PG Calc | Invested in your mission
Planned Gifts that Appeal to Younger Donors
Jeff Lydenberg
Vice President
PG Calc
617-497-4997
jeff@pgcalc.com
©2013 PG Calc
Planned Gifts That Appeal to Younger Donors
PG Calc | Invested in your mission
Agenda
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Defining the market
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Factors motivating younger donors
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Engaging the younger donor
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Planned gifts appropriate for the younger
donor
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Case studies
PG Calc | Invested in your mission
Defining the market
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Those under age 70 are “younger”
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More time
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Same factors motivate young and old
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Tax savings affect amount, how, and when
they give
Planned Gifts That Appeal to Younger Donors
PG Calc | Invested in your mission
Capital Gain Taxes
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Capital gains tax rate up from 15% to 20% for taxpayers
with AGI’s over:
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Married filing jointly $450,000
Single $400,000
Head of Household $425,000
3.8% Medicare surtax on net investment
income for taxpayers:
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Married filing jointly $250,000
Married filing separately $125,000
Head of households and single taxpayers $200,000
Planned Gifts That Appeal to Younger Donors
PG Calc | Invested in your mission
Capital Gain Taxes
• George and Ann, Married filing jointly
• $450,000 wage income
• $250,000 stock with $50,000 basis
– $200,000 of capital gain income
• 20% capital gain tax rate + 3.8% surtax
• $47,600 capital gain tax due
Planned Gifts That Appeal to Younger Donors
PG Calc | Invested in your mission
Capital Gain Taxes
• Bill and Susan, married filing jointly
• $200,000 wage income + $50,000 dividend income
• 28% tax on wages, 15% on dividends
• $1,000,000 asset, $100,000 basis
– $200,000 of gain taxed at 15%
– $700,000 of gain taxed at 20%
– $900,000 of gain taxed at 3.8%
• Total tax of $204,200
Planned Gifts That Appeal to Younger Donors
PG Calc | Invested in your mission
Qualified plan limits
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Limits on tax-deferred savings
– $17,500 for most in 2013
– $5,500 catch-up if 50 or older
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Buskens
– $400,000 family income
– $46,000 to qualified plans
– Just over 10% tax-deferred savings
Planned Gifts That Appeal to Younger Donors
PG Calc | Invested in your mission
Engaging younger donors
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Can’t “afford” planned giving
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Meet current commitments & make gift
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Extend marketing
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Targeted messaging
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Electronic communication
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Venues for younger prospects
Planned Gifts That Appeal to Younger Donors
PG Calc | Invested in your mission
Bequests
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Flexible
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Both modest and wealthy can participate
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Donor retains control
Planned Gifts That Appeal to Younger Donors
PG Calc | Invested in your mission
Bequest Prospect Profile
• Two primary age groups:
– Late 40s to late 50s, and 65-78
• Loyal donors, lower amounts
• Mid-to-upper middle income
• Charitably inclined
• Volunteers
Planned Gifts That Appeal to Younger Donors
PG Calc | Invested in your mission
Forms of Bequests
• Pecuniary
– A named dollar amount
• Specific
– A gift of specific property
• Residuary
– A gift of the remainder after satisfying pecuniary and
specific bequests
• Contingent
– Only takes affect on certain conditions
Planned Gifts That Appeal to Younger Donors
PG Calc | Invested in your mission
Bequest Substitutes
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Payable on death accounts
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Insurance product designations
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Savings bonds
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IRAs, qualified plans
Planned Gifts That Appeal to Younger Donors
PG Calc | Invested in your mission
Supplementing retirement income
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Avoid traditional life income gifts
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Deferred annuities
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Laddered annuities
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Flexible annuities
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Commuted annuities
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Flip unitrust
Planned Gifts That Appeal to Younger Donors
PG Calc | Invested in your mission
Charitable gift annuities
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Immediate payment annuities
– Not appropriate for those under 60
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Deferred annuities
– Appropriate for younger donors
– Supplemental pension for mid-career
professionals
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ACGA rates effective 1/1/2012
Planned Gifts That Appeal to Younger Donors
PG Calc | Invested in your mission
Charitable Remainder Trusts
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Financially savvy donor
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Willing to take risk
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Experienced investor
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Annuity trusts
– Gift annuity v. Annuity trust
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Unitrusts
– Regular v. Flip unitrusts
Planned Gifts That Appeal to Younger Donors
PG Calc | Invested in your mission
Pooled Income Fund
• Trust maintained by sponsoring charity
• Pays net income to beneficiary
• Remainder to sponsoring charity
• Disfavored due to interest rate climate
Planned Gifts That Appeal to Younger Donors
PG Calc | Invested in your mission
Build-up deferred gift annuity
Mr. and Mrs. Denton
– Ages 56 & 59
– $20,000 a year for 8 years to create 8 DGAs
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Laddered start dates
– 5.2% for annuity starting in 2020
– 5.7% for annuity starting in 2026
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$140,000 in contributions
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$176,220 income to Denton's
Planned Gifts That Appeal to Younger Donors
PG Calc | Invested in your mission
Flexible deferred annuity
Mr. Jasper
– Age 56
– $100,000 stock with $60,000 basis
– Choice of start dates from 2022 to 2032
• $6,200 annuity in 2022 at age 65
• $10,600 annuity in 2032 at age 75
– Longer he waits, higher the payment
– Lowest deduction
– Flexibility to choose first payment date
Planned Gifts That Appeal to Younger Donors
PG Calc | Invested in your mission
Commuted payment gift annuity
Mr. Thomas
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Age 58
Retiring at age 59 ½
Wants to preserve his IRA until forced to withdraw
Needs $70,000 a year for 10 years
Funds with $670,678 in 2013
Pays $70,000 annuity until age 70 ½
Remainder to charity at 70 ½
• $212,000 to charity at 5% return
• $434,000 to charity at 8% return
Planned Gifts That Appeal to Younger Donors
PG Calc | Invested in your mission
Retirement Flip unitrust
Mr. and Mrs. Binstock
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Both age 55
5% CRUT with flip provision, flips at age 65
Contribute $50,000 a year to CRUT for 10 years
Beginning at age 65 $41,063 income
Ten years after flip $55,185 income (assumes 8%!)
$1,431,027 total before-tax income
$1,669,450 for charity
Planned Gifts That Appeal to Younger Donors
PG Calc | Invested in your mission
Life Income for Another
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Parent
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Employee
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Family friend
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Gift annuity v. CRT
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Capital gain tax issue with CGA
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Gift tax issues
Planned Gifts That Appeal to Younger Donors
PG Calc | Invested in your mission
Life Income for Another
Mr. Gomez
– Age 55, 33% tax bracket
– Must earn $746 to give Mom $500
– Gift annuity for Mom paying 6.8%, partially tax-free
• Funded with $300,000 stock with $70,000 basis ($230,000 gain)
– Some capital gain tax due at funding
• Reduced capital gain income- $122,606 income
• Offset by deduction- $140,079
– Gift tax issue
Planned Gifts That Appeal to Younger Donors
PG Calc | Invested in your mission
Reducing current taxes - Lead trust
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Only 6,617 charitable lead trust tax returns filed
with IRS in 2011
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Pays income first to charity
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Remainder to heirs
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Generates gift/estate tax deduction not income
tax deduction
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Primarily a tool for the ultra-wealthy
Planned Gifts That Appeal to Younger Donors
PG Calc | Invested in your mission
Reducing current taxes - Lead trust
Mr. and Mrs. Thomas
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Both ages 55
Children 29 and 27
$4,000,000 to 5.5416% 20 year term CLAT
100% gift tax deduction
$4,443,280 to charity over 20 years
$8,491,008 to children in 20 years now ages 49 and 47
• Assuming 8% return
Planned Gifts That Appeal to Younger Donors
PG Calc | Invested in your mission
Bargain Sale
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Sell property to charity at reduced price
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Deduction for gift portion
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Gain on gift portion forgiven
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Gain on sale portion reportable
Planned Gifts That Appeal to Younger Donors
PG Calc | Invested in your mission
Case Study: Bargain Sale
Ms. Sawyer
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Age 52
Married filing jointly
35% income tax bracket
18.8% capital gain tax bracket
Rental property worth $575,000
$350,000 basis; no mortgage
Willing to make a gift
Wants a zero tax solution
Planned Gifts That Appeal to Younger Donors
PG Calc | Invested in your mission
Case Study: Bargain Sale
Options
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Sell for $575,000
– $42,300 capital gains tax
– Net to Ms Sawyer $532,700
– No gift
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Sell to charity for $475,133
– Charitable deduction of $99,867 saves $34,953
– Capital gains tax due of $34,953
– Net proceeds to Ms Sawyer of $475,133
Planned Gifts That Appeal to Younger Donors
PG Calc | Invested in your mission
Life Insurance
• Gift of paid-up policy
• Gift of policy with premiums due
• Gift of new policy
• Charity named as beneficiary, not owner
Planned Gifts That Appeal to Younger Donors
PG Calc | Invested in your mission
Questions and Answers
Planned Gifts That Appeal to Younger Donors