Planned Giving & Tax Deductions

May 2013

Coincident with the traditional tax-filing day, on April 15, the American Council on Gift Annuities held its semi-annual meeting and affirmed that the suggested maximum rates for charitable gift annuities will remain the same. Below is the text of the announcement from ACGA, and you can find more details about ACGA and the analysis behind the rates at acga-web.org.

Approved by the American Council on Gift Annuities on April 15, 2013

Information last updated April 15, 2013

IMMEDIATE AND DEFERRED GIFT ANNUITY RATES WILL REMAIN THE SAME

The American Council on Gift Annuities (ACGA) board of directors held its semi-annual meeting on April 15. The board conducted its regular review of the assumptions underlying the rates schedule for charitable gift annuities and voted to make no changes to the suggested maximum rates that originally became effective January 1, 2012. The current rate schedule will remain in effect until further notice.

In the current interest rate environment, IRS discount rates in the range of 1.2-1.4% generate a relatively smaller charitable tax deduction. However, the balance for donors is the relatively larger portion of the annuity payment that is tax-free income. Colby is a client of PG Calc, and I especially appreciate one of the new features in the latest version of their Planned Giving Manager. When you are preparing a charitable gift annuity illustration, you can easily get comparisons based on the three available IRS discount rates. The comparison highlights the different results obtained for the charitable tax deduction and the annuity income breakdown based on the current month and the previous two months. For some donors, a high tax deduction is of primary interest, while others prefer more tax-free income.

How are you addressing the question of the tax deduction amount with your donors? Are you getting more inquiries or more gifts this year? Do you have tips to share with other members of the Maine Planned Giving Council community?

Author:  Susan Cook, Senior Philanthropic Advisor Colby College

Working with Professional Advisors

March 2013

I am often asked how a non-profit can best utilize and work with the Professional Advisors in their area.  Below are three “myths” with some of my thoughts on the relationship between non-profits and the Professional Advisor community.

Myth #1:  We are not in a position to steer client giving.  I am surprised by the number of non-profit staff and board members who ask if I can suggest that my clients make gifts to their organizations.  Professional Advisors are rarely (and ethically I believe should never be) in a position to steer their clients’ giving to a particular organization.  What we can do (and could do better) is ASK our clients if charitable giving is a component of their estate/financial plan and COUNSEL our clients on the potential financial benefits of charitable giving.  Please DO educate us about your mission and needs.  If a client mentions your non-profit, it’s nice to know something about your organization.

Myth #2:  Most of the time we need to charge for our services.  Many of us are active volunteers in our communities, but like everyone else we need to carefully monitor how much time, services or donations we give away.  Most professional advisors with whom you have a relationship are happy to occasionally answer a quick 15 minute question, but if you have a complicated issue or need a written legal opinion or tax question answered, plan to pay for the work you’ve requested.  We do recognize the good that non-profits do for our communities and we do give back, but there is a cost to our services and those costs need to be met.

Myth #3:  All Professional Advisors are not created equal.  I often compare Professional Advisors with the Medical Profession.  Like medicine, the depth and breadth of the financial/legal/tax profession is so vast that no one person can be an expert at every facet.  You have to chose whether to be a generalist—knowing a little about almost everything, or a specialist—knowing everything about a single subject.  Like medicine, you wouldn’t go to your general practitioner for a triple-bypass.  You would seek out a cardiac surgeon—a specialist.  Your general practitioner is no less capable, valuable and able.  He/She has chosen instead to understand a little about the whole body/mind/spirit and you personally rather than to only know your heart and how it works.  Your general practitioner has a role in the treatment of your heart disease, but your cardiac surgeon is also a critical component to your recovery.  Likewise, you sometimes need to seek out a financial/legal/tax specialist to make sure you get the right treatment.

Author:  Sarah Robinson, CTFA Vice President and Trust Officer Bar Harbor Trust Services

PLANNED GIVING FOR SMALL SHOPS

February 2013 

If you don’t have a formal planned giving program, where do you start?

Bequests are the most common type of planned gift and, I think, the best place for smaller organizations to focus.  Bequests are often the simplest for the donor to arrange, and the organization to promote. If you do nothing else, let your donors know that they can include your organization in their will. If you’ve received bequest gifts in the past, share those stories to inspire others. Invite supporters who have already included a gift in their will to notify you, if they wish. Take that opportunity to thank them, and learn as much as they are comfortable sharing about their gift. You might establish a legacy society for donors who have notified your organization of a bequest arrangement. This is a simple way to thank donors and raise the visibility of planned giving.

How do you know who to ask for a bequest or a planned gift?

If you’re just starting out with planned giving, look to your longest-term supporters - those donors who give annually, even at very modest levels. Consistency of giving is one of the strongest indicators for bequest giving. Also look at those who have made a personal investment in the organization: your Board, Board alumni, other volunteers, and long-term members.

How do you ask someone for a planned gift?

Talking about bequests and the idea that we don’t live forever can be intimidating. Sometimes, without meaning to, we reinforce the idea that talking about wills and the future is taboo. Don’t approach this as a grim conversation about death and dying, but rather as a talk about life and living our values. You need to establish trust and credibility before you dive into a personal topic like this. But your words should be open, direct, and unapologetic. Here is a an example to begin the conversation:

“You’ve been a loyal supporter over the years and I know that you care deeply about our work. We know that some of our supporters have arranged gifts in their will, and we want to do more to encourage gifts like this because they can make such a powerful difference. Would you be open to considering a gift in your will?”

To learn more, checkout these resources:

Partnership for Philanthropic Planning at www.pppnet.org

Planned Giving Group of New England at www.pggne.org

The Planned Giving Design Center at www.pddc.com

The Complete Guide to Planned Giving by Deb Ashton

Author: Sue Telfeian, Strategic Fundraising & Planning for Nonprofits

SET AND ACHIEVE YOUR 2013 PLANNED GIVING GOALS

January 2013 - Ah, the beginning of a new year.  That means it’s time to set some New Year’s resolutions. Many of us think about resolutions for our personal lives, but what about professional resolutions?  Let 2013 be the year that your Planned Giving program becomes a reality.

As many New Year’s resolutions fall by the wayside after the first few weeks, it’s important to set goals that lead to success. In a recent issue of the Bangor Daily News, there was an article about how to set achievable goals. The article focused on setting personal goals; however, the tactics discussed easily apply to your professional life.

According to the article, good goals have the following in common: they are Specific, Measurable, Attainable, Relevant, and Time Bound (SMART).

So, let’s say that you don’t yet have a Planned Giving program in place. Using the SMART method, what might your goals look like?

Specific:  A goal such as “I will start a Planned Giving program in 2013” is too vague.  A specific goal is, “I will present information to the Board and gain their approval to start a Planned Giving program.” Or if you already have the Board’s approval, your goal could be, “I will include information in each of our current mailings encouraging donors to remember our organization in their estate plans.”

Measurable:  How will you know if your goals are successful? Can you measure your goal by a number or can you say whether or not it was achieved? If not, then you need to go back and make some revisions.

Attainable:  Be realistic about your goals or otherwise you could be setting yourself up for failure. You don’t have to wait until you can offer Charitable Gift Annuities to start a planned giving program. Start small by focusing on bequests and reminding donors, through your website and current communications (letters, newsletters, emails, etc.), to include your organization in their estate plans.

Relevant: Are your goals relevant to the size of your organization? Let’s face it. You may be the one paid staff member and the “fundraising hat” is just one of many hats that you wear. Be reasonable about how much time you have to dedicate to Planned Giving so that your other fundraising efforts don’t suffer.

Time Bound: When will you complete each goal? Three months? Six months?  Set a completion date and then work backward to determine what needs to be done when to stay on track.

So what’s stopping you? You don’t need to know everything there is to know about planned giving to get started. Start small and focus on bequests. Ask for help when you need it. The Maine Planned Giving Council is here to be a resource for education and information.  This year, the Council will be offering new educational opportunities to help you meet your goals. Keep watching the website and your email for information about upcoming educational programs for 2013! 

Author: Cheryl Callnan, Maine Coast Memorial Hospital

Musings From the Coast on the New York Post

December 2012 - The New York Post has recently reported that the legitimacy of millions of dollars in gifts made to a well known and well regarded Boston hospital by a now-deceased donor is being challenged by her heirs, who allege that the organization and its employees exerted undue influence over the donor, which lead to her making these gifts during her life and through her will.  Read The Article

Now, I will admit that having your organization’s ethical standards questioned by the Post is not in the same league as an expose in the New York Times.  Still, I think we can agree that it’s never a good idea to have your professional ethics questioned at all – in or out of print; New York Times or New York Post or Portland Press Herald. 

As we approach the holiday season, images of Santa and his ubiquitous list are unavoidable.  I invite you to take a moment and think about whether you are on the “nice” list… or the “naughty” one.  I think that most of us would place ourselves firmly on the “nice” list without a backward glance, particularly if Santa only looked at the relationships we have with our donors.  When we wear our planned giving hats, donors tell us extraordinary things about their financial situations and their private lives.  For us to be effective in our roles, they have to.  We need to know what sorts of assets they have to fund gifts and what their goals are in making a planned gift. 

I recall talking to one donor who confided that he was concerned that his adult children were not going to manage money that they would inherit from him well and wished that there were a way that he could provide them with an income stream until they grew into more financial maturity and would behave responsibly with the principal of their inheritance.  When I suggested that he could use two different types of charitable trust to do just that (a Charitable Remainder Trust that would pay them an income for ten years and a Charitable Lead Trust that would hand over principal to them after ten years), he was amazed that such a thing was possible, all while supporting an organization that he loved. 

When I look back on that conversation, I think that I presented him with an opportunity to accomplish all of his goals: provide support to his organization and a legacy to his heirs that would be timed appropriately for their own growth and development.  I believe that he was very happy with the plan and that I acted ethically in making those suggestions to him.  I wonder, though, if his kids might have had a different thought?  Am I likely to find myself featured in a future New York Post article on undue influence in the non-profit sector, accused of being an unscrupulous gift planner?  Only time will tell, but… in the unlikely event that I am, I will rely on the good work done by the National Committee on Planned Giving (now the Partnership for Philanthropic Planning) and the American Council on Gift Annuities, who developed model standards for our use in the ethical practice of our craft.  I encourage you to take a look at our Ethics & Standards page, if you have not already and consider your donor interactions through this lens.  I also wish you and yours peace and love in this holiday season. 

Author:  Elizabeth Limerick, Hospice of Southern Maine