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Gift Planning Without Tax IncentivesCHICAGO COUNCIL ON PLANNED GIVINGMAY 30, 2019

Presented By:Frank MintonFrank Minton, LLC16538 Beach Dr. N.E.Lake Forest Park, WA 98155Phone: 206-365-5154E-mail: FDMinton@gmail.com

Changes In Top Federal Income Tax Rate

1980 – 70%

2019 -37%

New Cost of $100,000 cash gift by a High-Income Donor

1980 - $30,000

2019 - $63,000

Net Cost of a Gift of Appreciated Securities by a High Income Donor

FMV of Securities $100,000Cost Basis $20,000Net Cost in 1980 $7,600Net Cost in 2019 $40,000

How would indexing basis for inflation affect gifts of appreciated property?

Changes in Standard Deduction Federal Income Tax – Joint Filers

1980 - $3,400

2019 - $24,400

If over age 65, $27,000

-Only 10% of taxpayers will itemize deduction in 2019

Increase in Federal Estate Tax Exemption

1980 - $161,000

2019 - $11,180,000

Number of Estates Subject to Federal Estate Tax

1980 – 20 out of 1000, which included majority of planned gift donors

2019 – 1 out of 1000, very few donors affected by the tax

Changes Regarding Charitable Remainder Trusts

1980 – No limit on number of and age of beneficiaries because no minimum remainder interest

2019 – Minimum remainder interest and payout rate, imposes limitations on who can be beneficiaries

1980 – Pooled income fund, most popular life income gift

2019 – Many pooled income funds have expired

Pooled Income Fund

Positive Developments

IRA Rollover Easier to make charity beneficiary of retirement

plan Flip Unitrust Deduction ceiling for cash gifts to 60% of AGI

On Balance, Tax Incentives Have Diminished

1980

2019

How Reduction in Tax Incentives has Affected Charitable Giving

Some say minor effect because giving has continued to increase

Other say total giving is lower than it would have been with retention of incentives

My Position

Tax incentives seldom motivate giving, but they influence the amount, type, and timing of gifts

Thus, we should continue to educate for measures that would stimulate giving

However,

If tax incentives were mostly eliminated…

PEOPLE WOULD STILL MAKE CHARITABLE GIFTSand

THE PLANNED GIVING PROFESSION AND CCPG

WOULD STILL EXIST

THERE ARE NINE REASONS THIS IS SO

Reason 1 – There are Non-Tax-Related Financial Benefits

Reason 2 – People Give to a cause with which they feel connected

Reason 3 – Most People Are Empathetic

Reason 4 – People Have an Impulse to Give Back

Reason 5 – Religious Convictions Engender Gifts

Reason 6 – Many Wealthy Individuals Have a Sense of Noblesse Oblige

Reason 7 – Donors May Receive a Personal Benefit

Reason 8 – Most People Enjoy Recognition

Cobb Lecture Hall

University of Chicago

Reason 9 – Human Desire to Overcome Mortality

The primary driver of legacy gifts

Pyramids of Giza, constructed more than 4,000 years ago

Religious Answers to Mortality

Resurrection to eternal life

Immortal soul

Reincarnation

Extending Life Through Science

Imagine a world where aging has been abolished, where you can run a marathon at age 94, and start a new career at age 110, where replacing a heart, liver, or kidney grown from your own body cells is as common as a knee or hip replacement is today.

Consciousness of Mortality Prompts Estate Planning

Difficulty of Deciding How to Divide Property

What a Gift Planner Can Offer

An extension of life through a charitable legacy

Why do stressed trees often produce an abnormally heavy crop of seeds?

Humans, like these trees, as they approach the end of life also focus on legacy.

Biological Legacy – genes transmitted to heirs.

Cultural Legacy – through creations and

charitable gifts that perpetuate one’s name,

values, and influence.

Some people have a bucket list

Hike the Himalayas See Machu Picchu Parachute Swim on the Riviera Go on a safari

This list is backward looking

Other people have a fountain list

This list is forward looking, as it refers to what will flow from our life.

An endowment is like a fountain

Example of a person who created 20 Fountain Legacies

Floyd and his late wife, Delores

Cotton Picker – Stock Picker – Philanthropist

How do you talk to donors about issues that remind them of mortality?

Which of the following would you normally choose?

a. Would you consider including our organization in your estate plan?

b. Would you consider including our organization in your will?

c. Have you ever thought about arranging a legacy gift to our organization?

d. Have you ever thought about leaving a bequest to our organization?

a. If you should predecease your spouse, payments would continue to (her/him).

b. If you die before your spouse, payments will continue to (her/him).

c. Have you made preparations in case something happens to you?

d. Have you made the necessary preparations before the end of your life?

Mortality by Increments

Life expectancy increased by two years, but only six months were healthy.

Escape cancer and heart attack only to get Alzheimer's.

40% of individuals over age 85 have some degree of dementia.

Guidelines for Talking to the Aging

Exercise patience in listening to repetitive stories. Remember that the donor was once young and vigorous

like you. Do not be patronizing. Be sensitive to competency issues if a gift is to be

arranged. Talk about what they most value and how they would like

to be remembered. Respect their religious beliefs whether or not you agree

with them. If they have made or will be making a legacy gift, help

them visualize how they live on through that gift.

Role of the Gift Planner

Know the tax law, have a command of the gift instruments, and know how to apply them

Help donors experience a sense of immortality through their legacy gifts and be a friend and comforter in the final stage of life

What do you do and say when a donor dies?

Guidelines for the Condolence Letter

1. No platitudes like “He’s in a better place,” or “At least he died doing what he loved.”

2. Refer to a positive memory of an actual event.3. Reference the impact of the person’s life.

Legacy Gifts

Legacy gift from charity’s standpoint: sum of money, usually given at the end of the donor’s life, and often for an endowment

Legacy gift from the donor’s standpoint: a way of overcoming mortality by leaving footprints.

The Central Role of Gift Planning

As gift planners, we have the unique opportunity to further the work of our institutions while helping individuals find meaning in their lives.

This noble role is not dependent on tax incentives.

Yes, tax incentives are important

And we should seek as favorable a tax regime for charitable giving as possible Replace income tax deduction with tax credit Expand charitable IRA Retain life income plans Make PIF appealing again Possible reduce estate tax exemption to address

inequality

But Gift Planning is Not Dependent on Tax Incentives

Because you can appeal to powerful motivators that are not tax-related

And

Because legacy gifts address the fundamental human quest to overcome death

Books Every Planned Giving Officer and Estate Planner Should Read

Leo Tolstoy, The Death of Ivan Ilyich Ernest Becker, The Denial of Death Elizabeth Kübler-Ross, On Death and Dying Stephen Cave, Immortality, The Quest to Live Forever

and How it Drives Civilization Sherwin Nuland, How We Die Atul Gawande, Being Mortal Leonard Hayflick, How and Why We Age