BREAKING ONTO THE PLANNED GIVING SCENE

1. BREAKING ONTO THE PLANNED GIVING SCENE • Getting Started • What are donors looking for? • Assets & Tools • Resources & Continuing Education .

2. WHERE DO I START? • Make a commitment to planned giving. • You won’t know everything. • Familiarize yourself with basic gift tools. • Start talking about it. • Collect resources. • People & Print .

3. WHAT ARE DONORS LOOKING FOR? • You can learn the technical details, but they pale in comparison to people skills. • Use your natural people skills to focus on the donor’s needs and desires. • If a planned gift seems appropriate, do some research and follow-up with the donor. .

4. WHAT ARE DONORS LOOKING FOR? • How can a planned gift can make them a significant donor? • Your role is that of facilitator. • Donors don’t expect you to know everything. .

5. WHAT ARE DONORS LOOKING FOR? • Find someone to help with technical details. • Remember not to over-promise. • Know when you need time to research. • Know when to call in donor’s financial advisors and/or attorney. .

6. WHAT ARE DONORS LOOKING FOR?Marketing Materials • Use case studies. • Use catchy phrases, not technical speak. • “You don’t have to be wealthy to make a significant gift.” .

7. BREAKING ONTO THE PLANNED GIVING SCENE Assets & Tools .

8. DESIGNING CHARITABLE GIFTSASSETS • Cash • Publicly Traded Securities • Closely Held Stock • Real Estate • Retirement Assets • U.S. Savings Bonds • Annuities .

9. ASSETSCASH • A cash gift is the simplest and easiest way to give. • Multiple ways to make gift: • A direct gift during life. • To fund a lifetime income gift. • To fund life insurance. • Through a will as a bequest. .

10. ASSETSCASH – INCOME TAX DEDUCTION • Available only to itemizers. • Charitable deduction is amount of the cash gift. • Unless a split interest gift (gift annuity or charitable remainder trust) • Date of gift is date hand-delivered to charity or deposited into the mail. .

11. ASSETSCASH – INCOME TAX DEDUCTION • Deduction subject to annual limitation - 50% of AGI. • Carryover - additional 5 years. • Example: • Donor’s AGI is $50,000. • Donor makes cash gift of $35,000. • 50% of AGI limitation means Donor can: • Deduct $25,000 in year of gift. • Carry over and deduct remaining $10,000 in year 2. .

12. ASSETSCAPITAL ASSETS • Gifts of appreciated capital assets such as securities, real estate, or closely-held stock may also be given. • Reduce Capital Gains Tax • Receive Income Tax Deductions • Reduce Transactional Burden • Reduce Estate Tax .

13. ASSETSCAPITAL ASSETS • Long term capital assets get special treatment as charitable gift. • Long term means held for “a year and a day” or longer. • Capital gains tax is avoided upon transfer to charity. • Charity does not recognize gain when selling the asset. • Deduction is equal to the fair market value of the asset on the date of gift. • Donor gets the benefit of appreciation without paying capital gain taxes. • Annual deduction limitation is 30% of AGI. .

14. ASSETSCAPITAL ASSETS • These favorable rules do not apply to: • Personal property, including household items and collectibles*. • Capital assets held for less than a year and a day. *Unless related to charity’s mission. For example, art given to an art museum. .

15. ASSETSCAPITAL ASSETS • Make sure that the donor has gain. • If the donor has a loss: • Sell asset and give cash. • Donor realizes loss to use against other gains. • Donor enjoys higher deduction limitations for cash gift. (50% vs. 30%) .

16. ASSETSCAPITAL ASSETS – REAL ESTATE • Bypass capital gains tax on appreciated real estate when transferred to Charity. • Multiple ways to make gift. • Direct gift • Life Estate Reserved • CRUT • Bequest .

17. ASSETSCAPITAL ASSETS – REAL ESTATE • Charitable income tax deduction equal to fair market value on date of gift. • FMV established by “qualified appraisal”: • IRS standards for a “qualified” appraisal and appraisers • Annual deduction limitation is 30% of AGI • Deduction reduced by: • Accelerated depreciation. • Gifts subject to life estate or into a charitable remainder trust. .

18. ASSETSCAPITAL ASSETS – REAL ESTATE DUE DILIGENCE: • Is real estate environmentally clean? • Certain uses not considered by most charities – former gas stations, landfills, industrial uses. • Does donor have “marketable title”? • Will it sell? • Talk with broker. / Visit property. • Is it encumbered? • Debt, unattractive easements, etc. • Is there a prearrangement? .

19. TOOLS • Direct Gifts • Life Insurance • Bequests in Will • Beneficiary Proceeds • Life Estate Reserved • Gifts Providing a Stream of Income • Gift Annuities • Charitable Remainder Trusts .

20. Reduce Capital Gains Tax Receive Income Tax Deductions Reduce Transactional Burden Reduce Estate Tax TOOLSDIRECT GIFTS .

21. TOOLSDIRECT GIFTS TARGET AUDIENCE • Wanting an immediate tax deduction. • Seeking to bypass capital gain tax on the appreciation of securities, real estate and closely held stock owned for more that one year. .

22. Personal & Tax Benefits TOOLSLIFE INSURANCE .

23. TOOLSLIFE INSURANCE • Donate existing life contract. • Receive deduction for lesser of cash value or cost basis and any ongoing premium payments. • Donate new contract. • Receive deduction for ongoing premium payments. .

24. TOOLSLIFE INSURANCE TARGET AUDIENCE • Ideal market is pre-retirement (50-64) and retired (65-75). • Those seeking to make a significant gift with smaller investments. • Those who want a tax deduction for premiums. .

25. Estate Tax Benefits TOOLSBEQUEST .

26. TOOLSBEQUEST TARGET AUDIENCE • Those who want to retain control over assets while living. • Those seeking an option to designate all or a portion of an estate to the Charity. .

27. Estate Tax Benefits TOOLSBENEFICIARY PROCEEDS .

28. TOOLSBENEFICIARY PROCEEDS • TARGET AUDIENCE • Those who want to retain control over assets while living. • Those seeking an option to designate all or a portion of an account to the Charity. .

29. Life Estate Personal & Tax Benefits TOOLSLIFE ESTATE RESERVED .

30. TOOLSLIFE ESTATE RESERVED WHAT IS IT? • Donor transfers title to property to charity, reserving a “life estate”. • Removes property from donor’s estate. • A Life Estate reserves the legal right for the donor to use the property for his/her benefit during life. • After the donor’s death, the charity takes possession of the property. .

31. TOOLSLIFE ESTATE RESERVED TARGET AUDIENCE • Seeking to make a gift of home, recreational property or farm while continuing lifetime use of property. • Seeking an immediate charitable deduction for a portion of the appraised value. • Want property removed from estate. .

32. Income Tax Deduction Reduction of Estate Asset Sold Tax Free Income for Life TOOLSCHARITABLE REMAINDER TRUST .

33. TOOLSCHARITABLE REMAINDER TRUST • A separate legal entity. • Subject to state and federal law. • Created by written agreement. • Irrevocable. .

34. TOOLSCHARITABLE TRUST TARGET AUDIENCE • Annuity Trust: • Older adults (70+) seeking fixed income. • Fiscally conservative clients. • Want to benefit two generations. • Unitrust: • Younger adults (50+) who can withstand market fluctuations. • Those who wish to give real estate. .

35. Income Tax Benefits TOOLSGIFT ANNUITY .

36. TOOLSGIFT ANNUITY • Written agreement between donor and charity. • Donor makes a gift and, in return, charity promises to pay annuity for life. • Assets of cash and/or publicly traded securities and mutual funds. • Annuity payments for one or two lives. • Income can be deferred. .

37. Ages Gift Annuity Rates 60 5.7% 75 7.1% 80 8.0% 90andover 11.3% 75,77 6.4% 80,83 7.2% TOOLSGIFT ANNUITY Sample Rates – American Council on Gift Annuities .

38. TOOLSGIFT ANNUITY - IMMEDIATE TARGET AUDIENCE • People 70 years and older. • People who already have a gift annuity. • People who have an annuity trust. • Older individuals with primarily fixed-income investments and/or cash equivalents. .

39. TOOLSGIFT ANNUITY - IMMEDIATE DONOR • Arizona man, age 81. GOAL • Wanted to increase his income and benefit charity. SOLUTION • Made a gift of $10,000 to the LCF for a gift annuity. • Received a charitable deduction of $5,047. • Donor receives $830/year for life (8.3%) • $562 of each annual payment is tax free. • At death, remainder will become a Donor Advised Fund. .

40. TOOLSGIFT ANNUITY - DEFERRED TARGET AUDIENCE • People who want to establish a supplemental retirement plan. • Retired individuals who want a deduction now, but don’t need payments. • Young donors or annuitants. .

41. TOOLSGIFT ANNUITY - DEFERRED DONORS • Couple, ages 48 and 52. GOAL • Wanted to increase retirement income and benefit charity. SOLUTION • Made a gift of $50,000 stock ($25,000 cost basis) to the LCF for a deferred gift annuity. • Donors receive a charitable deduction of $11,985.50 in 2005. • Donors receive $4,250.00/year for life (8.5%) beginning in 2015. • $637.50 of each annual payment is tax free. • At death, gift will become a Donor Advised Fund. .

42. BREAKING ONTO THE PLANNED GIVING SCENE Resources & Continuing Education .

43. RESOURCESProfessional Associations • Minnesota Planned Giving Council • http://www.mnpgc.org/ • Breakfast educational meetings • Annual Conference (Nov 7-8, 2007) • National Committee on Planned Giving • http://www.ncpg.org/ • Annual Conference • PALS (jobs in planned giving) • http://www.ncpg.org/pals/?section=11 .

44. RESOURCESResearch • Planned Giving Design Center - FREE • https://www.pgdc.com • Articles on every planned giving topic. • Calculators for GAs, CRTs, and CLTs. • Mailed and e-Newsletters to keep you up-to-date on charitable legislation and new topics. .

45. RESOURCESResearch • Crescendo Interactive – Gift Law - FREE • http://www.giftlaw.com/ • MN Medical Foundation Newsletters - FREE • http://www.rrnew.com/mmf/free_publications.htm • Lutheran Community Foundation - FREE • http://www.thelcf.org/givingtool - Giving Options Tool • Gift Calculators .

46. In Closing….Interesting Statistics • 35% of CRTs creatd by those 54 years or younger. • 15% of all planned gifts are established by those 45 and younger. • Typical prospect has earned $15,000 - $150,000/year for life. • Average time for maturation of planned gift is 7-10 years – not much longer than most campaign pledge periods. .

47. In Closing….. QUESTIONS? COMMENTS? .

48. THANKS FOR COMING!CALL ME! E-MAIL ME! Dana J. Holt, J.D. Gift Planner, Lutheran Community Foundation 612-844-4192 dana.holt@TheLCF.org .