Planned Giving with

Non-Cash and Unusual Assets:

From Acceptance to Disposition

Bryan Clontz, CFP®President, Charitable Solutions, LLC

bryan@charitablesolutionsllc.com (404) 375-5496

All Materials Copyright 2008-2009, Charitable Solutions, LLC

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Agenda

• Non-Cash Asset Market Overview• Non-Cash Asset Types• A 5-Minute Non-Cash Tax Seminar• Legislative Update• Reasons Non-Cash Assets are Declined• Top Ten Non-Cash Questions• Three Case Studies• Non-Profit Management and Disposition

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Non-Cash Asset Market Overview

Source: Spectrum Group and Reality Times, June 2004

• More than half of affluent investors’ assets are held in non-cash assets; cash only represents 3-5%

• Aggregate stock market value is approximately $14 trillion; non-cash market estimates are $40-60 trillion

• Of the $300 billion in donations last year, non-cash assets are estimated to be 3% or less

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Non-Cash Asset Types

• Real Estate – Residential vs. Commercial, Encumbered vs.

Unencumbered, Partial vs. Entire Interests

• Privately-Held Interests– C-Corp and S-Corp Stock, Limited Partnerships or LLCs

• Restricted Stock• Tangible Personal Property – Art/Collectibles (New PPA

Rules)• Weird Stuff

– Quarterhorse, Seat on New York Mercantile Exchange, Gold Bullion, Euro-Denominated Bond, Beach House in Mexican Land Trust, Paris Condo, UPREIT Partnership Units, Patents, Timber Deeds, Clay Mineral Rights, Book Royalties, Oil & Gas Interests, Hedge Fund Carried Interest, NFL Team, and finally, Dead Animals

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A 5-Minute Non-Cash Seminar

• Cash BAD – Everything else GOOD!

• Capital gain property receives a fair market value deduction AND an elimination of capital gains tax if donated to a public charity

• If donated to a private foundation, donations of non-cash assets during life only receive an adjusted cost basis deduction

• Public charities do not have a 5% payout requirement – private foundations do

• Donor advised funds are especially attractive for multiple grants

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Appraisal Considerations

• Appraisal may occur 60 days prior to gift at the earliest, and the latest being the time the donor files the tax return – Donor completes Form 8283 and Charity completes Form 8282

• Pension Protection Act Key Changes– Extended Form 8282 to 3 years, Tightened Definition

of Substantial and Gross Valuation Misstatement, Increased Appraisal Penalties and Definition of a Qualified Appraiser

– Tightened Deductions Related to Partial Interests in Tangible Personal Property

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80% Of All Non-Cash Gifts Rejected

• Tax and Legal Complexity (UBTI, Bargain Sale, Palmer/Blake/Ferguson Pre-arranged Sale Issues, Agreement Complexity, Self-Dealing, Excess Benefit, Private Inurement)

• Environmental Issues (Due Diligence, Remediation, Disclosures, Deep Pockets)

• Management Issues (Holding Period, Insurance Changes, Contract Changes, Appropriate Filings and Paperwork)

• Charity’s Internal Process (Timeliness, Thoroughness, Risk Tolerance, Weak Gift Acceptance Policies/Procedures)

• Perceived Risk/Reward Ratio

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Top Ten Non-Cash Questions

• Asset Description/Expected Value

• Asset Ownership

• Partial or Entire Interest

• Debt or Other Encumberances

• Outright, Life-Income or Testamentary

• Capital or Ordinary Asset

• Tax Implications

• Potential Buyers and Offer Status

• Holding Period and Management Issues

• Transfer Timing

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Dechomai Foundation, Inc. Flow

Dechomai Foundation, Inc.

DONOR CONTRIBUTES NON-CASH ASSETS

Step 1

Step 3

Step 2

Sweet Spot: $750K+ Fees: 1-3%

(1.7% Average)

For illustrative purposes only.

Grant to Referring Charity

ASSET IS SOLD

$100 Million+ Since 2003

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Case Study #1 Commercial Real Estate Contribution

For illustrative purposes only.

$1.2 million/20% Interest

Community FoundationFour Donor-

Advised Funds

Four Doctors Owned $6.0 Million

Medical Building

Building Purchased byPublicly-Traded REIT

Multiple GrantsTo Multiple Charities

$1.2 million/20% Interest

Four 7 PercentCharitable Remainder Trusts

For Life

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Case Study #2Limited Partnership Gift

For illustrative purposes only.

DECHOMAI FOUNDATION

DONOR ADVISED FUND

Family Limited Partnership Owns

$1.6 Million MontanaWorking Farm

Property

Farm Purchased by Adjoining Land Owner

Entire Interest

CHARITY’S CAPITAL CAMPAIGN

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Case Study #3Closely-Held Business

For illustrative purposes only.

NATIONAL HEALTH CARE CHARITY

Family BusinessC-Corporation

Partial Interest

Corporate Redemption

1. Donor Contributes Stock – Receives Full Deduction

2. Company Buys Stock Back

3. Minority Interest Holders Increase Percentage Ownership

With No Gift Tax

4. Donor Creates Named Research Fund

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Non-Profit Management and Disposition

• Assign One Staff Person Non-Cash Responsibility to Follow Gift Acceptance Policies/Procedures

• Document/Transaction/Asset Due Diligence

• Self-Dealing, Conflict-of-Interest, Private Inurement Due Diligence

• Prudently Manage Asset (tax filings, insurance changes, lease/rental changes, record deeds, pay bills, oversee maintenance, etc.)

• Manage Disposition – Hold, Sell to Private Party, Redeem/Surrender to Entity, Broker in Public Market, Auction

• Manage Risk – Asset Due Diligence, Indemnification Letter, Legal Counsel, Outsource Functions or Entire Gift to Another Firm or Charity