Tax Relief and Giving Your Way

Transcription

1 Tax Relief and Giving Your Way The Donor Advised Fund Presented by: Scott Talbot, CFP, CAP Director of Planned Giving The Great Commission Foundation & Michael Occhipinti, MBT Gift Planning Advisor Wycliffe Foundation

2 Tax Relief and Giving Your Way The Donor Advised Fund Find all our prior webinar videos here:

3 Tax Relief and Giving Your Way The Donor Advised Fund Presented by: Scott Talbot, CFP, CAP Director of Planned Giving The Great Commission Foundation & Michael Occhipinti, MBT Gift Planning Advisor Wycliffe Foundation

4 What We Will Cover Private Foundation Background What a DAF is and How It Works Benefits of a DAF Who Should Consider DAF Case Studies How to Set Up a DAF Questions

5 Private Foundations What are they? How do they work? Why do people create them? Benefits and Drawbacks of Private Foundations Enter the Donor Advised Fund

6 DAF: What is it? Charitable giving fund that is a separately administered fund by a public non-profit charity into which donors make irrevocable, taxdeductible contributions and from which they make grants to various charities. First pioneered in 1931 Works like a Private Foundation Gaining popularity Fastest-growing charitable giving vehicle in the U.S. More than 200,000 DAF s holding $45 billion $13.7 billion contributed to DAFs in 2012!

7 How does a Donor Advised Fund Work? Jones Donor Advised Fund 4 1. Open account 2. Gift cash or assets 3. Receive tax deduction 4. Grant gifts

8 PF vs. DAF Private Foundation Donor Advised Fund AGI % Limit Cash 30% 50% AGI % Limit Stock, Asset 20% 30% Valuation Pvt Stock, RE Cost Basis Fair Market Value Excise Tax Investment YES 1% to 2% NO Income Self-Dealing Rules YES NO Business Holdings Restrictions YES NO Separate Tax Return YES NO Tax Returns Open to Public YES NO Time Required to Establish Weeks or Months One Day Startup Costs Substantial Fees ($Thousands) None Privacy NO YES Administration Significant Handled by Charity Board Required Not Required Minimum Contribution $5MM Recommended $5k to $10k

9 Applications Tax Management Tool Anonymous Giving Tool Large Gifts to Multiple Ministries Estate Bequest Tool Family Legacy Tool

10 Tax Management Tool Sam Sorenson Closed a deal that put his income well above his lifestyle needs Needed income tax deductions Very involved in giving to a number of charities Wanted to make a meaningful gift to one or more However he needed time to meet with the charities to discuss and consider projects.

11 Tax Management Tool Solution: Established the Sorenson Giving Fund using a DAF. Contributed some of his additional income to the fund. This allowed him a tax deduction for the current year and Time and flexibility needed to make wise stewardship decisions.

12 Tax Management Tool Paul and Linda Anderson are just a few years away from retirement. Paul is in sales, and he has received several large bonuses over the last few years based on his stellar sales record. Their income, especially with Paul's bonuses, puts them in a high tax bracket. It also provides them with extra money that they would like to use, in part, for investing in several worthy ministries. They realize that their income will drop significantly when they retire and, as a result, their discretionary income will decrease. They will also be in a lower tax bracket, which means their deductions will be worth less in terms of tax savings.

13 Tax Management Tool Solution: Paul and Linda decided to ramp up their giving for the remaining years before retirement and contribute most of this to their Donor Advised Fund. Because they are in a high tax bracket now, they want to take the deductions while they're more valuable and create greater tax savings. When they retire and their income and giving capacity drop, they plan to supplement donations from income with distributions from their Donor Advised Fund, thereby providing a level of consistency and enabling them to continue giving generously to the causes about which they care.

14 Anonymous Giving Tool Some would rather give anonymously for a number of reasons, such as: Prefer confidentiality Avoid recognition Minimize potential correspondence Limit future expectations Help someone needy without their knowing from whom the help came Between me and God Unlike a private foundation, grants from a DAF can be completely anonymous.

15 Large Gifts to Multiple Ministries Joe and Dawn Green Worked in real estate and acquired several rental properties over the years Would like to donate one of the properties to support their church and two of their favorite ministries Selling the property would trigger a 30% capital gains tax. What can they do?

16 Solution: Established the Green Family Fund using a DAF, and contributed the property to the fund. This gave them an income tax deduction and bypassed federal and state capital gains taxes. Once the property was sold, they were able to make grants from their DAF to their church and other ministries.

17 Estate Bequest Tool Most people make changes to their list of charitable beneficiaries over time. To go to an attorney and update their wills or trusts to reflect these changes involves additional Time Effort Expense However, if one names his DAF as his charitable beneficiary, when modifying the list of charitable beneficiaries, it is simply a matter of sending a new letter to the ministry with the changes all for the cost of a stamp.

18 Estate Bequest Tool John and Mary Washington have an estate worth $20 million. They believe that leaving to their five children a total inheritance equal to the estate tax exemptions (assumed to be $5 million each, or $10 million for John and Mary combined) is adequate. With the remaining $10 million, they would like to begin giving to charity both during their lifetimes and after death. They do not want to pay a dime of estate taxes which unfortunately is their current default plan. In evaluating their options, they seriously considered and liked the idea of a Private Family Foundation but were put off by the start-up costs, ongoing administrative and reporting requirements, regulatory requirements, etc. Isn t there a better and easier way?! they ask.

19 Solution: Create a Donor Advised Fund with the Washingtons and their grown children as the advisors. Gross Estate $20 million Gifts to DAF During Lifetime Income Tax Deductions Advising DAF During Lifetime on Grants and Investments Grants to Charities

20 Solution: Create a Donor Advised Fund with the Washingtons and their grown children as the advisors. Gross Estate $20 million Gifts to DAF at Death of Survivor Estate Tax Deduction Gifts to Children at death of the Survivor. $2 million each

21 Solution: Create a Donor Advised Fund with the Washingtons and their grown children as the advisors. Gross Estate $20 million Caveat: You don t need to be a multi-millionaire to use this DAF planning strategy. Grants to Charities Family Advises DAF on Grants Continuing the Family Legacy

22 Family Legacy Tool Passing on the Family s Values Penny is a generous widow who supports several local and international charities with both her treasure and her time. She is very concerned about the affluence that surrounds her three grandchildren and its affect on them (the disease otherwise known as affluenza ). How can she pass on to the grandchildren her philanthropic values and provide them with practical hands-on training? Solution: The Jones Family Intergenerational DAF.

23 Penny established and contributed seed money to a DAF. Every month, she and her three grandchildren get together for dinner, and Penny uses the time to discuss her philanthropic values, why she gives to certain charities, what she looks for in a charity, etc. The grandkids bring to the table and discuss various charitable causes to which they have an interest in sending grants (within grandma s guidelines of course!). Gifts to DAF During Lifetime Income Tax Deductions During Penny s lifetime and after her death, the family advises the DAF on grants.

24 Benefits of a DAF Immediate Income Tax Deduction Capital Gains Tax Bypass (Appreciated Assets) Simplicity Flexibility Privacy Simple Receipting Legacy Planning Management of Tax Deductions (Year End)

25 WHO? Someone who needs time to make thoughtful giving decisions wants to support several ministries with one large gift desires maximum flexibility to change beneficiaries wants to maximize his giving through non-cash assets prefers to keep his giving confidential prefers a simple substitute for a private foundation desires to involve family members in giving needs end-of-year tax deductions

26 Think about the difference you can make and the good you can do for the Kingdom.

27 DAF Setup Steps Easy as 1, 2, Complete simple application 2. Set up account online 3. Fund your donor advised fund

28 Donor First Username: Demo Password: Donor1 Username: Demo_donor Password: Demodonor1

29 How Can We Help You? Our services are designed for you, our partners. This is our ministry to you. Your information is kept confidential, and there is never any cost or obligation to give. We can interact with your trusted advisors, as desired. You may have multiple charitable interests. We believe it is the Holy Spirit s job to direct you where to give.

30 Why Include Us on Your Team? No cost, no pressure, no hidden agenda Help from friends you know and trust Understand all of your options You will reap the benefits of wise stewardship

31 May we be of service to you? Please feel free to contact Michael or Scott. We look forward to the opportunity to be of service to you and pledge our finest efforts and complete confidentiality. Michael J. Occhipinti, MBT Gift Planning Advisor Phone: (800) Scott Talbot, ChFC, CFP, CAP Director of Planned Giving Phone: (877)