WESTERN REGIONAL PLANNED GIVING CONFERENCE Conference Primer May 27, 2015 Marian Finn, JD Kimberley Valentine, CSPG Suzanne Zolfo, CFRE

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1 WESTERN REGIONAL PLANNED GIVING CONFERENCE 2015 Conference Primer May 27, 2015 Marian Finn, JD Kimberley Valentine, CSPG Suzanne Zolfo, CFRE

2 What is Gift Planning? Gift Planning focuses primarily on planned gift fund raising which involves a continuous process of cultivation focused on raising ultimate gifts from individuals. Through planned gifts, donors can often make larger gifts than they believed possible. One thing that distinguishes a planned gift from others is that they are made with assets rather than income sources. Maximize philanthropy while minimizing taxes

3 Why is Gift Planning Important? Gift planning programs range from simple to robust, but not having a program is leaving significant money on the table. Maximizing philanthropy: Allows donors to be able to make larger gifts Allows larger pool of donors to make a significant gift Can become one of the largest revenue sources within an organization s fundraising program In times of economic downturn, it is often the bequest program that sustains the organization when other donations fizzle

4 Why Do People Make Planned Gifts? Support Organization Create a legacy Provide for loved ones Promote philanthropy Capture tax incentives (reduce income taxes; avoid/minimize capital gain, gift, and estate taxes) Generate life income Non-cash assets

5 Your Role as a Fundraiser Identify: Discover prospects Cultivate: Build lasting relationships Solicit: Facilitate the giving process Steward: Create opportunity for donor appreciation and recognition Educate: Provide tools for appropriate giving strategies

6 IDENTIFY

7 The Gift Planning Prospect Who to Look For: Typical Planned Giving Prospects are 55+, have either no children and/or spouse, and/or a long history of giving. How to Look: Interdepartmental referrals Research & Prospect Management Self-Identification Marketing Phone solicitations

8 EDUCATE

9 The Basics Revocable: The donor may choose to revoke the gift. vs. Irrevocable: The gift is final (typically these gifts provide a charitable deduction or an income stream during the donor s lifetime).

10 Planned Giving Options Deferred Giving Outright Giving Bequest Charitable Remainder Trust (CRT) Charitable Gift Annuity (CGA) One Life/Two Life Deferred CGAs (DCGA) Flexible Deferred CGAs (FDCGA) Commuted CGAs Step CGAs Charitable Lead Trust (CLT) Retained Life Estate (RLE) Life Insurance (beneficiary) (LI) IRA Charitable Rollover Gift Real Estate Gift Outright Bargain Sales Mineral/Oil Rights Gift of Tangible Personal Property Business Interests Life Insurance (owner) (LI)

11 Funding Assets Cash Appreciated securities Stocks (Publicly Traded, Closely Held) Mutual Funds Real Estate Examples: second home, moving into a retirement home, rental property Personal Property Examples: artwork, cars, wine, stamp collection Life Insurance Policies Retirement Plans (IRA)

12 CULTIVATE

13 Donor Visits Ask open-ended conversations listen for cues. Ask the passion question: What would you like to accomplish with your money that would be the most meaningful to you? Be mindful of making assumptions Take someone with you on a first visit Meetings Coffee, Lunch, Drinks, Dinner, Charity Events, Home Visits

14 SOLICIT

15 Solicitation Protocol: The Four P Strategy People Property Priorities Plan

16 People Family members and other heirs Special Needs Advisors (Financial, Tax, Estate Planning Attorney)

17 Property Appreciated Securities Real Property Valued Artwork Intellectual Property

18 Priorities Current Income Taxes: Income, Capital Gains, Estate Retirement Philanthropy/Legacy

19 Plan Does the donor have a professional advisor? Is there an estate plan? When did the donor last update their estate and financial plan? Are there charitable provisions in the donor s estate plans?

20 GIFT VEHICLES Identify and educate to create the best plan for your donor prospects

21 Bequest Donors 1 Bequest Provision Estate Plans 2 Gift to charity Charity

22 Bequests Gift by Will or Living Trust Can Be: Fixed Amount/Percentage A Specific Asset Residue (or percentage) Contingent (e.g., only if my nephew predeceases me) Testamentary planned gift

23 Sample Bequest Language I give [CHARITY], a non-profit public benefit corporation or trust, located at Los Angeles, California, [insert here: a dollar amount; percentage [%] of estate, or description of the property you intend to bequeath] for its general purposes or for an agreed upon restricted purpose.

24 Bequests: Life Insurance Policy Logistics: Designate charity as a beneficiary (revocable). Designate charity as the owner and beneficiary (irrevocable). Benefits: Particularly useful if the original purpose for purchasing the policy is no longer relevant (e.g. child s college education, mortgage, funds to cover estate taxes, money for loved ones) Charitable deduction Gift Acceptance Policy: Non-standard gifts like life insurance may be accepted or not, depending on your gift acceptance policies.

25 Bequests: Retirement Plan Logistics: Donor completes the beneficiary form Benefits: Asset could be taxed twice (estate and income) if left to an individual other than a spouse Not necessary to meet with an attorney Easiest way to leave a bequest

26 Example: Retirement Plan Benefits

27 Bequests: Assets paid on death Logistics: Establish a simple account at a bank or trust company. Benefits: They're easy to create. There's no limit on how much money you can leave this way. Designating a beneficiary for a bank account costs nothing. It's easy for the beneficiary to claim the money after the original owner dies. Caveat: You can't name an alternate beneficiary.

28 Identifying the Bequest Donor Profile: 55 years old 2 college bound children Anticipate their estate to exceed the $5.34M* estate tax threshold Goal: To reduce estate and gift taxes To plan ahead and care for their family beyond their lifetimes To benefit the charity or charities they love

29 Charitable Remainder Unitrust Logistics: A gift to the charity in which the donor s funds are invested during their lifetime to generate fixed percentage payments to the beneficiary. Upon the donor s passing, the residual amount passes for use to the donor s charity Minimum funding amount is $100,000 Benefits: Trust may grow over time based on the market returns, increasing income payments. Because markets tend to rise over time, a unitrust can provide a hedge against inflation. Bypass capital gain initially (the unitrust is tax-exempt) and have 100% of the value of the assets be available for reinvestment.

30 Charitable Remainder Unitrust $300,000 1 Donors 2 5% Unitrust $15,000 (variable) 3 Income Tax Deduction: $101,289 4 Total Remainder Amount to Charity: $628,133 Beneficiaries Total Payments: $546,889 Charity

31 Identifying the CRT Donor Profile: Age 65 2 children out of school 1 grandchild Total net worth of $7M Goals: Income, but concerned with inflation Estate tax deductions Reduce capital gains liability on their highly appreciated stock

32 Charitable Gift Annuities Definition: A gift to the charity in which the donor s funds are invested during their lifetime to generate fixed payments to the annuitant. Upon the donor s passing, the residual amount passes for use to the Donor s charity Minimum funding amount is $10,000 Age ACGA Rate Age (Two Lives) ACGA Rate % 70/70 4.6% % 75/75 5.0% % 80/80 5.7% % 85/85 6.7%

33 Charitable Gift Annuity Donors $50, Income Tax Deduction: $21, % Gift Annuity 4 Immediate Fixed Annual Payments of $2,850 Residuum to Charity: $71,824 3 Total Annuitant Payments: $34,200 Charity

34 Identifying the CGA Donor Profile: 80 years old 2 middle aged children 3 grandchildren Retired Travelers Inherited Coca-Cola stock in 1952 at 50 cents per share; the stock is now valued at over $42 per share Goals: Supplement retirement income for travelling and health care expenses Tax-free income Tax deduction

35 Charitable Lead Trust Logistics: CLT funds are invested to provide income. CLT payments go to the charity in the form of annual payments to a designated purpose. Upon termination of the CLT, the remainder transfers back to the donor or to the donor s heirs. Benefits: Alternate, tax-efficient way to provide inheritance for children Ideal for reducing transfer taxes and estate taxes See philanthropy in motion today Options: Annuity Trust: payment amount set Unitrust: payment amount variable based on market conditions

36 Charitable Lead Annuity Trust Donors $700, Gift Tax Deduction: $443,065 5% Lead Trust 4 Annual payments of $35,000 for 15 years Remainder: $1,270,006 3 Charity Beneficiary Gift to Charity: $525,000 Heirs

37 Identifying the CLT Donor Profile: Age 75 Total Net worth of $10M 2 adult children 4 grandchildren Goals: To provide for children and grandchildren To reduce estate taxes To see their philanthropy in motion today

38 Retained Life Estate Home valued at $1,500,000 1 Donors Ages 75, 80 Home to charity Retained Life Estate 3 Charity Income tax deduction: $905,747 Gains not taxed: $1,000,000 Beneficiary Gift to Charity: $1,500,000

39 Identifying the Life Estate Donor Profile: Ages 75 and 80 Primary asset in real estate Total Net worth of $10M Children not interested in inheriting and maintaining property Goals: To establish gift now and return use of home or vacation home To reduce estate taxes To see their philanthropy in motion today

40 Outright gifts that sometimes look like planned gifts (or fall in our laps just because ) IRA Charitable Rollover Gift Real Estate Gift Mineral Rights/Oil Rights Gift of Tangible Personal Property Business Interests Life Insurance (owner)

41 STEWARD

42 Stewardship Recognition of a gift takes many forms How you, as the charity, recognize your donors can be almost as important to the ongoing relationship as the gift itself Donor wall or plaques Articles Newsletters Notes Visits Celebrations Small gifts Special events Introductions to the people who made the relationship important to your donor curators, staff, principal stakeholders

43 MARKETING

44 Marketing Donor Education Benefits of specific planned gift or legislation Self Identification Solicitation Emphasize deferred giving as a way to leave behind a legacy A good marketing blast carefully embeds a solicitation within its broader theme of donor legacy/education. Marketing is an essential component to gift planning.

45 Marketing Ideas Taglines Response Boxes Websites Social Media Newsletters Seminars Brochures People Recognition Programs

46 Marketing Reach Marketing Pieces Distribution Frequency Reach Newsletter Published 3 times a year ~5000 per issue Magazine Published 2 times a year Postcards 3/4 times a year ~6000 Facebook Updates Monthly Reunion Marketing Coordinated with AF ~800 Portfolio Appraisals Quarterly + Annual Summary 38 Stewardship Events 2 times a year 545

47 Website

48 How Do We Do It? Program Division of Labor Director Strategic Vision Liaison to legal & financial advisors Administrative Coordinator Donor relations Gift tracking Budget Business Office Event Planning Estates Asset Manager Legacy Society Stewardship Proposals Fundraising Metrics Front Line Fundraising Prospects Legislation Faculty Marketing Reunion Communications Assistant Director

49 RESOURCES American Council on Gift Annuities ACGA-web.org Planned Giving Design Center PGDC.com Partnership for Philanthropic Planning of Greater Los Angeles PPP-LA.org Software providers Asset management administrators

50 RELEVANT CONFERENCE SESSIONS CRT: Allyson Simpson Friday: 8:00-9:15am CGA: Ray Rotolo Thursday: 10:15 11:30am Planned Giving Marketing : Ray Watts & Patience Boudreaux Thursday: 10:15 11:30am Blended gifts: Marian Finn and Kristen Dugdale Thursday: 2:00 3:15pm Social Technology and Planned Giving: Erica Chase Thursday: 3:45 5:00pm