Mile High Goals: Gift Planning in Mega Capital Campaigns Minnesota Planned Giving Council September 8, 2009

1. Mile High Goals: Gift Planning in Mega Capital CampaignsMinnesota Planned Giving CouncilSeptember 8, 2009 Laura Hansen Dean, Esq. Executive Director of Gift Planning The University of Texas at Austin lhdean@austin.utexas.edu

2. CampaignPlanning • Program Assessment • Discover strengths and weaknesses • Focus on basic elements and functions of development: gift policies, data, gift planning tools, staffing • Blueprint for reform – University of Texas at Austin

3. Campaign Planning • Campaign Planning Study • Formerly called a feasibility study • Do it right – use an RFP and get several firms bids but very few can play in this league • Consider cost (duh!), experience working with your enterprises your size, past relationships with your organization

4. Campaign Planning • Scope of Work – short list • Case or argument for support • Interviews – between 40 and 60 of top donors and prospects • Testing of preliminary goal • Internet questionnaire • Comprehensive report – written and presented to board

5. Campaign Planning You need campaign counsel You don’t have to use the firm that does your Planning Study

6. Campaign Planning • Goal Setting and Gift Pyramid • Creating discipline • Gift Pyramid will require gifts of +$100,000,000 and +$10,000,000 • At the end it may be 95/5 ratio but to build Culture of Philanthropy shoot for 80/20 • Be realistic with gift expectations but still stretch

7. Campaign Planning • Staffing and Training • Do it • Campaign Director – not CDO but #2 • Train staff, administration, volunteers – don’t let them get off the hook • Leadership Attitude • Let’s talk

8. Campaign Planning

9. Campaign Planning • Screening • Part of the discipline • Great for the “middle” of the gift pyramid and Culture of Philanthropy goal • Great for gift planning intelligence

10. Campaign Planning • Volunteers • A lot of work but worth it • They become better donors • Shore up uncertain leadership • Tipping point

11. Campaign Planning

12. Campaign Planning • Integration of Gift Planning into campaign • Set percentage of goal expected from GP • PGO’s on speed dial for every major gift officer • Training opportunities for staff and volunteers • Builds culture of philanthropy goal

13. Campaign Counting Standards

14. Campaign Counting Standards

15. Solicitation Stage of Campaign • Conduct Trainings with Colleagues • the gift planning process • the variety of assets that can be gifted • personal and estate planning goals that can be addressed by gift planning

16. Solicitation Stage of Campaign • Conduct Trainings with Colleagues • how a gift planning “ask” differs from a traditional “ask” • Would you consider a gift of $X if we can show you could make the gift? – here are really asking for willingness to take the time to explore some options. • Would you consider a gift of $X? – yes, no and sometimes maybe are possible responses.

17. Research on Prospects to Discover • types and values of assets owned • marital status, extent of family and loved ones likely to be heirs • known charitable interests • relationship with the organization and past gifts • purpose of past gifts to the organization

18. Gift Options at Different Amounts • $100,000 Gift • $100,000 outright in cash or non-cash assets. • $100,000 pledge over campaign period paid in cash or securities.

19. Gift Options at Different Amounts • $100,000 Gift • $100,000 charitable gift annuity • Donors age 70 and 68 would receive 5.6% recommended payout in quarterly payments. At 5% federal midterm interest rate, the charitable value would be slightly more than $33,000 • $100,000 testamentary gift or beneficiary designation

20. Gift Options at Different Amounts • $500,000 Gift • $500,000 outright in cash or non-cash assets • Non-cash example: Gift ownership in a closely-held business worth $500,000 before selling the business is negotiated with the buyer. • $500,000 pledge over campaign period paid in cash or securities

21. Gift Options at Different Amounts • $500,000 Gift • $500,000 blended gift • Donors age 65 and 63 pledge $250,000 over 5 years to create an endowment. At the end of 5 years, the endowment will pay out $12,500 annually at a 5% spending rate. • Donors contribute a piece of real estate worth $250,000 that cost them $100,000 to a flip charitable remainder unitrust with a 5% payout rate and quarterly payments for their joint lives and then for the survivor’s life. At 5% federal midterm interest rate, the charitable value would be about $84,500. • $500,000 testamentary gift or beneficiary designation

22. Gift Options at Different Amounts • $1 Million Gift • $1 million outright in cash or non-cash assets. • $1 million pledge over campaign period paid in cash or securities • $1 million charitable remainder trust • $1 million testamentary gift or designation

23. One Million Dollar Gift Contribution of Business Equity to CRUT Before Sale Pete wants to make a $1 million gift. He owns $3 million interest in family business , all subject to long- term capital gains tax. If the tax rate was 15% at the time of the sale, he would lose $450,000 of the $3 million sale proceeds in taxes. $2.55 million left invested at 6% = $153,000 retirement income.

24. Alternative to Sale: Gift $1 million equity to 5% CRUT for Life = $ 50,000 Sell $2 million, all subject to 15% LTCG tax, leaves $1.7 million to invest at 6% = $102,000 Estimated Total Annual Income $152,000 versus 6% return on $2.55 mil sale proceeds $153,000

25. Gift Options at Different Amounts • $10 Million Gift • $10 million outright in cash or non-cash assets • $10 million pledge over campaign period paid in cash or securities • $10 million from a charitable lead trust • $10 million testamentary or beneficiary designation

26. Ten Million Gift Charitable Lead Trust Donors are entrepreneurs in their 50’s and could easily give $10 million, but not ready to do so. Instead they fund a 7% grantor CLAT with $20 million of assets they expect to appreciate, lasting for 8 years. 7% of $20 million = $1.4 million x 8 years results in $11.2 million to charity.

27. Charitable value (5% FMR) is $9.2 million, with 20% of AGI deductible in year of gift (plus 5 carryover years) as income tax charitable deduction. • Since a grantor CLAT, the donors will be the taxpayers during the term of the trust. • Strategies to reduce taxation: only sell enough trust assets to make annual payout and pay trust expenses.

28. Gift Options at Different Amounts • $50 Million Gift • $50 million outright in cash or non-cash assets • $50 million pledge over campaign period paid in cash or securities • $50 million blended gift • $50 million in a testamentary or beneficiary designation

29. $50 Million Blended Gift • $10 million given during the campaign • Plus $33.6 million from a charitable lead trust: $20 million to CLAT paying 7% lasting 24 years – at the end of 24 years, the donor’s 4 children will receive the trust assets in their early to middle 60’s. Charitable value (5% FMR) is $19.677 million and only $323,000 is the value of the gift to the children. ● Plus $6.4 million testamentary gift.

30. If the $50 million gift will name a building, program, position, etc. at the charity, the charity could ask that the testamentary gift be a debt of the donor’s estate (if possible under state law) and therefore be irrevocable.

31. Gift Proposals • Detail Blended Gift Options • Best Assets to Fund the Alternatives

32. Thanks