on the same earning levels.

Single Married Ordinary Tax LT Capital Gain Tax$0 – $9,275 $0 – $18,550 10% 0%

$9,276 – $37,650 $18,551 – $75,300 15% 0%$37,651 – $91,150 $75,301 – $151,900 25% 15%$91,151 – $190,150 $151,901 – $231,450 28% 15%$190,151 – $413,350 $231,451 – $413,350 33% 15%$413,351 – $415,050 $413,351 – $466,950 35% 15%

$415,051+ $466,951+ 39.60% 20%

Federal Income Taxes

"If Warren Buffett made his money from ordinary incomerather than capital gains, his tax rate would be a lot higher

than his secretary's."

‐‐Michael BloombergWarren Buffett and his secretary, ABC News 2012

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The “Mental Health Services Tax” imposes an additional 1% surtax on all taxpayer earnings over $1 million.

Single Married Tax Rate$0 ‐ $7,849 $0 ‐ $15,699 1.0%

$7,850 ‐ $18,609 $15,700 ‐ $37,219 2.0%$18,610 ‐ $29,371 $37,220 ‐ $58,743 4.0%$29,372 ‐ $40,772 $58,744 ‐ $81,545 6.0%$40,773 ‐ $51,529 $81,546 ‐ $103,059 8.0%$51,530 ‐ $263,221 $103,060 ‐ $526,443 9.3%$263,222 ‐ $315,865 $526,444 ‐ $631,731 10.3%$315,866 ‐ $526,442 $631,732 ‐ $1,052,885 11.3%

$526,443+ $1,052,886+ 12.3%

State of California – Income Taxes

Investing: Major Asset Classes

Cash and Cash Equivalents Fixed Income

Alternative AssetsEquities

Cash and Cash Equivalents

Fixed Income

Alternative Assets Equities

EQUITIES/STOCKS

• Publicly Traded Company Shares• Stock Funds− Exchange Traded Funds (ETFs)− Mutual Funds

ALTERNATIVES

• Alternative Asset Funds− Exchange Traded Funds (ETFs)− Mutual Funds

• Commodities• Hedge Funds• Futures, Options, and Derivatives• Private Equity• Real Estate Funds

FIXED INCOME/BONDS

• Corporate Bonds• Government Bonds• Municipal Bonds• Bond Funds− Exchange Traded Funds (ETFs)− Mutual Funds

CASH & CASH EQUIVALENTS

•Checking Accounts•Savings Accounts•Certificates of Deposit (CDs)•Money Market Funds•Treasury Bills (T‐Bills) $ $

$

Your Donor Has:

Stock that he purchased in 1990

He paid $50,000 for it

It is now worth $100,000

Assuming he is in the top tax bracket and sold the stock, how much would he owe for:

Federal Income Tax State Income Tax

Income Tax Example

Starting this year:

The Standard Personal Deduction Amount has nearly doubled – you can take the Standard Deduction amount OR, itemize deductions

Donors may ‘bunch’ contributions to take advantage of itemizing

Small business, with pass through income, may be able to take advantage of the 20% deduction

With more money in their pocket, they may be able to do more gifting

Large amount of income (such as a business or real estate), may still be subject to AMT (Alternative Minimum Tax) – charitable options may make sense

How Has Tax Reform Changed Gifting?

• Federal Estate & Gift Tax Rates

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Federal Estate Tax Rates

Taxable Estate Tax Rate$0 – $10,000 18%

$10,001 – $20,000 20%$20,001 – $40,000 22%$40,001 – $60,000 24%$60,001 – $80,000 26%$80,001 – $100,000 28%$100,001 – $150,000 30%$150,001 – $250,000 32%$250,001 – $500,000 34%$500,001 – $750,000 37%$750,001 – $1,000,000 39%

$1,000,001 + 40%

Estate taxes – Federal only(no California estate or inheritance tax….for now)

2018 Annual Gifting Exemption = $14,000Estate Tax Exclusion Amount = $11,180,000

That can pass free of any estate tax

per taxpayer & per beneficiary

Qualified Charitable Distributions from IRAsThere is a special rule for taxpayers age 70 ½ or older who make charitable gifts. If the IRA trustee or custodian distributes money directly to an eligible charity, the distribution will not be included in your income for the year. This income exclusion rule is in lieu of the charitable tax deduction that you otherwise would have received, but the tax benefit of a qualified charitable distribution is as good as or better than a taxable distribution coupled with a charitable deduction.

This income exclusion applies to direct charitable distributions of $100,000 or less, regardless of the amount of the taxpayer’s current required minimum distribution (RMD); amounts in excess of $100,000 will be taxed as ordinary income.

Note that distributions to donor advised funds and private foundations are not eligible for the income exclusion.

*Each situation is different, for more information on how a Charitable IRA Rollover may potentially benefit you, please consult with your tax professional. This example is for illustrative purposes only. Not legal or tax advice

Qualified Charitable Distributions from IRAs

Conceptual Example - Assumptions:• Client is beyond age 70 ½• IRA Required Minimum Distributions are

$30,000• 35% Effective Tax Rate• Client expecting to gift $30,000 this year to

qualified charities either from their IRA’s Required Minimum Distributions; or, from appreciated securities

Gift of $30,000 Appreciated Securities*• Gift $30,000 of Appreciated Securities (Basis of $20,000;

assume 20% capital gains rate)• Must still take IRA Required Minimum Distribution of $30,000

• <$10,500> Taxes due on RMD distribution• +$2,000 Capital Gain Tax Avoided from Securities Gift• +$4,500 Approx. Credit from Charitable Gift (above

Standard Deduction for one taxpayer)• <$4,000> Illustrative Taxes Due

Gift of $30,000 Charitable IRA – RMD’s*• $30,000Charitable IRA Rollover of RMDs• $0 Taxes due on RMD distribution, plus full use of

standard deduction

*Each situation is different, for more information on how a Charitable IRA Rollover may potentially benefit you, please consult with your tax professional. This example is for illustrative purposes only. Not legal or tax advice

DON’T OVERLOOK THE DESIRE FOR END OF LIFE GIFTS

INCLUDING….IRA BENEFICIARY DESIGNATIONS

ESTATE PLANNING OVERVIEW

Susan Berkman, JD, CSPGAssistant Vice President, Gift PlanningCalifornia State University Long Beach

COMPONENTS OF AN ESTATE PLAN

WILL/ TRUST

ADVDIR

DPOA

TRUST DEFINITIONAn entity that holds assets for the benefit of one or more named persons or charities and managed by a trustee

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Trustor(aka Grantor, Trustor)

Trust Beneficiaries/Heirs

Trustee

Types of Trusts

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IRREVOCABLESPRINKLING POWERS REVOCABLE

A legal entity that holds assets inside its walls.

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THE TRUST

SPLIT–INTEREST GIFTS Type A

Charity gets remainder

Donor and/or another gets income for life

Trustor IRREVOCABLY gives an asset

Trustee manages & makes payments then distributions

Wills v. TrustsWILLS TRUSTS

Transfers assets upon death Transfers assets upon death

Names person to close estate Names person to close estate

Gives burial instructions Gives burial instructions

Takes effect only at death Takes effect NOW – gives trustee fiscal & personal management powers

Assets stay in your name Assets must be transferred to the trust

Administration supervised by Probate Court No supervision of trustee’s administration.

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INTESTACY

Died Without a Will or Living Trust

PRINCESONNY BONO

ARETHA FRANKLIN

$30 million in dispute

$80 million in dispute

Lots of debtNo creditor protection.

Little $ left after debts & taxes

If Intestate & Died in California….YOU

(the decedent)

Spouse, if no kids

If kids, 50% to spouse

50% to kids

If no spouse, to kids split evenly

If no spouse, but deceased kids, to

grandkids

If no one on left, then to

Parents

Siblings

Nieces Nephews

If no one on left, then to

Grandparents

AuntsUncles

Cousins

ANY living relative

If there is no living relative, the estate

goes to the State of California

(Legal term: “Escheat”)

• Specific Amount or Property

• Percentage of Estate

• Residual

• Contingency / Precatory

These apply to wills and revocable living trusts (a “will substitute”)

BEQUEST TYPES

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THE OUTCOME?(aka, no donations)

PLANNED GIFT VEHICLES

DEVON DOUGHERTY, CSPGChief Philanthropy OfficerOrange County Council Boy Scouts of America

LUNCHTABLE TOPICS

BEST PRACTICES DISCUSSION•Marketing Planned Giving

• Devon Dougherty, CSPG, Boy Scouts of America

•Trust Management • Sharon Buck, Northern Trust & Chuck McLucas, CPA, Charitable Trust Administrators

•Planned Giving Donor Recognition & Stewardship• Maria Kutscher, CFA, CFP, US Trust/Bank of America

MATCHING ASSETS & GIFT VEHICLES

ROLAND HO, CSPGSenior Executive Director, Planned Giving


Agenda• Review• Asset Risk Scale• Asset Classes

• Appreciated Assets Overview• Types of Assets

• Donor Profile• Deductibility• Donor Types:

• Individuals• Donor Advised Funds• Private Foundations

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Review: Estate Gifts• Revocable provisions that are included in an individual’s estate naming the University as a beneficiary

• Suggested Language:“I/We devise and bequeath [percentage, residual, amount, asset] to LEGAL NAME (TIN#######), located in CITY, STATE, to be used in our most

recently executed gift instrument on file with the LEGAL NAME.”

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Suggested Language:

“I/We devise and bequeath [percentage, residual, amount, asset] to LEGAL NAME (TIN#######), located in CITY, State, to be used in our most recently executed gift

instrument on file with the LEGAL NAME.”

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Why do we use this language?

1. It correctly identifies the Charity by the Tax Identification Number and Address

2. It helps to identify how the CHARITY should use the gift3. The gift agreement will state:

• Purpose• Endowed fund vs. non‐endowed• Name of fund• Contingent uses• Approximate value of the gift

Review: Estate Gifts

• Estate gifts can be irrevocable but it is inadvisable• CA has a higher standard, detrimental responsibility• Donors also do not want to commit assets that they are not sure they will have in the future

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Review: Estate Gifts

Estate Gifts: Donor Profile• Any individual who should have a will or trust (18+)• The ideal age: 45+• What is the current value of a probate estate?

$150,000

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Estate Gifts: Role Playing• Individual, unknown age, mentions a desire to name Charity as an estate beneficiary. Wants to know what language to include.

• What do you do?• What do you ask?• What do you say?

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Risk Scale

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1 2 3 4 5 6 7 8 9 10

Cash, publically Traded Stock

International Closely Held Businesses

Residential Real Estate

Art Work,Patents,Tangible Personal Property

Domestic Closely Held Businesses

Residential Rental Real Estate

Commercial Real Estate

Real Estate

Whole Life

Term Life

Universal Life

Life Insurance Policies

S‐CorpsC‐Corps

Current Gifts: Cash vs. Stock

$25,000 gift in support of student endowment• Cash gift and stock gift will both produce an income tax deduction of $25,000



Art Work,Patents,Tangible Personal Property


Real Estate

1 2 3 4 5 6 7 8 9 10

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Gift

Taxable Basis

Potential Capital Gains Tax

Income Tax Liability


How would you calculate the actual value and cost of the stock gift? Cash gift?

Appreciated Asset GiftAssuming a combined Capital Gains Tax Bracket of 24.3%, a gift of stock with a basis of $2,500 would by‐pass $5,467.50 of capital gains tax liability

Cash gift is using “after tax dollars”Assuming a 33% federal tax bracket, the cost of the gift is really $33,250, because they would have an income tax liability of $8,250 in income taxes

Stock

$25,000

Cash

$2,500

$5,467.50

N/A

N/A

$8,250

$25,000

N/A

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Cash Stock

Gift $25,000 $25,000

Taxable Basis N/A $2,500

Potential Capital Gains Tax N/A $5,467.50

Income Tax Liability $8,250 N/A


Tax Triggering Event• Stock (if gifted): donors avoid the capital gains tax• Cash: Ordinary Income taxes are already due

Cash vs. Stock: Role Playing• Couple in their late 40s.• Husband is an executive at Broadcom, wife is stay at home mother.• They have twin sons and wife has an older son from previous relationship.• Affinity with is for the homelessness in Orange County, which their older son has attended for four years and is about to graduate.

• They have made several small gifts and two larger gifts of $23,000 in 2014 and $10,000 in 2015 ‐ typically cash and in conjunction with an event.


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Donor Case Studies• Identify donors who you believe have or who you know have the following types of assets:

• IRD Assets (IRA, 401K, 403B)• Highly appreciated assets (stocks, real estate)


Your Goal: 1) Determine what the next move is toward your goal2) Determine common identifying patterns, goals between your various donors

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Current Gifts: Non‐Cash Gifts

• Tangible personal property can have great value, but also may give rise to major disputes with the Service. It is essential to locate an appraiser who is qualified to evaluate the specific type of tangible personal property.

• Art is particularly subject to large value variations determined by different appraisers. Therefore, an IRS Art Advisory Panel meets regularly to evaluate gifts of art to charities. The Art Advisory Panel reduces many of the claimed deductions for gifts of art by 20% to 40%.

• Donors who give tangible personal property should exercise caution in valuing the gifts. Forms 8283 and 8282 were in part developed because of excessive deductions claimed by donors for tangible personal property.



Art Work,Tangible Personal Property,Patents


Real Estate

1 2 3 4 5 6 7 8 9 10

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• Gifts of $250 or more to a charity require a receipt.

• For "quid pro quo" gifts over $75, the charity must make a good faith estimate of the value of the goods or services transferred to the donor and disclose the estimate. Reg. 1.170A‐13(f).

• Form 8283 must include a description of the property. For tangible personal property, this description should include the general condition of the property. Any restrictions or reservations of income, voting rights, acquisition rights or limits on use should be disclosed. For example, all charitable remainder trust interests must be disclosed. One method of disclosure is to append a deduction calculation to IRS Form 8283. Reg. 1.170A‐13(c)(3).

The appraisal document also should include the name, address and other applicable information about the appraiser. The appraiser must affirm that the appraisal was done on a specific date, that the property was valued as of the date of the gift, that the appraisal was done for income tax purposes and the appraisal must disclose the methodology used in deriving the property value. Reg. 1.170A‐13(c)(3).

• For gifts of property over $5,000 in value, ($10,000 for closely‐held stock), Part B of Form 8283 must be completed. In addition, both the appraiser and the charitable donee must sign Form 8283. With a charitable remainder unitrust or annuity trust, there may not be a vested charitable donee as remainder recipient. Therefore, for all unitrusts or annuity trusts, the trustee must sign in place of the charitable donee.

The signature of the donee is merely to acknowledge that the donee has received the property. Furthermore, when the donee signs Form 8283, it incurs an obligation to file Form 8282 within 125 days of sale of the asset, if that sale date is within three years of the date of the gift.





Real Estate

1 2 3 4 5 6 7 8 9 10

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Tangible personal property refers to any type of property that can generally be moved (i.e., it is not attached to real property or land), touched or felt. These generally include items such as furniture,

clothing, jewelry, art, writings, or household goods.Related‐use issue

If the charity is unable to use the tangible personal property (not including, land, home or patents) for a related use, the donor’s

deduction will be limited to the basis.





Real Estate

1 2 3 4 5 6 7 8 9 10

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Real Estate

1 2 3 4 5 6 7 8 9 10

Similarities

Limited liability protection. Both offer limited liability protection, so shareholders (owners) are typically not personally responsible for business debts and liabilities.

Separate entities. Both the S corp and C corp are separate legal entities created by a state filing.

Structure. Both have shareholders, directors and officers. Shareholders are the owners of the company and elect the board of directors, who in turn oversee and direct corporation affairs and decision‐making but are not responsible for day‐to‐day operations. The directors elect the officers to manage daily business affairs.




Real Estate

1 2 3 4 5 6 7 8 9 10

S‐CorpsC‐Corps

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Real Estate

1 2 3 4 5 6 7 8 9 10

S‐Corp C‐Corp

Taxation Pass‐through taxation, taxed at the individual level

Double Tax: corporate and individual level

Ownership S corporations cannot be owned by C corporations, other S corporations, LLCs,

partnerships or many trusts. Also, S corporations can have only one class of stock

(disregarding voting rights)S corps are restricted to no more than 100 shareholders, and shareholders must be US

citizens/residents

C corporations have no restrictions on ownership

Charity Charity can own S‐corp shares (since 1996) but S‐Corp Shares can not be contributed to CRTs

Charity Can hold these assets and can sell assets tax free. C‐Corp shares can be

contributed to CRTs




Real Estate

1 2 3 4 5 6 7 8 9 10

S‐CorpsC‐Corps

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Real Estate

1 2 3 4 5 6 7 8 9 10

S‐CorpsC‐Corps

Charity as an OwnerS‐corps will subject charity to Unrelated Business Income Tax (UBIT)

In cases where an individuals is considering gifting this to UCI, the University must conduct a due diligence process to mitigate liability

If the charity will participate in the sale of the company, it may be asked to make representations and warranties (and face potential liability) as a selling shareholder. The charity will generally seek to

eliminate or minimize any exposure as a selling shareholder, and may seek indemnification from the donor in certain circumstances (e.g., when there is unlimited financial liability post‐closing).

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Due Diligence Process

• Review of Corporate Bylaws• Review of Debts, Liabilities, Calls, Puts• Review of liquidation events• Review of Long Term liabilities

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• Entrepreneurial• Is looking to liquidate his/her holdings in the company• Subject to capital gains• May be the first or one in a series of liquidation events (“serial entrepreneur”)

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Donor Profile: Corporations

Current Gifts: Real Estate





Real Estate

1 2 3 4 5 6 7 8 9 10

S‐CorpsC‐Corps

• Subject to qualified appraisal rules• Has a range of potential liability depending on previous use• For most charities, real estate tax is due on the property• Real estate requires extra review (covered in the next presentation)

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Current Gifts: Real Estate





Real Estate

1 2 3 4 5 6 7 8 9 10

S‐CorpsC‐Corps

What do you suppose the liability is for the following pieces of Property?• Raw undeveloped land• Residential Property built in 1943• Rental, Residential Units• Property adjacent to land once used as a gas station• Commercial Office Space• Commercial Industrial Space

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Risk Scale: Life Insurance

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whole life insurancelife insurance that pays a benefit on the death of the insured and also accumulates a cash value.Characteristics: Higher Premium Value, provides a deduction for the cash value, premiums remain fixed

universal life insurance (often shortened to UL) a type of permanent life insurance, primarily in the United States of America. Under the terms of the policy, the excess of premium payments above the current cost of insurance is credited to the cash value of the policy.Characteristics: Mid range Premiums, accumulates cash value, provides a deduction for the cash value

term life insurancelife insurance that pays a benefit in the event of the death of the insured during a specified term. Characteristics: Low Premiums, no cash value, has an end date, premium goes up after a certain period of time

Risk Scale

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1 2 3 4 5 6 7 8 9 10

Life Insurance Policies

Whole LifeBeneficiary Designation,Paid Policy (ownership)

Fully Paid or Endowment Established

Partially Paid, Cash Value accumulated – Cash value

decreases overtime

Unpaid, no cash value accumulation

Universal Life

Beneficiary Designation,Paid Policy (ownership)

Fully Paid or Endowment Established

Partially Paid, Cash Value accumulated – Cash value

decreases overtime

Unpaid, no cash value accumulation

Term Life Beneficiary DesignationUnpaid, no cash

value accumulation

Criteria• Typically created with assets of at least $5.0M as a legal separate

entity• Subject to numerous reporting and administrative requirements• Must grant at least 5% of assets each year• May or may not have succession structure• Contributions and distributions are public information• Donor(s) control board and investments

Deduction• 100% Deduction• Deduction able to offset 30% of AGI for Cash Gifts, 20% of AGI for

Stock Gifts

Charitable Entities:The Private Foundation

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Private Foundations• Family may serve on the committee board to issue grants in your name or their name

• Family can set criteria and mandate an annual gathering or consensus on grant distributions

• CON: Family may not want to proceed with administering the PF, or they may not want the high costs

Charitable Entities Private Foundations

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Private Foundation501(c)3 Entity

Deduction

GovernanceInvestment Distribution

Charity

Administration AccountingExcise Taxes

Min 5%

Charity Charity

Charitable Entities:the Private Foundation

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Private Foundation• Cannot fulfill a personal pledge of a donor• Can enter into a pledge on behalf of the donor• Can provide naming options for the donor• Cannot provide goods and services to the donors• Can award scholarships (grants to individuals) but must receive advance approval and come under a higher level of scrutiny

• Canmake distributions to scholarship funds• Recommended: to be funded with at least $5.0 million

Charitable Entities:The Private Foundation

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Criteria• Created for the Community by the Community• Subject to IRS mandated reporting and administrative

requirements• Intended to last in perpetuity• Use of charitable funds are public information• Community controls board and investments

Deduction• 100% Deduction• Deduction able to offset 50% of AGI for Cash Gifts, 30%

of AGI of appreciated assets

Charitable Entities: Public Charity

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Charitable Entities: Public Charity

Public Charity501(c)3 Entity

Deduction

GovernanceInvestment Distribution

Administration Accounting

Programs Programs Programs

CommunityVolunteers

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Like a private foundation without the administrative and reporting burden

Criteria• Funded with as little as $5,000• Housed at institutions like Wells Fargo, Merrill Lynch and

Community Foundations ‐ fund is not a legal separate entity• Subject to IRS reporting and administrative requirements,

administered by the organization• No minimum distribution requirements• Distributions are public information, contributions are not• Community controls board and investments

Deduction• 100% Deduction• Deduction able to offset 50% of AGI for Cash Gifts, 30% of AGI of

appreciated assets

Charitable Entities: Public Charities|The Donor Advised Fund

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Donor Advised Funds• Family may serve as an advisory committee to issue grants

• Donor can set criteria and mandate an annual gathering or consensus on grant distributions

Charitable Entities: Public Charities|the Donor Advised Fund

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Donor Advised Funds• MAYBE can fulfill a personal pledge of a donor*• Can enter into a pledge on behalf of the donor• Can provide naming options for the donor• Cannot provide goods and services to the donors• Cannot award scholarships (grants to individuals), but can make distributions to scholarship funds

Charitable Entities: Public Charities|the Donor Advised Fund

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* New in 2018. Under current interpretation DAFs may be used, but ruling is not permanent.

Charitable Entities: Donor ProfilePrivate Foundation Donors:• Prefer Control ‐ asset investments• Have an attorney – and most likely an advisory team• Have long‐range plans for legacy• Desire to include family in management of assets, transfer of values

Donor Advised Fund Donors:• Prefer anonymity over control• Community Foundation Donors ‐ Desire greater impact• Bank Donors ‐ Fee sensitive, desires tax deduction• Wants more flexibility in grant making• Has long range plans for legacy• Desires the higher AGI Limitation: 50%, 30%, 20%

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Questions?

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PLANNED GIFT ADMINISTRATION

SUSAN BERKMAN, J.D., CSPGAssistant Vice President, Gift PlanningCalifornia State University, Long Beach

GIFT ACCEPTANCE POLICIESWHY we need them!

GIFT POLICIES DEFINE WHO• WHO has authority to negotiate planned gifts on behalf of the org?• WHO has authority to accept or decline planned gifts on behalf of the org?

DevelopmentOfficer?

CEO?

Board member?

Development Officer?

Board Member? CFO?CEO?

Staff orVolunteer?

GIFT POLICIES DEFINE WHAT

• WHAT kinds of gifts will you accept?• WHAT assessment do you need to do before considering acceptance?

OR

Real Estate Due Diligence Checklist Detailed Asset Information (description, location, APN, FMV, appraisal) Donor’s cost basis & net income from property (if any) Liens/encumbrances Estimated marketability of the asset Tenant information/other leasing information Environmental & geological review Title report/insurance Ownership information (Is it in a trust? If so, what type?) Trust information if it is in a CRT

Special circumstances of the donor, the property, the situation

GIFT POLICIES DEFINE WHEN

• WHEN do you count deferred gifts?• When the money arrives?• Do you count the estimated value now?• Do you report the estimate or wait?

GIFT POLICIES DEFINE HOW• HOW will you use the gift and how will we know what do in the future when it arrives?

OR

WRITTEN Gift Agreement or Instructions

• Gift Agreement checklist Donor information & gift description including estimated or real value Payment schedule, if known Purpose of the gift & criteria for use Gift fee info (if any) and description of who is responsible for investment/fiscal management in org Donor recognition information (Naming? Anonymous?) Circumstances under which a naming may be changed Future decision making powers if original purpose cannot be carried out

• MINIMUM: Gift written and signed instructions from the donor

HOWWILL YOU ADMINISTER THE GIFT?• Who will manage an asset like real estate?

• Will you be the trustee of a charitable or living trust?

• If so, who in the org will be named as responsible?

• Who keeps track of the gift agreements?

WORKING WITH ESTATE PLANNERS

MARIA KUTSCHER, CFA, CFPSenior Vice President

U.S. Trust, Bank of America Private Wealth Management

THE ALPHABET SOUP OF CREDENTIALS• CPA • CFP • CLU• ChFC• CFA • CTFA• STOCKBROKER

• Stock Advisor

• FINANCIAL PLANNER• INVESTMENT ADVISOR,

MANAGER• PRIVATE BANKER• TRUST OFFICER• ATTORNEY (JD, ESQ, LLM)

• Paralegal

• PRIVATE FIDUCIARY• TRUSTEE/ADMINISTRATOR

REGULATORS of Estate Planners

• Bank, Broker/Dealer = FINRA (finra.org)• Registered Investment Advisor = SEC (sec.gov)• Private Bank = OCC• Attorneys = State Bar of California (calbar.ca.gov) • CPAs = CalCPA (calCPA.org)• Private Fiduciary = Profesional Fiduciaries of California (fiduciary.ca.gov)

Identifying a Good Partner

• What is your experience with foundations/organizations like mine?• What is your firm’s experience with organizations like mine?• What licenses do you hold?• What products/services do you offer?• What are your fees and how are the structured?• Do you do legacy planning with prospective donors?• Do you administer planned gifts?• What type of fiduciary are you?

Identifying a Good Partner• What type of fiduciary are you and what regulatory issues are there?• Can I call you for specialty asset consulting or management?

• E.g. timber, farms, oil rights, water rights, real estate• Do you offer trustee services?• Do you offer non‐financial consulting?

• Strategic planning• Board governance & training• Staff education & training• Social Media• Fundraising• Capital campaigns• Grant consulting

What Happens When a Donor Dies

Date of DeathLiving Trust: 9‐18 monthspossible preliminary distributions

Will: 12‐36 monthsAll action steps, including final distribution, must be approved by Probate Court. Many steps require court dates

Estate Distribution Timing

ROADBLOCKS‐ Creditor claims or liens‐ Beneficiary lawsuits‐ Tax problems; IRS reviews‐ Court delays/ scheduling difficulties

FAST TRACK‐ Beneficiary distributions

‐ Life insurance‐ IRA‐ CGA‐ CRT

PLANNED GIVING Additional Education Resources• Planned Giving Roundtable of Orange County: pgrtoc.org

• National Council of Gift Planners: charitablegiftplanners.org(parent organization of PGRTOC)

• American Council on Gift Annuities: ACGA‐web.org

• Planned Giving Design Center: PGDC.com

• Planned Giving Today (a monthly newsletter about planned giving): liebertpub.com/overview/planned‐giving‐today/235/

Planned Giving Vendors forMarketing & SoftwareThe vendors provide educational opportunities as well as materials and there are others besides those named here. This list is for educational purposes only does not imply an endorsement by PGRT‐OC or that these vendors can meet your specific needs.

• Crescendo Interactive: crescendointeractive.com• PG Calc: pgcalc.com• Stelter: stelter.com• Sharpe: sharpenet.com• R&R Newkirk: rrnewkirk.com• Pentera: pentera.com• Plannedgiving.com (formerly Virtual Giving)

CASE STUDY REVIEW

ROLAND HOSenior Executive Director, Planned Giving


• Dr. and Mr. Lund- 78 and 50 years, respectively

• Primary asset is Dr. Lund’s company

• Dr. Lund is ready to sell the business

Case Study #1 – The Entrepreneur

• Started business with $500,000 investment 25 years ago

• Approximate current sale value is $35 million

• What questions would you ask Dr. and Mr. Lund?

• What solutions might you propose for review?

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• Dr. and Mr. Lund- age 78 and 50 years, respectively

• Primary asset is Dr. Harper’s company

• Dr. Harper is ready to sell the business

Case Study #1 – the Real Story

• Wanted to give a cash gift after the sale- $3.0 million

• What issues do you see?

• Which strategies would you suggest?

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Leveraging Charity to mitigate taxesCurrent and deferred Gift

Charitable Remainder Trust

$5,000,000

Deduction

TrusteeInvestment Distribution

Beneficiary

Charity

5%

1. Stock is gifted into charitable remainder trust and outright to charity.

12. Dr. and Mr. Lund receive a one time income tax deduction.

3. CRT sells stock and makes annual distributions of 5% of the CRT assets per year.In the first year, that income is projected to be $250,000.

2

34. At death of the beneficiaries, the CRT disburses all of its assets to charity.

4

1

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CHARITY

this information is for educational purposes only and does not ... · (no california estate or...

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