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Integrating Estate Gifts into Planning
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  1. Integrating Estate Gifts into Planning

  2. Integrating Estate Gifts into Planning Eddie Thompson, Ed.D., FCEP Founder & CEO eddie@ceplan.com Ben Powell, FCEP Senior Vice President ben@ceplan.com Thompson & Associates Brentwood, TN www.ceplan.com Matthew McBurnie, MBA, CEP, FCEP Executive Director matthew-mcburnie@riversidehealthcare.net Riverside Healthcare Foundation Kankakee, IL www.riversidemc.net/foundation

  3. Riverside Medical Center Kankakee, IL

  4. Vision and Motto The Foundation exists to develop resources that support Riverside HealthCare in pursuit of its mission. Guided by the principle that generosity is a powerful healing force, the Foundation will develop resources by linking people with opportunities that fuel their dreams, satisfy their desire to serve others, and ignite their benevolent spirit. With its motto, Generosity Heals, the Foundation will become the most compelling, trusted, and effective vehicle in our region for remarkable philanthropic journeys.

  5. The Impact of Estate Planning • Board leadership engagement • An early participant experience • Solving an estate planning problem • A remarkable employee

  6. How does Estate Planning work for us? • One participant to another • Constant promotion • Small group presentations • Key participants: • Longtime donors • Employees

  7. Why do it? • Donor focused • Builds trust • Generosity heals

  8. Charitable Deduction Changes • Limits on deductions is gaining ground • Charities are competing for decreasing discretionary income gifts • Higher income and estate tax rates will lead donors to lifetime and testamentary techniques to reduce taxes and achieve their goals

  9. Side Effects on Planning • Estate plans will become more complex as exemption amounts go down and tax rates go up • Charitable trusts and other leveraging techniques to minimize taxes and maximize what can pass to heirs

  10. The Outcome on Giving • They will do what they have done in the past • Likely decrease discretionary income gifts • Increase giving through their estates • Increased taxes on estates make charitable estate gifts even more attractive

  11. Major Gifts The effect on charities: The organizations that are focused on relationships and are important to communities will be fine after a few months as the new normal is accepted

  12. Estate Gifts The effect on charities: Organizations that pursue estate gifts will see an increase in gifts to endowment and outright planned gifts. Wise nonprofits will adapt to the changing market. Others will struggle!

  13. Practical Approaches to Address These Realities Integrating Estate Gifts Into Planning • Your future success depends on your efforts today! • You must plan to be successful • You must then execute your plan • KEEP YOUR MESSAGE IN FRONT OF YOUR DONORS!

  14. A Few Fundamental Concepts • Three types of gifts • Three types of donors • Two sources of assets • Three questions • Four giving techniques

  15. Three Types of Gifts Annual Capital Planned

  16. Three Types of Donors ~ 70% Give Out Of Habit ~ 23% Give Based On Emotion ~ 7% Are Strategic Donors

  17. Where Are We Looking for Gifts? Planned Annual Discretionary Income Net Worth ?

  18. Three Questions… …that must be answered for, and by, Strategic Donors!!

  19. #1 – My Needs • Do I have enough to live on for the rest of my life?

  20. #2 – Heir Needs • How much should I leave my heirs? • Do I have enough to live on for the rest of my life?

  21. #3 – Social Capital • Would I rather my executor or trustee write a check from my estate to the IRS, or to my favorite charities? • How much should I leave my heirs? • Do I have enough to live on for the rest of my life?

  22. Tax Total Wealth Self Directed Charitable Gifts Financial Independence Inheritance for Heirs Government Directed

  23. Now, To the Issues at Hand • Many donors might not have the disposable income that they once had • Or, are concerned that they may no longer have the resources that they need to maintain their lifestyle

  24. An Important Question • "If a number of my donors don't feel like they can write me check, but they still want to give, what other ways to give are available to them?" • There are many answers to that question, but here are a few that fit in the current economic environment:

  25. 4 Types of Gifts Donors Are Making • Gifts of net worth • Testamentary gifts • Gifts that provide income • Gifts that also fulfill estate planning objectives

  26. Flashback to Chemistry Class

  27. An Estate Planner’s Version

  28. Trend 100% 20% Outright 40% Annual 40% Lump Heirs

  29. Trends in Charitable Estate Planning 100% 20% Outright 40% Annual 40% Lump TCLA/UT TCRUT Charity Heirs

  30. The Mechanics of a Trust

  31. Estate Plan Other Assets $ 2,375,000 Life Insurance $ 4,525,000 Retirement Accts. $ 2,400,000 Total Estate $ 9,300,000 Before Planning: Heirs $ 7,200,000 Charity $ 0 Taxes $ 2,100,000 (potential immediate income & estate taxes) $9,300,000 Death of the first spouse After Planning: Heirs $ 6,450,000 Charity $ 2,400,000 Taxes $ 450,000* Credit Shelter Trust $3,500,000 Surviving Spouse Outright $5,800,000 Health, Education. Maintenance, Support Death of the surviving spouse Passes to Heirs free of tax Retirement Accounts Heirs $6,450,000 Charity $2,400,000 Taxes $450,000 * Entirely Tennessee Inheritance Tax

  32. Trends In Estate Planning 100% 20% Outright 40% Annual 40% Lump Heirs

  33. IRDs to Testamentary Charitable Remainder Trust Estate $3,800,000 ($2,000,000 in IRAs) Current Planning* Heirs $ 2,890,000 Charities $ 0 Taxes $ 910,000 Remaining Assets $1,615,000 TCRUT $2,000,000 (7% ROI) Taxes $185,000 ET Recommended Plan Heirs $ 3,340,000 Charities $ 2,896,000 Taxes $ 185,000 5% payout For 20 years After Tax Total** $1,725,000 Present Value of Recommended Plan*** Heirs $ 3,340,000 Charities $ 2,855,000 Taxes $ 185,000 Heirs $3,340,000 Charity $2,896,000 Taxes $185,000 * Actual future value of estate and gift may be higher or lower at time of death. ** Income Tax calculated at a 28% rate *** Future Values discounted at 3.5% for inflation to arrive at present values

  34. Tax $140,000 Husband’s Heirs $2,460,000 Wife $30,000,000 Wife’s Heirs $30,000,000 ILIT $10,000,000 ILIT $10,000,000 Husband $2,600,000 Charity $15,000,000 Tax $4,710,000 Wife’s Heirs $15,290,000 Wife’s Heirs $20,000,000 TCLTs $20,000,000 5 yrs. 10 yrs. 15 yrs. 20 yrs. Example of TCLT if Husband Dies First Death of 1st Spouse Tom’s DSUEA - $2,400,000 Death of 2nd Spouse 6% payout 6% return State Tax - $1,600,000 Fed Tax - $3,110,000

  35. Trends in Charitable Estate Planning 100% 20% Outright 40% Annual 40% Lump TCLA/UT TCRUT Charity Heirs

  36. Family Trusts $35,000,000 Foundation $5,800,000 $18,000,000 QPRT $2,800,000 ILIT 100,000 Current Plan Heirs $12,975,000 Charities $ 525,000 Taxes $ 7,400,000 $1,500,000 $16,050,000 $450,000 Recommended Plan Heirs $24,145,000 Charities $10,125,000 Taxes $ 4,100,000 Credit Shelter Trust (No State Gap Trust) Surviving Spouse Charity GST Trust To Heirs $3,000,000 Heirs $775,000 Lead Trust $9,600,000 Taxes $4,100,000 Charity $75,000 20 years 5% to Charity Heirs $24,145,000 Present Value of Plan Heirs $11,175,000 Charities $ 5,625,000 Taxes $ 4,100,000 Remainder to Heirs $17,470,000 * Actual future value of estate and gift may be higher or lower at time of death.

  37. $54,500,000 Current Plan Heirs $21,700,000 Charities $19,730,000 Taxes $13,220,000 Marital Deduction $2,800,000 Specific Bequests $3,550,000 Charitable Bequests $10,300,000 CRT $20,000,000 CLTs $12,950,000 Recommended Plan* Heirs $43,760,000 Charities $46,890,000 Taxes $ 5,260,000 20 years 5 years 10 years 15 years 20 years Income to Charity Present Value of Plan** Heirs $24,500,000 Charities $25,360,000 Taxes $ 5,260,000 Heirs Charity *Actual future value of estate and gift may be higher or lower at time of death. **Present Value is discounted at 6%

  38. Introducing New Concepts to Donors • Put their needs first • Help them achieve their objectives and goals • Show a better use of social capital • Give them time to think about it • Trust them!

  39. Do Tax Considerations Impact Giving? • Do you think donors give so they can get a charitable deduction? • Do you think donors would rather give to local charities than to the IRS? • Do you think tax considerations impact the technique a donor may use to achieve their charitable intent?

  40. Questions?