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Planned Gifts that Appeal to Younger Donors

Planned Gifts that Appeal to Younger Donors. Jeff Lydenberg Vice President PG Calc 617-497-4997 jeff@pgcalc.com. Agenda. Defining the market Factors motivating younger donors Engaging the younger donor Planned gifts appropriate for the younger donor Case studies. Defining the market.

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Planned Gifts that Appeal to Younger Donors

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  1. Planned Gifts that Appeal to Younger Donors Jeff Lydenberg Vice President PG Calc 617-497-4997 jeff@pgcalc.com Planned Gifts That Appeal to Younger Donors

  2. Agenda • Defining the market • Factors motivating younger donors • Engaging the younger donor • Planned gifts appropriate for the younger donor • Case studies

  3. Defining the market • Those under age 70 are “younger” • More time • Same factors motivate young and old • Tax savings affect amount, how, and when they give Planned Gifts That Appeal to Younger Donors

  4. Capital Gain Taxes • Capital gains tax rate up from 15% to 20% for taxpayers with AGI’s over: • Married filing jointly $450,000 • Single $400,000 • Head of Household $425,000 • 3.8% Medicare surtax on net investment income for taxpayers: • Married filing jointly $250,000 • Married filing separately $125,000 • Head of households and single taxpayers $200,000 Planned Gifts That Appeal to Younger Donors

  5. Capital Gain Taxes • George and Ann, Married filing jointly • $450,000 wage income • $250,000 stock with $50,000 basis • $200,000 of capital gain income • 20% capital gain tax rate + 3.8% surtax • $47,600 capital gain tax due Planned Gifts That Appeal to Younger Donors

  6. Capital Gain Taxes • Bill and Susan, married filing jointly • $200,000 wage income + $50,000 dividend income • 28% tax on wages, 15% on dividends • $1,000,000 asset, $100,000 basis • $200,000 of gain taxed at 15% • $700,000 of gain taxed at 20% • $900,000 of gain taxed at 3.8% • Total tax of $204,200 Planned Gifts That Appeal to Younger Donors

  7. Qualified plan limits • Limits on tax-deferred savings • $17,500 for most in 2013 • $5,500 catch-up if 50 or older • Buskens • $400,000 family income • $46,000 to qualified plans • Just over 10% tax-deferred savings Planned Gifts That Appeal to Younger Donors

  8. Engaging younger donors • Can’t “afford” planned giving • Meet current commitments & make gift • Extend marketing • Targeted messaging • Electronic communication • Venues for younger prospects Planned Gifts That Appeal to Younger Donors

  9. Bequests • Flexible • Both modest and wealthy can participate • Donor retains control Planned Gifts That Appeal to Younger Donors

  10. Bequest Prospect Profile • Two primary age groups: • Late 40s to late 50s, and 65-78 • Loyal donors, lower amounts • Mid-to-upper middle income • Charitably inclined • Volunteers Planned Gifts That Appeal to Younger Donors

  11. Forms of Bequests • Pecuniary • A named dollar amount • Specific • A gift of specific property • Residuary • A gift of the remainder after satisfying pecuniary and specific bequests • Contingent • Only takes affect on certain conditions Planned Gifts That Appeal to Younger Donors

  12. Bequest Substitutes • Payable on death accounts • Insurance product designations • Savings bonds • IRAs, qualified plans Planned Gifts That Appeal to Younger Donors

  13. Supplementing retirement income • Avoid traditional life income gifts • Deferred annuities • Laddered annuities • Flexible annuities • Commuted annuities • Flip unitrust Planned Gifts That Appeal to Younger Donors

  14. Charitable gift annuities • Immediate payment annuities • Not appropriate for those under 60 • Deferred annuities • Appropriate for younger donors • Supplemental pension for mid-career professionals • ACGA rates effective 1/1/2012 Planned Gifts That Appeal to Younger Donors

  15. Charitable Remainder Trusts • Financially savvy donor • Willing to take risk • Experienced investor • Annuity trusts • Gift annuity v. Annuity trust • Unitrusts • Regular v. Flip unitrusts Planned Gifts That Appeal to Younger Donors

  16. Pooled Income Fund • Trust maintained by sponsoring charity • Pays net income to beneficiary • Remainder to sponsoring charity • Disfavored due to interest rate climate Planned Gifts That Appeal to Younger Donors

  17. Build-up deferred gift annuity Mr. and Mrs. Denton • Ages 56 & 59 • $20,000 a year for 8 years to create 8 DGAs • Laddered start dates • 5.2% for annuity starting in 2020 • 5.7% for annuity starting in 2026 • $140,000 in contributions • $176,220 income to Denton's Planned Gifts That Appeal to Younger Donors

  18. Flexible deferred annuity Mr. Jasper • Age 56 • $100,000 stock with $60,000 basis • Choice of start dates from 2022 to 2032 • $6,200 annuity in 2022 at age 65 • $10,600 annuity in 2032 at age 75 • Longer he waits, higher the payment • Lowest deduction • Flexibility to choose first payment date Planned Gifts That Appeal to Younger Donors

  19. Commuted payment gift annuity Mr. Thomas • Age 58 • Retiring at age 59 ½ • Wants to preserve his IRA until forced to withdraw • Needs $70,000 a year for 10 years • Funds with $670,678 in 2013 • Pays $70,000 annuity until age 70 ½ • Remainder to charity at 70 ½ • $212,000 to charity at 5% return • $434,000 to charity at 8% return Planned Gifts That Appeal to Younger Donors

  20. Retirement Flip unitrust Mr. and Mrs. Binstock • Both age 55 • 5% CRUT with flip provision, flips at age 65 • Contribute $50,000 a year to CRUT for 10 years • Beginning at age 65 $41,063 income • Ten years after flip $55,185 income (assumes 8%!) • $1,431,027 total before-tax income • $1,669,450 for charity Planned Gifts That Appeal to Younger Donors

  21. Life Income for Another • Parent • Employee • Family friend • Gift annuity v. CRT • Capital gain tax issue with CGA • Gift tax issues Planned Gifts That Appeal to Younger Donors

  22. Life Income for Another Mr. Gomez • Age 55, 33% tax bracket • Must earn $746 to give Mom $500 • Gift annuity for Mom paying 6.8%, partially tax-free • Funded with $300,000 stock with $70,000 basis ($230,000 gain) • Some capital gain tax due at funding • Reduced capital gain income- $122,606 income • Offset by deduction- $140,079 • Gift tax issue Planned Gifts That Appeal to Younger Donors

  23. Reducing current taxes - Lead trust • Only 6,617 charitable lead trust tax returns filed with IRS in 2011 • Pays income first to charity • Remainder to heirs • Generates gift/estate tax deduction not income tax deduction • Primarily a tool for the ultra-wealthy Planned Gifts That Appeal to Younger Donors

  24. Reducing current taxes - Lead trust Mr. and Mrs. Thomas • Both ages 55 • Children 29 and 27 • $4,000,000 to 5.5416% 20 year term CLAT • 100% gift tax deduction • $4,443,280 to charity over 20 years • $8,491,008 to children in 20 years now ages 49 and 47 • Assuming 8% return Planned Gifts That Appeal to Younger Donors

  25. Bargain Sale • Sell property to charity at reduced price • Deduction for gift portion • Gain on gift portion forgiven • Gain on sale portion reportable Planned Gifts That Appeal to Younger Donors

  26. Case Study: Bargain Sale Ms. Sawyer • Age 52 • Married filing jointly • 35% income tax bracket • 18.8% capital gain tax bracket • Rental property worth $575,000 • $350,000 basis; no mortgage • Willing to make a gift • Wants a zero tax solution Planned Gifts That Appeal to Younger Donors

  27. Case Study: Bargain Sale Options • Sell for $575,000 • $42,300 capital gains tax • Net to Ms Sawyer $532,700 • No gift • Sell to charity for $475,133 • Charitable deduction of $99,867 saves $34,953 • Capital gains tax due of $34,953 • Net proceeds to Ms Sawyer of $475,133 Planned Gifts That Appeal to Younger Donors

  28. Life Insurance • Gift of paid-up policy • Gift of policy with premiums due • Gift of new policy • Charity named as beneficiary, not owner Planned Gifts That Appeal to Younger Donors

  29. Questions and Answers Planned Gifts That Appeal to Younger Donors

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