~ An Insider’s Perspective On Marketing Insurance and Trusts to Charity ~

1. ~ An Insider’s Perspective On Marketing Insurance and Trusts to Charity ~ Henry T. Rubin, JD Executive Director, Major and Planned Gifts Albert Einstein College of Medicine 212 917 710-2098 hrubin@yu.edu

2. Operating Income: steady, sustainable sources of annual revenue What 3 Things Do Charities Really Want? Operating Income: steady, sustainable sources of annual revenue Endowments: to replacelost donor annual revenue for perpetuity

3. What Do Major Donors Want Most? • To make an “Impact” Gift • To be Seen as Leaders • To Reduce Taxes • To Help Family • To Establish Legacy …..the Common Denominator?? Quid pro quo Psychological, social, emotional, esteem and control

4. ~ Tips to sell to charity ~ • Sell cash, not deferred goods. • Make sure your deferred gift will be additive with cash. • Don’t go through the advancement office or even the President’s office. • Go through a major board member – and get him to lead the board by example! • Pay to play to gain credibility • Join a committee • Return part of the premium • Don’t get too sophisticated so no one understands you • Make certain to your advancement officer and donor that your vehicle will not cannibalize the donor’s annual gift.

5. Why Insurance is “Such as Awful Charitable Gift” and other Myths • “It will cannibalize the donor’s annual gift”. • “We need current cash”. • “We’ll have to wait 20 years for the money”. • “The Board hates it”. • “We just don’t do it.”

6. Destroy the Myths!Show how trusts, insurance and annuities provide cash to charities

8. The Charitable Lead Trust: Apply Historically Low Interest Rates to Dramatically Reduce Estate Tax! Estate Tax Saved: Assumptions: $10,000,000 Lead Annuity Trust 21 Years, 3% annually to charity 2 % Federal 7520 Rate as of February 2015

9. The Charitable Remainder Trust LEVERAGE ASSETS THAT WOULD HAVE BEEN TAXED TO BUILD CAPITAL FOR YOUR FAMILY (Up to 23% leverage on capital gains; up to 80% leverage on pensions) KEEP SELL CRT $100,000 -0- $100,000 $100,000 $100,000 - 20,000 -0- $80,000 $100,000 7% Annual Income $70,000 Income Tax Deduction: $400,000 0 Annual Income 5% Annual Income $40,000 Estate tax (Double Tax) Estate tax Avoid estate tax Gift to Charity

10. Problem: Donor seeking security is invested in CDs or Bank accounts yielding almost nothing Solution: $100,000 6% CRT $100,000 Wurzweiler Endowment! $6,000 Annual Income $2,000 Personal Use $2,000 Annual Wurzweiler Scholarship $2,000 Insurance

11. The “Spigot” TrustHave the two life charitable remainder trust purchase insurance on one spouse, or an annuity (net income or nimcrut)

12. Bad for Charities…Good for You • Charitable gift annuities simply can’t compete with SPIAS, noncharitable indexed, deferred or lifetime annuities • Many charities are somehow reluctant to offer higher yields in charitable trusts • How to sell your annuity while becoming the charity’s friend: • Name the charity as successor or contingent beneficiary • In lieu of a lower paying charitable gift annuity, contribute cash “spread” from SPIA. • INDEXED ANNUITIES/QLACs/LTCI – will all help donor make annual gifts easier.

13. The Testamentary Pension Charitable Remainder Trust LEVERAGE ASSETS THAT WOULD HAVE BEEN TAXED TO MAKE YOUR FAMILY MONEY (Up to 80% Leverage) KEEP LUMP SUM CRT $100,000 -0- $100,000 $100,000 $100,000 - 80,000 -0- $20,000 $100,000 7% Annual Income $7,000 Income and Possible Estate Tax Deduction: $80,000 0 Annual Income 5% Annual Income $1,000 Estate tax (Double Tax) Estate tax Avoid estate tax Gift to YU

15. Marketing Insurance and Trusts to Increase Current Gifts • Accelerate bequest into insurance and current cash and perhaps double gift. • Use a CRT to generate more annual cash to donor AND charity. • Use as a legacy gift to sustain annual gift. • Use as a stretch gift. • Promote “virtual endowments” with cash and insurance. • Lead Trust • Instead of gift annuity, obtain SPIA, giving a part of additional income to charity. • Make children “richer” through insurance, SPIAs, indexed annuities, trusts, “charitable Roth arbitragaes, and “supplemental pensions” so you can give more to charity.

16. “”I WANT TO BE A BENEFACTOR!” (But I don’t have the money right now) Using Insurance to Develop “Stretch” Gifts • Insurance is a way to allow your donors to “stretch” their gifts to meet their charitable goals. • For example, we were recently presented with a supporter who had gifted/pledged a cumulative $600,000, but lacked the additional $400,000 to become a Benefactor. • How Do We Make Him a Benefactor??

17. A Pledge of Insurance • We enabled him to be recognized as a $1,000,000 Benefactor by pledging just $35,000 in “plus” monies every year. How? • The $35,000 would be used to purchase a $1,000,000 insurance policy for YU. Since the supporter is over 60 years old, he and the Advancement Officer would get credit for the present value of this gift of insurance – approximately $400,000. • The $35,000 a year “buys” the donor a “gift” of $400,000 – and opens the door up for him to be considered a Benefactor.

18. The following circumstances are most favorable to a “stretch”gift: • Potential Benefactors who have contributed over $500,000; • Scholarship donors who would like to perpetualize their gift with a legacy endowment; • Donors who have established programs they would like to see endowed in perpetuity; • Aspiring leaders or board members who cannot contribute as much as they wish: • “Impact” donors and alums who may enjoy broadened recognition possibilities: • Professionals such as physicians and attorneys having a secure income but limited capital: • Donors with illiquid assets such as real estate.

19. How to Give $2,000,000to Children and Charity ~ForAlmostNothing~

20. Your Pension- or- Good Money vs. Bad Money~Why the Best Money When You’re Working, Becomes the Worst Money when you Retire ~

21. The Zero Plan The Hero Plan

22. Thank you

23. Misc. Slides

24. The Charitable Lead Trust a/k/a, ~ the Jackie Kennedy Trust ~Transfer up to $20,000,000 to family… and $6,300,000 to your Foundation…for No Estate Tax at all.

25. The Jackie Kennedy Estate Plan Jackie $40,000,000 Friends • $600,000 among maids and butlers • Sculpture to Maurice Templesman; artwork to friends • Hammersmith Farm to Step-Brother • $500,000 for each child of Lee Radziwill $10,000,000 John Jr. and Caroline • New York Apartment • Art • Personal effects $10,000,000 Charitable Lead Trust (residual estate) • Income to Charity • Principal to Grandchildren $20,000,000 55% Tax 55% Tax 2% Tax

26. The Family Limited Partnership Lead Trust The “Double Discount Lead Trust”

28. ~ More Techniques to Build Capital forFamily and Charity~ • The Leveraged Charitable Remainder Trust • Use CRT to potentially generate 500% more income; invest additional income in strategic insurance to generate potentially 500% more capital! • The Lead Trust Income Tax Arbitrage • Use a “defective lead trust” to get a 40% income deduction on money taxed at less than 15% • Zero Tax Planning • Move your estate from children and the IRS to children and charity • Using Charitable Trusts As Tax Favored “Super Supplemental Retirement Plans”