planned gifts that appeal to younger donors
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Planned Gifts that Appeal to Younger Donors. Jeff Lydenberg Vice President PG Calc 617-497-4997 [email protected]. Agenda. Defining the market Factors motivating younger donors Engaging the younger donor Planned gifts appropriate for the younger donor Case studies. Defining the market. - PowerPoint PPT PresentationTRANSCRIPT
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©2013 PG Calc Planned Gifts That Appeal to Younger Donors
Planned Gifts that Appeal to Younger Donors
Jeff Lydenberg Vice President
PG Calc617-497-4997
PG Calc | Invested in your mission
Agenda
• Defining the market
• Factors motivating younger donors
• Engaging the younger donor
• Planned gifts appropriate for the younger donor
• Case studies
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Planned Gifts That Appeal to Younger Donors
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
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Planned Gifts That Appeal to Younger Donors
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
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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
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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 $204,200Planned Gifts That Appeal to Younger
Donors
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Planned Gifts That Appeal to Younger Donors
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
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Planned Gifts That Appeal to Younger Donors
Engaging younger donors
• Can’t “afford” planned giving
• Meet current commitments & make gift
• Extend marketing
• Targeted messaging
• Electronic communication
• Venues for younger prospects
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Planned Gifts That Appeal to Younger Donors
Bequests
• Flexible
• Both modest and wealthy can participate
• Donor retains control
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Planned Gifts That Appeal to Younger Donors
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
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Planned Gifts That Appeal to Younger Donors
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
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Planned Gifts That Appeal to Younger Donors
Bequest Substitutes
• Payable on death accounts
• Insurance product designations
• Savings bonds
• IRAs, qualified plans
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Planned Gifts That Appeal to Younger Donors
Supplementing retirement income
• Avoid traditional life income gifts
• Deferred annuities
• Laddered annuities
• Flexible annuities
• Commuted annuities
• Flip unitrust
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Planned Gifts That Appeal to Younger Donors
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
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Planned Gifts That Appeal to Younger Donors
Charitable Remainder Trusts
• Financially savvy donor
• Willing to take risk
• Experienced investor
• Annuity trusts– Gift annuity v. Annuity trust
• Unitrusts– Regular v. Flip unitrusts
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Planned Gifts That Appeal to Younger Donors
Pooled Income Fund
• Trust maintained by sponsoring charity
• Pays net income to beneficiary
• Remainder to sponsoring charity
• Disfavored due to interest rate climate
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Planned Gifts That Appeal to Younger Donors
Build-up deferred gift annuityMr. 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
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Planned Gifts That Appeal to Younger Donors
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
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Planned Gifts That Appeal to Younger Donors
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
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Planned Gifts That Appeal to Younger Donors
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
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Planned Gifts That Appeal to Younger Donors
Life Income for Another
• Parent
• Employee
• Family friend
• Gift annuity v. CRT
• Capital gain tax issue with CGA
• Gift tax issues
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Planned Gifts That Appeal to Younger Donors
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
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Planned Gifts That Appeal to Younger Donors
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
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Planned Gifts That Appeal to Younger Donors
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
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Planned Gifts That Appeal to Younger Donors
Bargain Sale
• Sell property to charity at reduced price
• Deduction for gift portion
• Gain on gift portion forgiven
• Gain on sale portion reportable
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Planned Gifts That Appeal to Younger Donors
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
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Planned Gifts That Appeal to Younger Donors
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
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Planned Gifts That Appeal to Younger Donors
Life Insurance
• Gift of paid-up policy
• Gift of policy with premiums due
• Gift of new policy
• Charity named as beneficiary, not owner
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Planned Gifts That Appeal to Younger Donors
Questions and Answers