Charitable Gifts II: Deferred Giving Techniques

Transcription

1 Charitable Gifts II: Deferred Giving Techniques Susan Berkman, J.D. Assistant Vice President, Gift Planning California State University, Long Beach This information is for educational purposes only and does not constitute legal or estate planning advice or make you my client. Now the State Bar is happy. AGENDA The most common gifts Life Income Gifts AKA: split interest gifts AKA: CRT, CGA, CLT 1

2 What are the Most Common Deferred Gifts? The Most Common Deferred Gifts? BEQUESTS A bequest is a gift from a will or living trust 2

3 Wills & Trusts GLOSSARY REVIEW Executor(trix) / Personal Administrator(trix) / Personal Representative Decedent Probate Beneficiaries Heirs Guardian Conservator Bequest Devise Distribution If you have a will you are TESTATE CSULB Gift Planning ~ ~ 5 Intestacy = Without a Will $30 million estate 3

4 If Prince Died in California. YOU (the decedent) If no one on left, then to If no one on left, then to Spouse, if no kids If kids, 50% to spouse 50% to kids If no spouse, to kids split evenly Parents Siblings Nieces Nephews Grandparents Aunts Uncles Cousins If there is no living relative, the estate goes to the State of California (Legal term: Escheat ) If no spouse, but deceased kids, to grandkids ANY living relative TYPES OF BEQUESTS 4

5 Types of Bequests Specific Amount or Property Percentage of Estate Residual Contingency / Precatory These apply to both wills and living trusts 9 Bequest Donor Profile EXPERTS DIFFER!!! Some say it is a donor who gives small gifts regularly, usually 10+ years in a row. 5

6 Bequest Donor Profile Some say it is a donor who is age 70+ making their final estate plan Others say it is a donor who is age 40+ making their first estate plan Bequest Donor Profile Sometimes the person had little or no contact until the gift arrived. 6

7 Bequest Donor Profile THE BOTTOM LINE: NOT Wills v. Trusts WILLS Transfers assets upon death Names person to close estate Gives burial instructions TRUSTS Transfers assets upon death Names person to close estate Gives burial instructions Takes effect only at death Takes effect NOW gives trustee fiscal & personal management powers Assets stay in your name Administration supervised by Probate Court Assets must be transferred to the trust No supervision of trustee s administration. 14 7

8 WHAT is the OUTCOME? Your Testament Explains your gifts or says why you gave what you did Unlikely to be part of a will or trust these days. If not in your file, obtain these during donor s lifetime: Letters of Intent/Gift Agreements for charities Legacy Letter or Ethical Will that may include Personal or video letters to each heir or beneficiary including charities Values statements Bio or statement of key life events Why the charity is so important 16 8

9 POST MORTEM TAXATION (quick refresher) Estate Tax ~ $5.5 million excluded per person Portability = ~ $11 million excluded Gift Tax / other transfer taxes (Generation Skipping or GST) Income Tax Capital Gains Tax Capital Gains Tax Refresher CAPITAL GAINS FAIR MARKET VALUE (FMV): What it s worth now COST BASIS: What you paid more than 1 year ago 9

10 Various types of trusts CSULB Gift Planning ~ ~ 19 TRUST DEFINITION An entity that holds assets for the benefit of one or more named persons or charities and managed by a trustee Trustee Trustor (aka Grantor, Trustor) Trust Beneficiaries/Heirs 20 10

11 THE TRUST Alegal entity that holds the assets inside its walls. 21 SPLIT INTEREST GIFTS Type A Trustee manages & makes payments then distributions IRREVOCABLY gives an asset Charity gets remainder Gets income for life 11

12 Charitable Remainder Trust (CRT) Charity gets remainder REAL ESTATE or other APPRECIATED assets Donor and/or another gets life income 23 CRT FAST FACTS Income rate negotiated at time of formation Income likely to be taxable at one of 4 tiers May save on capital gains Can be testamentary (created by will or trust) Can be ANNUITY trust (fixed income) or UNITRUST (set percentage of annual value of trust) 12

13 CRT DONOR PROFILE Owns appreciated property Often is rental real estate and tired of being a landlord Can be appreciate securities or any other asset that has gone up in value No heirs or heirs get other assets Wants life income or wants someone else to get life income Best funding: $1 million or more Can be as lower but costs may exceed benefit Charitable Gift Annuity (CGA) LIQUID asset CGA / CONTRACT Charity gets remainder Donor/another gets FIXED income for life 13

14 CGA FAST FACTS Provides FIXED income for life based on age of donor at the time CGA is formed Best rate for fixed income occurs when donor is age 70+ Need a license to sell* and it is formed by contract A portion of income may be tax free for first period of years CGA DONOR PROFILE Older donor (65 70+) Wants fixed income or increased income Has liquid assets to form the CGA Minimum to form may be as low as $5,000. Each program sets its own minimum amount and age. If your nonprofit does not have a CGA license, check with the California Community Foundation in Los Angeles for assistance. 14

15 Split Interest Trust Type B: CHARITABLE LEAD TRUST (CLT) Heirs get remainder at end of term CHARITY gets income for TERM OF YEARS or life of donor & spouse CLT FAST FACTS Charitable Lead ANNUITY Trust is most common, but can be UNITRUST Children or grandchildren most often receive remainder Remainder transfers to heirs without transfer taxes Reduced or eliminated capital gains tax and charitable deduction upon creation 15

16 CLT DONOR PROFILE Large estate or windfall Transfer tax concerns Defer gifts to young children or grandchildren Pledge fulfillment RETAINED LIFE ESTATE Donor deeds property to charity then enters in agreement to maintain & live in house for life. 16

17 FINAL NOTE STEWARDSHIP! STEWARDSHIP! STEWARDSHIP! Gifts may not come for 20+ years Be ready for long term recognition & stewardship. It is easy for donors to change their minds if they are not part of the family Planned Giving donors May start or increase annual gifts May decide to do a small major or blended gift to see the result during their lives on a smaller scale Can refer to other donors Will advocate for your cause Creatively Steward Think beyond a Heritage or Legacy Society These donors may be interested in what other like minded supporters are doing Recognize those who want recognition; give options for anonymity Include visits in home and at site from a variety of people, not just planned giving officer Invite to special events Create involvement/volunteer opportunities Be creative! 17

18 Meet Carolyn and Jim Ages 75 & 80 Live in Poway Have children & grandchildren They own rental property in Irvine Cost basis: $40,000 FMV: $1,300,000 Their concerns: Capital gains tax They need the rental income They are tired of being landlords Kids do not want the property What are some solutions do you suggest? 18

19 Meet Carolyn and Jim Ages 75 & 80 Live in Poway Have children & grandchildren They give annually Want to stay in home for rest of life. Have savings to pay for in home care They are afraid to make a major gift for that reason Children do not want the house They love Your Agency and wish they could do more for your current fundraising campaign What are some solutions do you suggest? MEET ANNE SMITH AGE: 80 Lives in Laguna Woods Widow, no children Makes annual gifts of $200 $500 per year Has been giving annually for 20 years You visited her and she shares Her cash gifts are from a stock portfolio her husband managed while he was alive. She doesn t understand what he did She already included your agency in her will She would like to do more for your agency What are some solutions you might suggest? 19

20 MEET ANNE SMITH AGE: 80 Lives in Laguna Woods Widow, no children Makes annual gifts of $200 $500 per year Has been giving annually for 20 years You visited her and she shares Her cash gifts are from a stock portfolio her husband managed while he was alive. She doesn t understand what he did She already included your agency in her will She would like to do more for your agency, but needs some of the income What are some solutions do you suggest? Meet Chris and Christie Ages 63 and 65 Live in Newport Beach Have 1 son, recently deceased 1 granddaughter age 5 Total estate = $7.5 million, mostly stock Want to give to Your Charity and My Charity, $250,000 each in estate Want majority to go to granddaughter to help her through school and to buy first home Concerns: Transfer taxes Young age of granddaughter Management of so much money What solutions do you suggest? 20

21 Meet Chris and Christie Ages 63 and 65 Live in Newport Beach Have 1 son, recently deceased 1 granddaughter age 5 Total estate = $7.5 million, mostly stock Want to give to Your Charity and My Charity, $250,000 each in estate Want majority to go to granddaughter to help her through school and to buy first home Concerns: Transfer taxes Young age of granddaughter Management of so much money Long term care for themselves What solutions do you suggest? Questions? Susan Berkman, J.D. Assistant Vice President, Gift Planning California State University, Long Beach (562) Susan.Berkman@csulb.edu 21

22 PLANNED GIVING Education Resources Planned Giving Roundtable of Orange County: pgrtoc.org American Council on Gift Annuities: ACGA web.org Planned Giving Design Center: PGDC.com Planned Giving Today (a monthly newsletter about planned giving): liebertpub.com/overview/planned giving today/235/ Planned Giving Vendors for Marketing & Software The vendors provide educational opportunities as well as materials and there are others besides those named here. This list is for educational purposes only does not imply an endorsement by PGRT OC or that these vendors can meet your specific needs. Crescendo Interactive: crescendointeractive.com PG Calc: pgcalc.com Stelter: stelter.com Sharpe: sharpenet.com R&R Newkirk: rrnewkirk.com Pentera: pentera.com Plannedgiving.com (formerly Virtual Giving) 22