The Charitable Gift Annuity

Transcription

1 Mid-America Planned Giving Conference August 14, 2015 The Charitable Gift Annuity Presented by John F. Marshall Senior Vice President Jeffrey Byrne + Associates, Inc. Jeffrey Byrne + Associates, Inc. National fundraising and financial development firm headquartered in Kansas City Helped raise more than $1 Billion for more than 300 nonprofit organizations Mission: Committed to nonprofit fundraising success. Services Consulting Services Advancement Planning Communications, Publications + Marketing Analytics Futures Program Member of The Giving Institute Values: Service, Passion, Integrity, Leadership What We Know Bequests and other types of planned gifts have grown tremendously in importance to charities over the past 35 years The opportunities for even greater growth is as strong today if not stronger Consider this: between 1985 and 2035 it is projected that within the United States, the transference of wealth from one generation to the next will exceed $22 trillion 1

2 We Also Know That Despite the up-tick in charitable giving, it is estimated that only 10% of American donors have provided for a charity within their estate plans FOR HEAVEN S SAKE... WHY?! Three Reasons Only a fraction of the 1.08 million registered nonprofits have a defined Planned Giving program primarily for three reasons: 1. There is a general lack of understanding of Planned Giving on the part of executives and their boards of directors 2. Given the pressures for immediate financial resources, Planned Giving is often viewed as a tomorrow vehicle for revenue generation 3. Resource constraints are such that Planned Giving is either severely underfunded or not funded at all Reasons People Don t Leave An Estate Gift To Charity NO ONE ASKED THEM TO! (#1 reason) No one ever suggested they do so I just didn t think of it Only 5% of those who die leave a bequest to charity compared to 85% who give during their lifetime 2

3 Giving in the United States In 2014 Understanding Philanthropy 2014 contributions: $ billion by source (in billions of dollars all figures are rounded) SOURCE: Giving USA Foundation GIVING USA 2015 Understanding Philanthropy 2014 contributions: $ billion by type of recipient organization (in billions of dollars all figures are rounded) SOURCE: Giving USA Foundation GIVING USA

4 About Planned Gifts They are often unexpected out of the blue Will likely come from a current or past donor to your organization Are more frequently designated Come from and with the donor s intent Why Make A Planned Gift? One can make a much larger gift than they thought possible Increase current income Plan for the future needs of a spouse or loved one Reduce income and/or capital gains tax Leave a charitable legacy for future generations Who Makes Planned Gifts? People at all income levels leave charitable estate gifts Those closest to your organization consistent donors current and former Board Members current and former volunteers staff 4

5 Who Makes Planned Gifts? (cont.) People with religious affiliations are more likely to make a charitable estate gift Single people, widows, widowers, couples without children No gender differences; HOWEVER: women tend to make more bequests men make more gifts by way of trust The Benefits Of Planned Giving To The Donor An opportunity for more creative ways to give Potential income, capital gains and estate tax deductions An attractive fixed or variable income for life Additional retirement income Access to sound assess management The Benefits Of Planned Giving To Your Organization Helps to establish a closer relationship with your donor Encourages the donor to consider using assets as potential gifts Enhances opportunities for bequests Provides a steady stream of future income to your organization security 5

6 The Charitable Gift Annuity The Types of Planned Gifts Bequests Life Income Plans Charitable Gift Annuity Charitable Remainder Trusts Lead Trust Life Insurance The Charitable Gift Annuity An irrevocable gift of assets to a charity in which the donor receives income for the remainder of their life and possibly a second beneficiary Income is based upon the age of the beneficiary(ies) Annual payments are fixed and never change The donor receives a charitable contribution deduction which can be deducted for up to 6 years Income payments start immediately 6

7 Funding Your Charitable Gift Annuity You can fund your Charitable Gift Annuity through donating: Cash Appreciated Securities Real Estate Tangible Personal Property Gifts Of Personal Property Gifts that are related to the mission of the organization and that can be used directly by the organization Artwork Jewelry Vehicles Timber Livestock Precious Metals Collectibles Boats Oil + Gas Rights The Benefits of the Charitable Gift Annuity to the Donor A guaranteed income for life which never changes An attractive charitable contribution deduction A reduction in capital gains liability An estate tax deduction No legal work is required It can be funded in modest amounts 7

8 What are the Benefits to Your Organization? The provision of future financial income to ensure that the very best in service and programs will continue for its constituents What are the Current Income Rates? GIFT ANNUITY RATES Single Life Two Lives AGE RATE AGE RATE % 65 & % % 70 & % % 73 & % % 76 & % % 80 & % % 83 & % NOTE: Charitable Gift Annuity rates are subject to change. Please call our office for the latest rates, or for the rate for your actual age(s). What Are the Various Tax Benefits? Charitable Contribution Deduction Income Tax Capital Gains Tax Estate Tax Deduction 8

9 Let s Look at Two Charitable Gift Annuity Illustrations Single-Life Two-Life The Single-Life Charitable Gift Annuity Bob is an 85 year-old widower who wishes to create a single-life Charitable Gift Annuity. He has decided to fund his annuity with a gift of appreciated stock with an approximate value of $10,000 but which has a cost basis of $5,000. He wants his gift to eventually benefit the youth programs within your organization Illustration for a One-Life Charitable Gift Annuity Donor/Beneficiary: Bob Age: 85 Gift amount: $10,000 in long term appreciated with a cost basis of $5,000 Rate of return: 7.8% Income: $780 per year Tax-free income: $322 Effective rate of return: 10% *Charitable contribution deduction: $5,622 Capital gains liability: by transferring the stock directly to your organization, there is no capital gains liability to Bob *Can be deducted in the year of the gift with an additional five years to deduct if the full amount of the deduction cannot be used in the year of the gift 9

10 The Two-Life Charitable Gift Annuity Peter and Louise are 86 and 84 years old respectively and wish to create a two-life Charitable Gift Annuity. They have decided to fund their annuity with $10,000 in cash. Peter and Louise do not wish to designate the eventual distribution from their gift annuity and are comfortable with your organization using the funds wherever the need is greatest. Illustration for a Two-Life Charitable Gift Annuity Donors/Beneficiaries: Peter & Louise Ages: 86 & 84 (respectively) Gift amount: $10,000 in cash Rate of return: 6.7% Income: $670 per year Tax-free income: $286 Effective rate of return: 9.6% *Charitable contribution deduction: $4,811 *can be deducted in the year of the gift with an additional five years to deduct if the full amount of the deduction cannot be used in the year of the gift The Minimum Requirement for Creating a Charitable Gift Annuity To fund a Charitable Gift Annuity will require a minimum investment of How much? The donors gift is deemed to be irrevocable and cannot be refunded The donor cannot add to their Charitable Gift Annuity. However, they can easily create another at their discretion 10

11 The Management of The Charitable Gift Annuity The Charitable Gift Annuity must be separately accounted for Donor is sent regular income payments based upon the frequency of payments the donor has chosen (quarterly, semi-annually, annually) At the end of the year you will receive a statement to assist in their preparing their income tax return Thank YOU! Committed to nonprofit fundraising success fundraisingjba.com 11