The Top of the Pyramid: Planned Giving from the Donors' Perspective

1. The Top of the Pyramid: Planned Giving from the Donors' Perspective Philip Ellis, Community Foundation Dave Eitland, Grand Traverse Bay YMCA March 24, 2011 12:00 noon – 2:00 pm

2. Goals for Our Presentation • As you are very busy, we want to: • Give you a sense of the what to do when you get your first planned gift. • Give you the basic elements, vehicles, and marketing of planned giving • Give you want you need to get started • Point you to other resources

3. Who are we? • Phil Ellis • Executive Director, Your Community Foundation • Ph.D. in Clinical Psychology • Clinician and Administrator of Pine Rest Christian Mental Health Services – 25 years • Executive Director - Pine Rest Foundation – 3 yrs • $20 million Foundation • Married to Barbara (Jordon) Ellis, leadership consultant • Dave Eitland • Director, Development & Marketing, GT Bay YMCA • B.A. in Political Science • 25 years in professional philanthropy & implement dreams as consultant, staff manager, and volunteer • 15 years in planned giving • Trained financial planner • Married to Katheryn King, Episcopal Priest (Lutheran)

4. Either today or tomorrow it’s going to happen! • You learn that someone has left you $500,000! • What will you do?!

5. Factoid: On December 31, 2009 there were 252 active Estate and Trust Cases in Grand Traverse County. Estimated average size was between $50,000 - $350,000. The low was $5,000 and the high was $1.2 million. Grand Traverse County Probate Court Staff, 3/18/11 & Michigan State Courts Published Summary Reports. Factoid: 2009 Assets based on Gross Estates: http://www.irs.gov/pub/irs-soi/09esassetsstate.pdf

6. Then What? Go to your Board… Go to your legal counsel…

7. Best Option: Go to your gift acceptance policy to determine what you do with unexpected gifts… How current is your organizations gift acceptance policy? A gift policy accepted by your board in advance will provide direction on how to deal with extraordinary giving! Sample Gift Policy - http://www.mvnu.edu/univadv/GiftAcceptance.pdf

8. What are Planned Gifts? Planned gifts are a variety of charitable giving methods that allow you to express your personal values by integrating your charitable, family and financial goals. Making a planned charitable gift usually requires the assistance of the charity’s development professional and/or a knowledgeable advisor such as an attorney, financial planner, or CPA to help structure the gift. Planned gifts can be made with cash, but many planned gifts are made by donating assets such as stocks, real estate, art pieces, or business interests—the possibilities are endless. Planned gifts can provide valuable tax benefits and/or lifetime income for you and your spouse or other loved one. The most frequently-made planned gifts are bequests to charities, made through your will. Other popular planned gifts include charitable trusts and charitable gift annuities. Partnership in Philanthropic Planning, http://www.pppnet.org/resource/about-cgp.html

9. Typically …. • Donor has reason to support your organization • Often has been a past donor • May want to be anonymous—or at least to have their plan be private • Often are set up in later years—part of their overall estate plan

10. Planned Gifts • Often are unexpected • Frequently are designated • Come from and with donor’s intent • Often given to several causes or organizations

11. Planned Giving/Gift Planning Planned giving is a means of  “leaving a legacy”. • Planned Gifts are frequently assets that are fully realized upon donor’s death • A way of leaving a lasting impact upon a cause or organization near to a donor’s heart • Assuring continuation…the future

12. Basic funds needed by charities: A Balancing Act • Current and Operational funds • Special capital needs based on growing organization to fulfill its mission • Quasi-endowments • “raining day”, reserve funds, or set aside • Endowments • long term health and continuing mission • helps to temper the ups and downs of funding • planned giving works for endowment building and long term mission needs

13. Endowment (Later) vsCurrent Needs (Now) • We need the support now! • An endowment is not always the appropriate giving platform • Problems are immediate/emergent • Problems can be solved by charitable giving—now • Goals are not consistent with sustainable giving of an endowment • The “either or” or “both and” depends on the organization balance between short term and long term needs. “Can we afford not to have an endowment?” “Show me the MONEY!!!!!!!!

14. How do you assure Future? Donors have individual intentions and interests • Making an immediate impact • Solving a problem • Building a building • Most frequent interest is something lasting Endowing a program, scholarship, special interest area, creating a lasting impact…

15. Why donors give to endowments • Perpetuity…the “legacy factor” • Desire for the long-term health of the organization...the “sustainability factor” • Concern for the use over time…the “confidence factor” • Encouraging others to give…the “investment factor”

16. Organizational or Community Foundation (CF) Endowment Some donors want to give to an organization…directly • Gets immediately to the organization • Confidence in the organization’s ability to steward these resources • Confidence in the organization’s capacity for investment and managing larger funds

17. Organizational or CF Endowment • Some donors prefer to give through CF • Confidence in CF ability to invest and manage larger sums of money • Confidence in the perpetuity factor—legal underpinnings of an endowment fund • Able to make planned gift to one entity with several beneficiaries • CF are known for endowments • Confidence that it really is an endowment

18. Critical: Understanding Donor Intent!! • Questions to consider …. • What is the donor really giving to? • For what purpose? • Immediate? Short-term? Endowment? • Does the purpose have a “shelf life”? • Why does the donor want to make the gift in this fashion? • Does the gift allow for any flexibility in the future? • What happens if your organization changes its mission? • How will the donor be recognized? • - Will it be forever? • Will their family know of the gift? In this day and age, donor intent needs to be in writing, part of any gift agreement, and secondary documented (digital recording?) depending on the gift.

19. Why Would You Say NO? • Are there gifts we should not accept? • Is it aligned with our vision and mission? • What does our gift policy say in this instance? • Are there gifts we cannot accept? • What contingencies and restrictions are on this gift? • Too complicated? • For us … For anyone • What will it cost us? Legal problems? • What is the environmental impact? GIFT

20. Tools for Giving

21. Tools for Giving • Any planned giving tool must be used to fulfill the donor’s need to give and in consideration of any future financial need of the donor. • Any planned giving tool must be thoroughly understood by the donor and any of their financial, tax, and legal professionals. Concrete examples and illustrations are necessary before any tool is used. • Tools are used to “build” the donor’s philanthropic plan and in the donor’s best interest to fulfill their need to give to the charity. When in doubt, ask … http://www.pppnet.org/ethics/model_standards.html

22. Tools for Giving • You as a charity provide information on planned giving for only educational purposes. • Donors must consult with their professionals (financial planners, CPAs, lawyers, trust officers, etc) for tax, future obligations, and future needs of the donor. • What is the charity’s overhead on a gift?

23. Tools for Giving Concerns & Factors for giving: • Self and future care/health needs • Spouse/Partner and future care/health needs • Special Need Children • Children & Relatives (sometimes) • Faith Community (if a believer) • Charity Order of this list depends on donor.

24. Tools for Planned Giving:In order of frequency for non-PG staffed development shops 4 types of tools • Cash (always works) • Beneficiary designations • Stuff - Personal property (things to convert to cash) • Income options - To donor - To organization

25. Donor Benefits Some of the benefits depending on the tool • Reduced Estate Tax • Reduced Income Tax • Reduce or Eliminate Capital Gain Tax • Income back from Gift • Give an asset but keep on enjoying it Source: The Ultimate Quick Reference Planned Giving Pocket Guide, PlannedGiving.com

26. Cash & Securities Gift Cash is the easiest gift and provides the maximum deductions. • 50% of AGI with 5 year carry over* • 30% of AGI with appreciated assets (securities)* ABC Charity Donor gives cash. Provides immediate benefit to charity. Source: The Ultimate Quick Reference Planned Giving Pocket Guide, PlannedGiving.com

27. Beneficiary Designations • Bequests • Life Insurance • Retirement Plans Assets (IRA*) • Securities & Annuities • Savings Accounts & CD’s • Real Estate & Titled Stuff • Watch implications of Fractional Interests. *Some IRAs will come to beneficiaries as straight, taxable income. ABC Charity Fills out form or document to make gift Source: The Ultimate Quick Reference Planned Giving Pocket Guide, PlannedGiving.com

28. Beneficiary Designations Do you know your EIN? • I devise and bequeath to the Grand Traverse Bay Young Men's Christian Association (YMCA), Traverse City, Michigan, USA, a State of Michigan charitable institution, Federal ID #38-1709640, (insert sum or percentage or description of property) which shall be used for such YMCA purposes as the Board of Directors may determine." Please always consult with legal counsel or your other financial professionals to make sure any changes in your will or living trust are recorded correctly and have taken into account all aspects of this kind of gift including future needs.

29. Facts • 55% - 60% of Americans do not have a will. • http://www.legislature.mi.gov/(S(ung5pv252hw50h45vjc0uw55))/mileg.aspx?page=getObject&objectName=mcl-700-2102 • http://www.legislature.mi.gov/(S(ung5pv252hw50h45vjc0uw55))/mileg.aspx?page=getObject&objectName=mcl-700-2103 • For the sake of charity we have to get people to write wills!

30. Stuffconveyed either before or at the time of the estate distribution • Giving appreciated real estate or vacation property • Personal property • Artwork, precious metals, collectables, equipment, vehicles, boats, timber, farms, livestock, mining rights, oil and gas rights, inventions, mission related gifts that can be used directly by your organization • Paid up life insurance policies • Life insurance arrangement to take ownership now, donor gives gift to pay for premium • Retained Life Interest • Give real estate but reserve the right to use it for life MAKE SURE THE CHARITY WANTS THE GIFT! ABC Charity Fills out form or document to make gift, or gives outright Source: The Ultimate Quick Reference Planned Giving Pocket Guide, PlannedGiving.com

31. Income producing gifts Provides the donor an income stream for donor • Charitable Gift Annuities • Immediate, deferred, or flexible • Charitable Remainder Annuity Trusts • Charitable Remainder Unitrusts • Pooled income funds Created in 1969 by the Government and all are legal. Source: The Ultimate Quick Reference Planned Giving Pocket Guide, PlannedGiving.com

32. Income producing gifts An Example -- Charitable Gift Annuities • Donor gives a gift ($25,000). Can run 1 or 2 life-times • Charity guarantees income for life time to donor in an contract • Donor gets up-front donation receipt, portion of payout is taxed as ordinary income, part comes back as tax free return of donor’s principle • Most charities use American Council on Gift Annuities which assumes 50% will eventually come back to charity. • Michigan has little regulation on CGAs. Gift CGA Remainder Fixed income + deduction ABC Charity Source: The Ultimate Quick Reference Planned Giving Pocket Guide, PlannedGiving.com

33. Other Gift Plans • Charitable Bargain Sales • Donor sells property at reduced FMV, receives deduction for balance and cash for the property • Charity can use property or sell for cash. • Charitable Lead Trust • Allows for the passing of a property to relatives at a reduce or avoid gift and estate tax. • Donor transfer property to Lead Trust that generates income to a charity for a fixed time • After a time period Trust transfers the remainder of the property to donor or family. Source: The Ultimate Quick Reference Planned Giving Pocket Guide, PlannedGiving.com

34. Marketing the Planned Gift

35. Marketing Planned Giving http://www.leavealegacy.org/ultimategift_video.asp PSA video http://myarmygift.com/ Salvation Army reply form

36. Unforgettable http://www.leavealegacy.org/MediaCenter/Docs/poster_petgroomer.pdf Poster

37. Personal • Newsletters & Ads • see samples • Ad: http://bit.ly/hiUSIb • Sample web sites • http://www.clubgift.org/plgive_wills.jsp?WebID=GL2007-0850 • http://www.kpbs.org/give/planned-giving/ • http://purdue.giftlegacy.com/plgive_main.jsp?WebID=GL2007-0825 • http://www.rotary.org/en/contribute/waystogive/plannedgiving/pages/ridefault.aspx

38. A Simple Plan • identify your prospect group • all pledge cards/return envelopes – mention wills • P.S. Have you considered putting <charity> into your estate plan? • website and make it visible • make sure EIN is visible and use sample language • charity newsletter articles with donor stories • consider a newsletter/web service • purchase a set of brochures with charity’s name on it. • identify a list for postcards and send ideas for giving. • http://bit.ly/fRLnPN • buy planned giving software. • Join the Partnership for Philanthropic Planning • do it over and over and over and over … • Your first planned gift will more than pay for any expense!

39. A Simple Plan Structural Issues • Board’s Role • Planned Giving Committee • Board Members • Community Champions • Knowledgeable “skill-holders” • Champions/Proponents/PG Givers-Investors • Community Resources • Knowledgeable “skill-holders” • Communication vehicles

40. Resources: http://www.stelter.com/site/index.jsp Thanks! http://www.plannedgiving.com/ Thanks! http://www.pppnet.org/resource/resource.html PPP http://www.crescendointeractive.com/ Software/Info http://www.pgcalc.com/index.htm Software/Info http://ptec.com/pp/solutions-planned-giving/4155 Software http://www.pgdc.com/host/planned-giving-design-center-llc/overview ultimate technical resource for PG http://www.acga-web.org/ Everything about CGAs http://www.sharpenet.com/ Sharpe Group – PG resources http://www.liebertpub.com/products/product.aspx?pid=235 Planned Giving Today newsletter

41. Forever • Planned Giving provides for the future • Forever • Next generation • A project • Assurance of one’s philanthropic intentions • Our largest gift is likely to be our last • This is the gift that we’ve always wanted to give • Assuring that what we supported in life, we’ll support after our death…pretty cool! Contact us: Phil Ellis, 231-935-4066, pellis@gtrcf.org Dave Eitland, 231-933-9622, dave@gtbayymca.org