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Gifts of Estates and Assets
Leadership ConferenceSeptember 26, 2012
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Intergenerational Wealth Transfer
$44 trillion to $135 trillion dollars
in the next 50 years
$6 trillion to $25 trillion dollars
in charitable bequests alone
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Intergenerational Wealth Transfer
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In Minnesota more than $47.9 billion will transfer from one generation to the next
over the 20 years, 2011-2030
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Charitable Giving Marketplace:Who Makes Charitable Gifts?
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Where the money is
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Charitable Giving Marketplace:Who Receives Charitable Gifts?
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Everyone Can Make An Estate Gift
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Fundraising StrategiesAnnual Giving Special or Major Gifts Planned Giving
Donor’s Source of Funds for Contribution
Primarily income or cash on hand
Contribute (or sell) assets or make multi-year pledges
Estate Wealth
Charity’s Use of Contribution
On-going operations
Special projects or unique needs
Unrestricted, Capital and Endowment
Target Audience Any and all active constituents
Prospects with linkages, interest and liability
Anyone who might be interested in the cause
Target Audience Annual solicitation Opportunistic strategy seeks
Continuous education, long term cultivation
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A Generation-Based Approach to Giving
A
Under Age 50
B
Aged 50 – 70
C
Over Age 70
All donors find themselves at some stage of life…
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…all donors have certain assets and income…
1
Highest Wealth & Income Range
2
Average Wealth & Income Range
3
Below Average Means
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…all donors find a “home”
Younger Middle-Aged Older
Wealthy A1 B1 C1
Moderate Means
A2 B2 C2
Limited Means
A3 B3 C3
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Common Donor Concerns
• Dying too soon• Living too long• Illness or loss• Disability
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Gift Planning Solutions
A. Benefits to Charity in Near Term
B. Benefits to Charity Deferred
C. Full Benefit to Charity
Outright Gifts of
Cash and
Appreciated Assets
Bequests via Wills, Trusts, Life Insurance & Retirement Plans
D. Split Benefit to Charity
Charitable Lead Trusts Term of years, CRT Assignment of
Income
Charitable Remainder Trusts, Charitable Gift Annuities, & Pooled
Income Funds
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Charitable Gift Planning Vehicles-50 YOUNGER 50-70 MIDDLE-AGED 70+ OLDER
WEALTHY
A1Outright gifts
B1Charitable Remainder Trust for Term of Years
C1Bequests, Charitable Trusts for Life,Charitable Lead Trusts
MODERATE MEANS
A2Outright gifts
B2Charitable Trusts for Life, Pooled Income Funds
C2Bequests, Charitable Trusts for Life, Charitable Gift Annuities,Retirement Plans
LIMITED MEANS
A3Outright gifts
B3Outright gifts, Bequests
C3Bequests, Charitable Gift Annuities, Retirement Plans, Life Insurance
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When Assets are Often Gifted
During Lifetime:• Cash• Stock – publicly traded
or closely held• Mutual Funds• Real Estate• Life Insurance• Crops
At Death:• Retirement Plan Assets• Bonds• Life Insurance
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Types of Planned Gifts
• Bequests • Beneficiary Designations• Life Income Gifts
• Gift Annuities and Trusts• Gifts of Life Insurance• Retained Life Estates
• Real Estate
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Life Income Gifts
Simple definition:
“An asset in exchange for an income”
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Life Income Gifts
Gift Amount Fixed Payment Variable Payment
(Inflation)
$10,000 to
$100,000
Charitable Gift Annuity
$100,000 and up Charitable Remainder Annuity Trust
Charitable Remainder Unitrust
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Charitable Gift Annuity
• Contractual promise to pay• Payments are fixed at the time of the gift• Usually provides tax-free income• Two types, payments can start now or later
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Basic Concept:
“The right to hold an asset can be separated from the right to receive
income from the asset.”
Charitable Remainder Trusts
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Charitable Remainder Trusts
• Common Elements• Irrevocable gift• Established either inter vivos or testamentary • Income payments are made at least annually• The remainder beneficiary must be a charity• Income for lifetime or term of years
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Charitable Remainder Unitrusts
• Variable income stream• Additional contributions can be made• Minimum payout of 5%• 10% Rule• 4 types of unitrusts
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Charitable Remainder Annuity Trusts
• Fixed income stream• Cannot make additional contributions• 10% Rule
• Charitable remainder• The 5% Probability Test
• Corpus exhaustion
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Retained Life Estate
• Donate home to charity, but retain the right to live in it
• Charitable deduction in the year the gift is made
• Donor is responsible for maintenance, taxes and insurance
• Property maintains homestead status
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Case Studies
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Donor Profile #1
“I want to make a gift, but I can’t afford to do so now.”
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Solution: Estate Gift
• Charitable bequest or• Beneficiary designation of
• A will or trust• life insurance or • retirement plan assets
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Donor Profile #2
“I have enough assets and I want to see my gift at work.”
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Solution: Outright GiftCash vs. Stock GiftGift of: Cash Stock
Contribution deduction
$10,000 $10,000
Income taxes saved (28%)
$ 2,800 $ 2,800
Capital gain taxes saved (15%)
$ 0 $ 1,200
After tax cost of gift $ 7,200 $ 6,000
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Donor Profile #3Donor Profile #3
“I want to make a gift, but I really could use the income.”
• Donor Age 80
• $10,000 cash
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Solution: Charitable Gift Annuity
Donor Remainder to
charity $8,200
$10,000 Cash
6.8% 6.8% Charitable Charitable
Gift Gift AnnuityAnnuity
Income tax deduction$4,607
Annual Income$680
CharityCharity
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Donor Profile #4
• Husband & wife, ages 70, 70• $100,000 in appreciated stock• $10,000 cost basis• Currently receives 2% dividend• Would like more income
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Solution: Charitable Remainder Unitrust
Donor Remainder to
charity $149,729
$100,000 Property$ 10,000 Basis
5% 5% UnitrustUnitrust
Income tax deduction$40,825
Gains not taxed$90,000
First Year Income$5,000
CharityCharity
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Solution: Charitable Remainder Unitrust
5% Charitable Unitrust
Gross Principal $100,000
Net Principal $100,000
Charitable Deduction $40,825
Total Before-Tax Benefit to Income Recipients
$133,053
Donor Principal $0
Benefit to Charity $149,729
Total Benefit $323,607
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Most Important FactorMost Important Factor
• When making a charitable gift, donors rank When making a charitable gift, donors rank the following factors in order of importance: the following factors in order of importance:
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Thank You!
Your thoughts?