2. What is Charitable Gift Planning?
Charitable Gift Planning is the process of cultivating, designing, facilitating,
and stewarding gifts to charitable organizations.
Charitable Gift Planning:
• Uses a variety of financial tools and techniques for giving
• Requires the assistance of one or more qualified specialists
• Utilizes tax incentives that encourage charitable giving, when appropriate
• Covers the full spectrum of generosity by individuals and institututions,
and is based on powerful traditions of giving in the United States
3. What are Planned Gifts?
Planned Gifts are a variety of charitable giving methods that allow you to express
your personal values by integrating your charitable, family, and financial goals.
Making a planned charitable gift usually requires the assistance of the charity’s
development professional and/or a knowledgeable advisor such as an attorney,
Financial planner, or CPA to help structure the gift.
Planned Gifts can be made with cash, but many are made by donating assets
Such as securities, real estate, art, or business interests – the possibilities are
endless. Planned Gifts can provide valuable tax benefits and /or lifetime income for
the donor, donor and spouse, or other family members. The most frequently-made
planned gifts are bequests to charities, made via wills or trusts.
4. Why Make a Planned Gift?
Many people want to make charitable gifts but need to do so in a way that helps meet
their other personal, family, or financial needs. Planned Gifts give donors the option for
making charitable gifts in a ways that may allow one to:
• Make a larger gift than thought possible
• Increase current income
• Plan for the future needs of a spouse or loved one
• Provide inheritances for heirs at a reduced tax cost
• Reduce income tax and/or avoid capital gains tax
• Diversify investment portfolio
• Receive income from personal residence or farm
• Plan for the transfer of a business
• Leave a charitable legacy for future generations
5. Types of Planned Gifts
• Bequests – make up over 80% of all Planned Gifts
• Life Insurance
• Retirement Accounts
• Life Estate
• Charitable Remainder Trust (CRT)
• Charitable Lead Trust (CLT)
• Charitable Gift Annuity (CGA)
• Immediate LegacyTM
• Donor Advised Fund (DAF)
• Pooled Income Fund (PIF)
• Community Foundation
More Complex Planned Giving Strategies
• Bargain Sales
• Private Foundations
• Operating Foundations
• Supporting Organizations
6. Bequest
• Made by will
• Not complex
• But represent 83% of planned gifts, per a
study of university giving by Jonathon
Gudema
7. Bequests and Estate Tax
• Deductible for estate tax if
– Made to eligible charity
– The amount can be ascertained with reasonable
certainty
– Passes in appropriate legal form rather than
executor’s discretion
– Cannot be defeated by a contingency, event, or
person
8. Qualified Disclaimer
• Estate will qualify for estate tax deduction if a
qualified charity gets the bequest as a result
of a qualified disclaimer.
– “All my estate to St. Barnabas Church, except for a
bequest of $250,000 to my daughter.”
– If daughter properly disclaims the money; it
passes to the charity; and is deductible from the
estate.
9. Now/Later?
• Give now or at death?
• Income tax deduction is available for life time
gifts – that is one advantage
• Charities prefer “now” money
• Donor may enjoy giving while alive
• Advisors can compute whether a major life
time gift is possible
10. Life Estate
• Can give a personal residence, vacation home,
farm or ranch, while retaining the right to live
there.
• Transfer made by deed, not trust
• Charity will get property without restrictions
• Deduction is for remainder interest
11. Life Estate Calculation
• Factors in valuing the remainder interest:
– Age of donor(s) or term of the agreement
– Value of the building, useful life, and salvage value
– Value of the land
– 7520 rate (used as discount rate) 2.4% as of 1/11
– Can refer to www.pdgc.com for gift calculators
12. Gift of Real Estate
• Real estate is 50% of individual wealth, but
only 2% of gifts
• A largely untapped market for planned gifts
13. To Prepare to Accept Real Estate
• Include in Gift Acceptance Policies
• Have a Gift Acceptance Committee
• Establish minimum gift size
• Consider transaction costs & carrying costs
• Consider need for appraisal
• Consider EPA inspection
• Consider need for a real estate attorney to review title
• Consider holding period – when will it sell?
• Who will pay any debt associated with property?
14. Easements
• Income tax and estate tax deduction equal to
value of the easement
• Estate exclusion of remaining value
– 40% excluded up to $500,000
– Exclusion is reduced if the easement is less than 30% of
the land’s value
– Reduction is 2% for every 1% that the value of easement is
below 30% of total value of property
– Other complex rules apply
15. Valuing Easements
• Fair Market Value of Easement:
– Find by comparing to similar easements, or,
– Take Fair Market Value of property before
easement minus FMV after easement
• Qualified Appraisal required for deduction
over $5,000.
16. Retirement Accounts
• Gain inside an IRA, 401(k), or deferred annuity
is taxable at death as “income with respect to
a decedent.”
• IRD is taxed first under the estate tax rules.
Then it is taxed again under the income tax
rules. The income taxable amount is reduced
by the estate tax attributable to the IRD.
17. Practical Points
• Clients generally have a variety of assets.
• Capital gain assets (in years other than 2010),
get a stepped up basis at death.
• IRD(Income in Respect of Decedent) assets
can be subjected to double tax: estate tax and
income tax.
• It just makes good sense to send the IRD
assets to charity, for those making gifts, and
the capital gain assets to heirs.
18. Lifetime Gifts of Deferred Annuities
• For annuities issued before April 22, 87, a
potential tax trap exists. Based on a private
letter ruling, if the charity surrenders the
contract in a year later than the donor’s gift
– Donor gets deduction for basis in year of gift
– Donor is taxed on full gain in the year the charity
surrenders the contract
19. Uses of Life Insurance
• Gift of existing policy:
– Income tax deduction for fair market value or
basis, if less.
– Deduct premiums up to 50% of AGI if check is
made out to charity which then pays premium
– Deduct up to 30% of AGI if charity owned policy
premium is paid by donor direct to insurance
company
20. Encumbered Life Insurance
• Gift of a policy subject to a loan is considered
a bargain sale, resulting in income to donor
• Red Flag for donor
21. Life Insurance Valuation
• Gifts of existing life insurance policies with fair
market value in excess of $5,000 require a
qualified appraisal
22. Uses of Insurance in Giving
• Give old policy
• Give premiums towards a new charity owned
policy
• Use insurance to give heirs what is “right” for
them, so gift can go to charity from other
estate assets
23. Uses of Insurance
• Insurance owned by a trust outside of the
estate can buy assets from the estate that are
not appropriate for charity to own (like a farm
or business).
• Then the cash can go to a public charity or to a
family foundation, while the heirs or their
trust get the farm or business.
24. Uses of Insurance
• Insurance can replace assets gifted to charity
• Can be teamed with a CRT
– Example: Parents give $1 million to a CRT.
– Income tax deduction and cash flow from the trust
are used to replace, in whole or in part, the $1
million given.
25. Insurance and IRA
• Make charity the beneficiary of the IRA
• Meanwhile, use income from the IRA to fund
life insurance payable to heirs
• Result can be better than having the IRA go to
heirs, while some other asset goes to charity
26. Zero Estate Tax Planning
• Ask wealthy clients if they have good planning
and they say they do. Ask if they are still
paying estate tax, and many say they are.
• To get to zero tax, charitable tools may be
needed
• As part of such a plan, life insurance often
finds a natural role
27. Life Insurance
• Life insurance is a useful tool within an overall
estate plan. Such planning can result in
excellent outcomes for both heirs and charity.
• Gifts of new or existing policies to charity
makes emotional sense to small givers who
can see their small gift become a big gift at
death.
28. Insurance Philosophy
• Insurance is a fair deal, not magic money.
• Charities need to consider the carrying cost of
maintaining large numbers of small policies.
• What if donors don’t continue the premiums?
• What happens if policies lapse?
• Gift acceptance policies should address accepting
and administering insurance.
29. Insurance Philosophy
• Charities are well advised to work with insurance
professionals who place insurance either as a
straightforward gift or within a good estate or
financial plan
• Aggressive insurance concepts, often involving third
party owners, or debt financing, lead to mistrust
among charities of insurance people
• Knowledgeable fundraisers/advisors can lead in
good planning, for clients and charity, while avoiding
questionable concepts
30. CRTs, CGAs, and PIFS
• Each requires donor to make an irrevocable transfer
to a charitable entity
• Each generates an income stream to the donor or an
individual or individuals named by the donor.
• Each is part charitable and part non-charitable
• Each generates an income tax charitable deduction
for the charitable portion of the gift
• We will consider each tool in turn
31. Charitable Remainder Trust
• An irrevocable arrangement in which a donor
transfers assets in trust in exchange for an
income interest.
32. Parties to a CRT
• Donor(s)
• Trustee
– Administration
– Investment management
– Tax reporting
• Income Beneficiary (donor or other)
• Remainder Beneficiary
• Heirs
33. Charitable Remainder Trusts
Donor CRT Charity
• Donor gifts cash or assets
• Deduction is for remainder interest
• Income back to donor
• Remainder to charity at end of the trust term
34. Benefits of CRT
• Partial deduction
• Income generally for life, or term of years up to 20
• Sell asset without paying capital gain
• Diversify holdings
35. Types of CRT
• Charitable Remainder Annuity Trust (CRAT)
• Charitable Remainder Unitrust (CRUT)
• Net Income Charitable Remainder Unitrust
(NICRUT)
• Net Income With Makeup Charitable Remainder
Unitrust (NIMCRUT)
• Flip Unitrust
36. CRAT
• Pays fixed income to income beneficiaries
• Fixed % of initial contribution
• No adjustments to payout based on trust balance
• No additional contributions to the trust
37. CRAT
• Must pass 5% probability test (a less than 5% chance
that the trust will exhaust before the end of its term,
based on factors in place when trust is established)
• Must pass 10% remainder test (must show at least a
10% remainder based on current assumptions when
trust is established)
• CRAT may in reality exhaust itself, terminating
income payout and leaving nothing for charity
38. CRUT
• Pays a fixed percentage of whatever the trust has
grown to or shrunk to
• Income to donor varies
• Additional contributions are allowed
• Must pass 10% remainder test
• 5% test always met
– the trust pays a percentage of the remaining
balance, and so the trust may dwindle but not
exhaust.
39. NICRUT
• Pays the lesser of payout % or distributable net
income (DNI)
• Not allowed to distribute principal
• DNI includes rent, dividends, interest, royalties
• Trust document may include capital gains realized
post-funding in DNI definition, if state law allows
• Prefunding capital gains may not be included in
DNI, even if realized post-funding
40. NIMCRUT
• A special NICRUT that builds up an account of
undistributed DNI from previous years
• May make up payout % for current year by drawing
on undistributed DNI account
• Trust document may include capital gains realized
post-funding in DNI definition, if state law allows
41. “Spigot” NIMCRUT
• Defer income to retirement, say, or college funding
• CRT asset strategies control the flow of income
• Among the income control methods:
- variable annuities
- zero-coupon bonds
- zero dividend stock
42. FLIP CRUT
• NICRUT or NIMCRUT that becomes Standard
CRUT on occurrence of predetermined event
• No income paid out when no income available
• Good for gift of, say, land, which initially produces
no income.
• Converts to a Standard CRUT when assets are
converted to produce both income and growth,
which may then be used to make the payout.
43. Permissible Trust Terms
• Life, or lives
• Term of years not to exceed 20
• Combination of the above
44. 4 Tier Taxation
• “Worst first”
1. Regular income from current and prior years
2. Capital gains from current and prior years
3. Tax-free income and other income from current and
prior years
4. Untaxed return of principal
• Trustee can adjust beneficiary taxes through
investment strategies
45. Issues in Choosing Format
• Income needs of income beneficiaries
• Risk tolerance of income beneficiaries
• Nature of the funding assets
- E.g., use of real estate or other non income-
producing property may dictate choice of a
NICRUT or NIMCRUT or Flip Unitrust
46. Among Assets to Avoid
• Partnership interests
– Income passes through to trust creating unrelated
business taxable income which is taxed at 100%
• Personal residence
– Cannot live in residence without committing self dealing
48. The Funding Decision
• Funding decision is the final step in the process of
analysis, choice, and strategy that flow out of and
determine the identity of the assets chosen by the
donor to accomplish his or her long-term charitable
and financial intentions
• Choice of assets depend upon type of CRT and
donor’s planning objectives
49. Funding a CRAT
• A CRAT may only be funded once over its life
• No additional contributions are allowed
• All assets must be transferred to the trust
simultaneously
- E.g., cash, stocks, and mutual funds used to fund the
CRAT must be transferred to trustee at the same time
50. Limitations on Transfer of Assets
• Contractual or regulatory pre-transfer requirements
must be met
- E.g., restricted stock is subject to SEC rules and
disclosure requirements, as well as contractual
limitations which may delay effective date of transfer
• Timeliness is important to avoid significant
fluctuations in value of funding assets
51. Asset Sale and Management
• Asset management strategy must be developed prior to
funding
• Asset sale, if required, must be planned and
accomplished in a timely manner
• All technical, legal, administrative requirements must
be met in a timely way
52. Issues in Choice of Payout
• Expected investment performance
• Needs of income beneficiaries
• Risk tolerance of income beneficiaries
• Charitable remainder desired
• Type of trust
53. Who Bears the Investment Risk?
• CRAT shifts investment risk to remainder beneficiary
• Unitrusts distribute market risk more evenly between
income and remainder beneficiaries
• By limiting income payout to DNI, net income
unitrusts, especially NICRUTs, shift market growth to
remainder beneficiary
55. Estate Tax Issues
• Assets in CRT are includible in the donor’s estate
• Charitable deduction generally will remove CRT
assets from the taxable estate
• Income to spouse may be excluded from decedent
donor’s estate
• Income to anyone other than spouse causes inclusion
of all CRT income in the decedent donor’s estate
56. Administrative Concerns
• Strict federal and state reporting requirements
• Income distributions must be timely
• Requires available funds to pay distributions
• If liquid funds are unavailable, required payment of
in kind assets
57. Use in Sale of Business
• Transfer stock to CRT then sell the stock
• Avoids capital gains taxes at time of sale
• Get deduction for remainder interest
• Converts non-liquid equity in business into income-
producing CRT assets
• Investments in CRT enjoy tax-free growth
• An advanced technique requiring expert legal
counsel
58. Gift Annuity
Gift
Donor Charity
Annuity
• Donor gifts cash or assets
• Often used for gifts of $50,000 or even less
• The charity itself is the payer; no trust involved
• Deduction is for remainder interest
• Income back to donor is taxed with basis, capital gain, and income
prorata
59. Benefits of Gift Annuity
• Income for life
• Partial income tax deduction
• Can defer capital gain
• No legal work required
• Can be done for small amounts
60. Essential Elements
• One or two lives
• Not a term of years
• The annuity payments are fixed and are not based on
the charity’s own return
• Gift portion must represent at least 10% of the gift’s
value on date of contribution
61. Payout
• Based on income beneficiary’s age at time of gift
• Charity is free to set its own rates
• Uniform (suggested) rates set by American Council on
Gift Annuities (since 1927)
• ACGA rates designed to retain half of gift for charity
at life expectancy
62. Immediate Gift Annuity
• Payments start immediately
• Payments guaranteed for life of donor or donors
• Provides income tax deduction for the donor based
on value of gift minus present value of payments
• Capital gain is spread over life of donor
63. Deferred Gift Annuity
• Payments start in a later year determined by donor
• Tax deduction is taken at time of gift, based on age,
payment, and start date of annuity
64. Stepped Gift Annuity
• Payment stream increases over life of annuitant
• Schedule set forth in annuity agreement
• Also may be accomplished with a series of gift
annuities
65. Charity’s Management Issues
• Secured by the full faith and credit of the issuing
charity
• Return is guaranteed by the charity
• Annuity payment is not conditioned upon a return
received by charity
• May be reinsured by charity’s purchase of a
commercial annuity, subject to state law
66. Income Beneficiary
• Any individual named by donor at time of gift
• Up to two individuals may be named
• If other than donor or spouse, a taxable gift occurs
• Tend to issued at older ages, 65 and up
67. Prospects
• Typical gift annuity donor is single, age 77
• Median CGA is $57,000
• Competes with a CD for those with charitable intent
68. Advantages to Donor
• Easy to understand
• Provides donor with guaranteed income stream
• Transaction is part gift
• Income tax charitable deduction in year of gift
• Beneficial capital gains treatment for donor
• Simple documents, little or no legal expense
69. Cautions
• Charity dies before donor? Donor is left as a general
creditor
• State laws govern; some require registration
• Not all charities offer these
• Look for a strong stable organization
• Some charities have large blocks of CGAs and may
not have sufficient assets backing them, on an
actuarial basis
70. Pooled Income Fund
Donor PIF Charity
• Donor gifts cash or assets into commingled fund with assets from other
donors
• Gets prorata share of income back
• Gets deduction for the remainder interest
• Income retains its character, i.e, if dividends paid out, then taxed as
dividends; if interest paid out, taxed as interest, etc.
71. Pooled Income Funds
• Fund is created and operated by a charity
• Transfer to the fund is irrevocable
• Donor income based on value of contributed assets
compared to total fund value at time of gift
• Fund distributes income to beneficiaries for life
• At death of income beneficiary, fund liquidates
interest of that beneficiary and distributes
underlying assets to the charity
72. PIF Income Tax Issues
• Provides a partial income tax charitable deduction
• Deduction based on remainder interest computed
using fund’s highest income in past 3 years
• Avoids tax on long-term gain contributions
• PIF pays tax on income, less amounts paid to
beneficiaries, less long-term capital gains
• Short-term gain taxed unless distributed
73. Income Beneficiaries
• May include the donor, donor’s spouse, children, or
other beneficiaries
• Beneficiary must be alive at the time the fund is
created
• Beneficiary interest is for life
74. Contribution Assets
• Many charities restrict contributions to cash,
marketable stocks and marketable bonds to simplify
investment issues and avoid problems
75. Advantages
• Income beneficiary receives income for life
• Donor can make small gifts without legal costs
• Donor receives a charitable deduction
• Long-term gain property avoids capital gains tax
76. Disadvantages
• Fund operation is hard to understand
• Fund startup and maintenance expenses
• Once started, charities may feel stuck with it
• Income today tends to be quite low
77. Charitable Lead Trusts
• “Split-interest” gift with a “lead (income)
interest” and a remainder interest
• “Lead interest” goes to one or more
qualified charitable organization(s)
• Remainder interest goes to non-charitable
entity
• NOT TAX EXEMPT
78. Simple Points to Remember
• 90+% of CLTs are for estate tax reduction, not
income tax reduction.
• Used by very wealthy families to reduce or
zero out an estate for transfer tax purposes.
• Can be set up during life or at death
• Compete with Foundations in some respects
as grant-making entities.
79. Simple Points to Remember
• Low Federal rate, the 7520 rate, is ideal for
CLTs (2.4% as of 1/1/11)
• Depressed asset prices going into CLT are
ideal, if asset is expected to rebound
• So, today is historically the best time ever for
the most common CLT – called “Non-grantor
CLT
80. CLT Formats and Terminology
• CLUT • Testamentary
– Income to charity varies – Set up to start at death
• CLAT • Inter Vivos
– Income to charity fixed – Set up during lifetime
• Non-Grantor
– Estate tax tool
• Grantor
– Income tax tool
81. Charitable Lead Trusts
Asset Asset
Donors CLT Remainder
For non-grantor,
CLT remainder
Income goes to heirs; with
grantor trust may
go back to donor
Charities
82. Factors in Computing Charitable
Element
• Charitable element is a function of term trust, discount rate,
trust type (unitrust or annuity trust), and payout rate
• A longer term, higher payout, and lower discount rate (7520
rate), are all conducive to a larger charitable deduction for
estate tax purposes (nongrantor CLT) or income tax purposes
(grantor CLT).
83. Non-Grantor CLT
Donor CLAT Charity
Heir
• Donors give asset to CLT
• Income goes to charity
• At end of term, balance goes to Heir
84. Benefits of Non-grantor CLT
• Zero out an asset • Help charity with
• Or greatly reduce its stream of income
value for transfer tax during trust term
• Can zero out an entire
estate
85. Permissible Payout Term
• For either a fixed term or “lives in being”
– limited to one or more of the donor, the donor’s spouse,
or a lineal ancestor or spouse of a lineal ancestor of all of
the remainder beneficiaries
• Remainder to any non-charitable entity
– may include Donor or Donor’s “heirs”
86. Non-Grantor CLT
• Trust is taxed as a separate entity
• Trust itself entitled to an unlimited income
tax deduction for charitable gifts paid in
accordance with trust terms.
87. Non-Grantor CLT
• Donor gets no income tax deduction for
setting up the non-grantor CLT
• The trust has income from investments, but
gets offsetting income tax deduction when
payout is make each year to charity.
• This is transfer tax play, not an income tax
play!
88. Charitable Lead Annuity Trust
• Irrevocable gift to Trust, paying a fixed amount to
Charity annually
– may be stated as a fixed dollar amount or
– may be stated as percentage of initial value
– payout does not change as assets in trust go up and
down
– no upper or lower limit on percentage/annuity amount
89. Charitable Lead Unitrust
• Irrevocable gift to Trust, paying a fixed percentage
of assets to charity based on the value of those
assets, as revalued annually
– no upper or lower limit on percentage/annuity amount
90. “Zero-value” Non-Grantor CLAT
• With a high enough payout rate, a low enough
7520 rate, and a long enough trust term, the
actuarial value of the charitable interest will
shelter the entire value of the asset transferred to
the trust.
• Trust can zero out for tax purposes while assets
inside trust may actually grow!
• “Can you beat the 7520 rate over the trust term?”
If so, CLTs are attractive.
91. Zeroed out Non-Grantor CLT
Donor CLAT Charity
Heir
• Donor give $1,000,000 to CLAT
• $70,000 fixed to charity each year for 20 years
• 7520 rate at 3% for this illustration
• “Zeros out” transfer tax on that asset
• At end of term, balance goes to Heir
• If trust earns 8% heir gets $1,400,000 – all without transfer tax
92. Grantor-Retained CLT
• A CLT in which the Donor retains an interest
or power which results in the trust being
treated as a “grantor trust”
• With a grantor trust, income, deductions and
other tax consequences flow back to the
donor’s own tax return
• Income tax benefits to donor when set up
• But all income taxed back to grantor over
trust term (“phantom income”)
93. Grantor CLT
• “Phantom Income” and Remainder Value
actually received by the beneficiaries are
influenced by investment strategy and asset
allocation.
94. Grantor-Retained CLT
• If Donor dies prior to end of CLT term,
possible “claw back” of initial Charitable
Income Tax Deduction.
95. Grantor Charitable Lead Trust
DONOR CHARITY
CLT
Transfer Assets Trust disburses at end of
to CLT term to grantor (this is
one way to make it a
grantor trust
DONOR
96. Grantor Charitable Lead Trust
Initial
DONOR Income Tax CHARITY
Charitable
Deduction
CLT
Annual
“Phantom”
Income
to donor on
Trust income
DONOR
97. Grantor Charitable Lead Trust
DONOR CHARITY
5% CLAT
10 yrs
Transfer
$1,000,000
cash to CLT
DONOR
99. Grantor Charitable Lead Trust
DONOR CHARITY
5%
CLAT: 10
yrs Annual
Distribution to
Charity:
$50,000
DONOR
100. Grantor Charitable Lead Trust
DONOR CHARITY
5%
CLUT: 10
yrs
Remainder Assets to
Donor: Whatever the
assets have grown to or
shrunk to DONOR
101. Grantor CLT Investment Issues
• Traditional “Diversified” Portfolio
– Some Ordinary Income (rent, dividends, interest)
earned each year
– Some Gains (Long and Short Term) realized from
time to time as portfolio is actively managed
• All taxable receipts are taxed to Donor,
whether paid out to charity or retained by CLT
102. Traditional Portfolio
• Does not consider the tax effect of earnings, trades
or other components of asset management that
might impact the donor in a Grantor trust
(“phantom income”)
• Trust holdings not specifically designed to minimize
effects of “phantom income”
• May result in tax payments by donor which are not
necessary in light of donor’s objectives
103. “Tax-Free” Portfolio?
• All earnings of CLT tax-free, so donor gets no
“Phantom Income”
• Growth of corpus is minimal at best
• If payout is greater than earnings, corpus will be
distributed, reducing remainder value
104. CLT: Generation Skipping Transfer Tax
• Comes up when the donor wants to make the trust
go at termination to a beneficiary more than one
generation down (e.g., grandchildren)
• Subjects generation skipping transfers to an
additional transfer tax to, in effect, make up for the
asset not being taxed in the intervening estate
• Rules differ for CLAT as opposed to CLUT
– More favorable for CLUT
105. GSTT for CLUT
• For Charitable Lead Unitrusts, a charitable
exemption is allowed at inception in
computing GST.
• Meaning: GSTT implications are
determined and controlled at funding date
– client’s prefer this.
106. GSTT for CLAT
• For CLAT a charitable GST exemption is NOT allowed
at inception
– Rather an “adjusted exemption” is allowed at termination
– “Adjusted exemption” determined by increasing the
exemption amount over the term of the trust at the 7520
rate in effect at creation of the trust
• Makes it impossible to determine accurately the final
GSTT consequences of a transfer to a Charitable Lead
Annuity Trust – Donors dislike the uncertainty
107. Practical
• GSTT rules are complex and beyond the scope
of this course.
• Recogize that:
• A CLT for, say, grandkids is a red flag
• Most likely a CLUT will be preferable, but leave that
conversation to qualified counsel
108. “Private Foundation” Rules
• CLT trust terms must prohibit:
– Self-dealing
– Excess business holdings
– Jeopardy investments
– Taxable expenditures
• Note: These rules will be treated at greater
length in the assignment on Foundations.
109. “Private Foundation” Rules
• “Self Dealing” includes sale or exchange of property
between trust and “disqualified person,” including
Donor or Trustee.
• Jeopardizing investments are risky investments that
my jeopardize the trust
110. Private Foundation Rules
• Excess business holdings and jeopardy
investment restrictions not applicable if
– Charitable interest of the CLT at inception is less than 60%
of the aggregate fair market value of the trust assets at
inception
– And the CLT income interest is devoted to specified
charitable purposes.
• Note: This exception can be useful when seeking to
fund a CLT with a closely held business interest
111. CLT Donor Profile
• A client who wants to benefit charity
• Client whose non-charitable remainder
beneficiaries can afford to wait for property (BUT,
think Irrevocable Life Insurance Trust as a
temporary solution)
• Client who can forego income from CLT assets for
term of trust
112. CLT Donor Profiles
• Client is making gifts to charity
– Use CLT to make current gifts
– Move assets dedicated to supporting current
gifts from taxable estate and begin moving
principal (and any net growth) to heirs today
113. Non-Grantor CLT Client Profiles
• Substantial future estate tax problem
• Assets which the client-donors
– Do not need for current income production
– Do not need to be able to sell or otherwise control
for their own benefit
• Most likely married candidates will have
$7,000,000 or more of net worth
114. Non-Grantor CLT Prospect
• Donor is hitting the AGI limits for annual gifts
• Consider gifting to CLT an income producing asset.
• Income from asset is 100% deductible to trust, but
limited to a fraction of AGI in donor’s hands.
• Net result: Donor need no longer realize income
from the asset that donor cannot deduct as a gift.
115. Example
• Client makes $60,000 annual gifts
• Client has “dedicated” $1,000,000 of asset base
PLUS its earnings to sustain this giving at 6% net
return on assets
• $1,000,000 is currently part of Client’s taxable
estate
• Move $1,000,000 to CLAT with 6% payout to
sustain giving AND remove, or largely remove,
assets from taxable estate
116. Design Strategies
• Inter vivos (lifetime) term of years CLT: Setting up
sooner is better than later
– Assets pass to children at younger ages
– Gets assets and future growth out of the estate
– Allows lower distribution requirements since term can
be longer (time until heirs “inherit”)
117. Design Strategies
• CLT not income tax exempt
– Therefore, always need tax efficient management
(possible investment management selling point)
– Best funding = high basis assets or cash
– Can fund with low basis assets, but would need to develop
“sell strategy” with asset manager since the gain is taxable
to the trust in year of sale, and there may not be a
sufficient offsetting charitable deduction
118. Design Strategies
• Charitable Lead Trusts do not necessarily
stand alone
– CRT could provides source of replacement income
lost to lead trust asset transfer
– Wealth replacement insurance can provide
interim liquidity and/or guaranteed inheritance for
children who might have to wait for the CLT
(particularly a testamentary CLT) to disburse
119. CLT and Foundation
• Use payout from CLT to create and build
foundation assets
• Care should be taken in setting all this up to
consult with qualified counsel (donor can’t have
too much control over both CLT and Foundation.)
120. CLT versus Foundation
• Client considering a foundation?
• Maybe a CLT would do the same job better.
• A CLT is donor-created grantmaking entity, but
one that will eventually pour over to the heirs.
• Whereas, a foundation never reverts to the
family.
121. Issues
• The ever changing taxation and legality of
such strategies to displace and defer the final
application of charitable dollars to community
needs is one issue.
• The other issue is how much good is done,
when, for whom?
122. Where? When? How?
• “Where would you like to make a difference in
the world?”
• “When? Now, later, or at death, or beyond
death?”
• “How? With that tools?”
123. CLT from Charity’s Perspective
• A living lead trust can pump significant dollars
to a charity for current programs.
• Life insurance can replace the stream of
payments when the trust term ends.
124. CLT from Heir’s Perspective
• “A deferred inheritance trust.”
– CLT at death for 20 years, say.
• Yet, consider it in comparison to a Foundation
– With a CLT assets do eventually go to the heirs,
with a Foundation they never will
– Again insurance can provide money at death,
while the heir waits
125. CLT from Heir’s Perspective
• The heir too may be philanthropic and civic
minded.
• A CLT like a Foundation can advance higher
aspirations, and meet community needs, as
well as providing all the social benefits of
“beneficence.”
126. Not a Package Sale
• “There has never been a better time for CLT’s”
– True!
• But a CLT is a tool or technique of an overall
estate plan and financial plan
• An advisor will “kill the deal,” unless consulted
early about how the trust fits in the overall
plan
127. Questions for Prospects
• You have an excellent estate plan, I am sure.
Are you still paying any estate tax?
• Have you considered a Foundation? Would
you be interested in an alternative in which
your heirs can actually get the assets back
often free of estate tax?
128. Questions for Prospects
• As generous as you have been, do you
sometimes hit the limits on what you can
deduct? May I show you a tool that will allow
you to give more in a tax advantaged way?
129. Questions for Prospects
• I am sure you have an excellent estate plan.
Are your advisors aware how idealistic and
committed you are to giving? Would it be
helpful if I were to meet with them to discuss
options that can help you personally, help
your heirs, reduce estate tax, and make a big
difference for the causes you care about?
130. The Close
• You do not “close” for a CLT
• You close for a process that suits tools and
techniques to client goals via an overall plan
for self, family, and society
• Having carefully understood the prospect’s
goals, you often close for a meeting with
advisors, or for permission to convene a team
132. Impact
• A CLT is a powerful tool for achieving a
positive impact for heirs and for charity.
• What is in it for the donor is knowing that his
or her goals are accomplished with great tax
efficiency.
• Sell impact and the rest falls into place.
133. Donor Advised Funds
• Hugely popular
• Can be considered like family foundation for those
of more modest means
• Some of the largest donor advised fund
complexes are offered by the nonprofit arm of
such financial firms as Fidelity, Schwab, and
Vanguard (and many others)
• Have traditionally been offered by Community
Foundations, Jewish Federation, and other
nonprofits
134. Immediate Legacy™
• A Patent Pending Process That
– Generates an Immediate Donation to a Charity at
No Net Cost to a Charitable Supporter
– Provides the Charitable Supporter a Current
Income Tax Deduction for the Donation Created
A Non-Disclose Agreement is Required
135. The Four Quadrants of Wealth™
Assets
Income Earmarked for Charity
Retirement Assets
Earmarked for
Family
136. Insured Death
Benefit
$17,000 $500,000 At
Annually Supporter’s
Death
Charitable $500,000 Charitable $364,000 Personal
Supporter LLC Pension
$22,500 $39,500
Annually for Annually
Term of for Life of
Loan Supporter
Charity $136,000 IMMEDIATE
DONATION
137. Flexibility of Immediate Legacy™
Immediate Donation Now
Immediate Donation Now & Annual Donations
138. Insured Death
Benefit
$17,000 $500,000 At
Annually Supporter’s
Death
Charitable $500,000 Charitable $364,000 Personal
Supporter LLC Pension
$22,500 $39,500
Annually for Annually
Term of for Life of
Loan Supporter
Charity $136,000 IMMEDIATE
DONATION
139. Insured Death
Benefit
$17,000 $500,000 At
Annually Supporter’s
Death
Charitable $500,000 Charitable $364,000 Personal
Supporter LLC Pension
$22,500 $39,500
Annually for Annually
Term of for Life of
Loan Supporter
Annual Gift to Charity Charity $136,000 IMMEDIATE
DONATION
140. Flexibility of Immediate Legacy™
Immediate Donation Now
Immediate Donation Now & Annual Donations
Immediate Donation Now
Annual Donations
Donation at Death
141. Insured Death
Benefit
$17,000 $500,000 At
Annually Supporter’s
Death
Charitable $500,000 Charitable $364,000 Personal
Supporter LLC Pension
$22,500 $39,500
Annually
for Life of
Supporter
$12,500
To Deferred $10,000
Gift of Annual Gift Charity $136,000 IMMEDIATE
$365,000 to Charity
of Life DONATION
Insurance
143. Charitable Remainder Trust Immediate Legacy
Tax Deduction for Donor? YES YES
Income Paid to Donor? YES YES
Immediate Donation to Non-Profit? NO YES
All Assets Returned to Donor? NO YES
144. Charitable Gift Annuity Immediate Legacy
Tax Deduction for Donor? YES YES
Income Paid to Donor? YES YES
Immediate Donation to Non-Profit? Maybe YES
All Assets Returned to Donor? NO YES
145. Immediate Legacy™ Case Studies
Donor:
Age/Gender: 64 Male
Estimated Net Worth: $7 Million
Marital Status: Married
Spouse: 60 Female
Combined Income Tax Bracket: 33%
(Federal and State)
Asset Used for Immediate Legacy™: Cash Account
Asset Size: $1,000,000
Interest Earned on Account: 3%
Interest Amount: $30,000
Tax on Interest: $10,000
Net Income: $20,000
146. Insured Death
Benefit
$24,049 $1,000,000 At
Annually Supporter’s
Death
Charitable $1,000,000 Charitable $768,601 Personal
Supporter LLC Pension
$40,000 $64,049
Annually for Annually
Term of for Life of
Loan Supporter
Charity $231,399 IMMEDIATE
DONATION
147. Before After
Income from Asset $30,000 $40,000
Tax on Income @ 33% $10,000 $5,333
Net Income $20,000 $34,667
Income from the Immediate Legacy™ Program is Tax-
Advantaged Due to Something Called a Tax-Exclusion Ratio. A
Tax-Exclusion Ratio Provides the Income Recipient Tax-
Advantaged Income for His or Her Statistical Life Expectancy*.
In this case, assuming a 33% combined tax bracket, a taxable
equivalent yield of 5.17%, rather than the 4% stated rate.
*Should the income recipient live to his/her statistical life expectancy, the tax exclusion
ratio ceases.
148. Additional Potential Tax Benefits:
Charitable Donation $231,399
Tax Savings @ 33% $76,362*
In This Example, The Supporter Receives Greater Net Income on
the Asset; All the Money Used in the Process Will Be Returned to
the Supporter’s Family AND the Supporter Receives $76,362 in
Income Tax Savings, Effectively Getting Paid to Execute the
Strategy!
*Cash Charitable Donations Are Deductible Up to 50% of Adjusted Gross Income. Unused
Deductions in a Current Tax Year Can Be Utilized in up to 5 Subsequent Tax Years for a
Total of 6 Tax Years.
149. Immediate Legacy™ Guidelines:
Supporters Aged 45-85 (Strategy designs have been
completed on supporters as young as age 28)
Male or Female
75% Success Rate
15% - 35% of Loan Amount Provides an Immediate Donation
to Charity
151. Donor Advised Funds
• Donor makes irrevocable contribution to a non-profit
organization that administers
the fund
• Receive immediate income tax deduction
– Qualify for public charity deductions
• Donor recommends charitable grants based on
his/her timetable
• Some charities will allow named beneficiaries may
assume advisory role after death, if the charity
allows this
152. Donor Advised Funds
• Can be opened in modest amounts, like
$10,000
• As easy to establish as a mutual fund
• Some organizations will accept appreciated
property, or even business interests, under
certain circumstances
153. DAF Uses
• “Training wheels” for a future Foundation
• Good way to engage children in giving
• Can be used in high income years to set
money aside for future gifts
154. DAF Uses
• A small foundation may prove cumbersome
for a family
• They may decide to roll the foundation into a
DAF
• Foundations require public disclosure of
grants, but with a DAF giving can be
anonymous (c.f., gifts to controversial causes)
155. “Conduit” or “Pass Through”
• A private foundations that by its own terms
must distribute each year all its net assets for
charitable purposes
• May pay reasonable administrative expenses
from assets
• Receives “public” tax treatment for income tax
purposes
156. Community Foundations
• Serve a philanthropic hub for the community,
connecting donors and nonprofits
• Have their own endowments
• Also hold DAFs and other segregated funds
• Are staffed to “reach out” to advisors, as well
as donors and nonprofits
157. Community Foundations
• Have deep local knowledge of needs and
causes
• Can connect donors to others interested in
same causes
• Are philanthropic educators and motivators
• Nearly 700 CFs in the US
158. Community Foundations
• CFs may get 40-80% of funds from advisor
referrals
• Do advisors, CFs, and DAF providers like
Fidelity, Schwab and Vanguard compete for
assets under management and client control?
– Yes, but also collaborate to raise the field
– CAPs works throughout this sector
159. Which Tool is Right?
• What assets are being used?
• How much will go into the tool?
• How much control is enough?
• How important is privacy?
• How important is perpetuity?
160. Which Tool is Right?
• Planning tolerance
• Fee tolerance
• Time required
– “This Foundation is more trouble than a pet,” as
one donor said.
• Prestige?
161. Resources to Research
• Council on Foundations
• Foundation Center of Atlanta
• Association of Small Foundation
• National Network of Consultants to Grant-makers
• Regional Association of Grantmakers
• Local Community Foundation (CFGA)
• Foundation Source
• Attorney in your area specializing in exempt
organizations and estate planning
162. Passion
• The depth of your commitment to “social
good” is a common bond with well connected
leaders
• As one advisor said, “In philanthropic advisory
work you meet the best people in their best
moments.”
• The tools and the plans are ways to amplify
money to best effect
163. Types of Private Foundations
• Private Family Foundation
• Supporting Organization
• Private Operating Foundation
• “Conduit” or “Pass-Through” Foundation
164. Private Family Foundation
• A private foundation that makes grants rather
than provide services to the public
• Funded by, governed by, and usually named
after a particular individual or a family
165. Private Foundation
• Gifts to PFs are deductible,
– appreciated publicly traded securities at FMV;
– Other appreciated property at basis
• Deduction subject to 30% AGI limitation for
cash and 20% limitation for long term capital
gain property
166. Private Foundations
• Popular with affluent families
– Maximum flexibility and control over assets
– Means to instill values in family members
• Restricted deduction limits
– But consider a Supporting Organization for higher
deductibility and for various “problem” assets
• Stringent reporting requirements
167. Private Foundation
• Created in trust or corporate form
• Governed and managed by trustees or
directors
• Regulated by states and by federal
government
168. Private Foundations
• Generally make grants to 501(c)(3)
organizations
• 5% granted out each year, including
administrative costs
169. Private Foundations
• IRS and State Attorney General or Secretary of
State, have jurisdiction
• Policies a foundation should adopt include
– Conflict of interest
– Investment policy
– Travel and expense policy
– Record retention policy
170. Private Foundations
• Should have a succession plan
• Regular meetings of its Board, with record of
Board minutes
• Should have accounting, recordkeeping, and
bookkeeping systems
• Solid financial controls
• 990-PF is a disclosure form filed annually and
publicly available
171. Private Foundation Grant-making
• Formal or informal
• Best to have some focus so that grant requests
can be limited to that focus
• Grant guidelines can be published
• Recipients should agree with grantmaker on
“metrics” and reporting
• Impact becomes an issue – “Have we
accomplished anything in the world?”
172. Private Foundations
• Often called Family Foundations
– Can bring family together in common purpose, or
give them something new to fight about
– Instill traditions of giving
– Involve children early
– Open the eyes of succeeding generations about
community needs and how others live
173. Private Foundations
• Council on Foundations, Association of Small
Foundations, and Regional Associations of
Grant-makers, among others, can bring
families with foundations into a “flotilla” of
like minded funders.
174. The Private Foundation Rules
• Stemmed abuses
• Make very hard to use a foundation to hold small
business assets or to have dealings back and forth
between the donor, the donor family, donor
controlled entities, and the foundation
• Complex area of the law
• Qualified counsel is advised when a situation touches
on these rules
176. Requirements for Income Tax
Deduction
1. Must be voluntary
2. Made to an eligible charity
3. Without consideration or benefit to donor
Note: Above is the general rule. The majority of
planned gifts are exceptions to #3.
177. Completed Gift
• To be deducted a gift must be “complete”
– No strings attached
– No ability to revoke
– Nothing of value coming back to the donor (“quid
pro quo”)
– No deduction for gift of a partial interest.
• These are the general rules. For quid pro quo gifts
and gifts of a partial interest certain special rules and
exceptions apply.
178. Eligible Charities for Income Tax Deduction
• The Federal Government , a state, the District of
Columbia, a political subdivision, but only if used for
a public purpose
• An entity organized exclusively for religious,
charitable, scientific, educational or other approved
civic purposes
• A Veterans organization
• A domestic fraternal order, such as Shriners
• Certain cemetery companies
179. Pub. 78
• IRS publication listing eligible charities
• Can be accessed at www.irs.gov
180. Gifts to Individuals
• Gifts directly to individuals are not deductible.
• Must go via an eligible charity
• The charity must have control
181. Gift of Partial Interest
• Give it all, without consideration, or no
deduction, unless it falls under an exception:
– CRTs, CLTs, Pooled Income Funds, Gift Annuities,
Life Estates, Bargain Sales are among the
exceptions
– When the donor does get such things as a dinner
or sports tickets back, the value received reduces
the deduction.
182. Deduction Limitations
• Note: These rules are complex, but are the
stock and trade of anyone doing philanthropic
advising.
• It is best to memorize them, but the CAP
should in any case keeps the rules handy.
• An excellent chart is found in Charitable
Strategies, Appendix 3 A.
183. Factors in Computing Deduction
• The type of property donated
• The type of charity receiving the gift
• The fair market value of the gifted property
• The value of any goods or services received in
return for the gift
184. Limitations
• In addition to the rules as to computing the
deduction, another set of rules determine how much
of the deduction a client can take in a given year.
Those rules turn on the donor’s “contribution base,”
which is generally, Adjusted Gross Income.
• Thus, a gift may be “deductible,” yet the donor may
not be able to take it, because it hits the donor’s
deduction limit for that year.
185. Type of Property Given
• Generally, gifts are deductible at fair market
value, but there are exceptions.
• On the following slides are items deducted at
fair market value reduced by unrecognized
gain.
186. Ordinary Income Property
• Inventory, short term capital gain property, life
insurance, deferred annuities, works of art or
literature created by the taxpayer
• These are among the items that can be
deducted only at Fair Market Value minus any
unrecognized gain.
187. Tangible Personal Property
• Furniture, collectibles, jewelry, equipment,
works of art, etc.
• These are generally deductible only at FMV
minus gain, unless they will be used by the
charity for its exempt purpose.
188. “Applicable Property”
• This is tangible personal property that seems to
qualify for a FMV deduction since it will, apparently,
be used by the charity for an exempt purpose, but is
in fact not so used.
• When the deduction claimed is more than $5,000,
and the charity sells the property within the tax year,
the property is considered applicable property and
deduction is for basis.
189. “Applicable Property”
• When the property given for use by the charity in its
exempt purpose is sold by the charity within 3 years,
the difference between the deduction for FMV and
for basis is recaptured by the tax payer….
• Unless, the charity has given the taxpayer a good
faith certification at the time of the gift that the
property will be retained and used for an exempt
purpose.
190. Appreciated Property to Private
Foundation
• Gifts of appreciated property to private
foundations (other than operating
foundations) are deductible at basis unless the
property is “qualified appreciated property.”
• Qualified appreciated property is property
traded on a public exchange for which
quotations are generally available.
191. Review
• What is the general rule?
– Deduction for FMV
• What are the exceptions?
– Ordinary income property
– Tangible personal property, unless used by charity for
exempt purpose
– “Applicable property”
– Capital gain property, other than “qualified appreciated
property,” given to a Private Foundation
192. Quid Pro Quo Rule
• Gift made and donor gets goods or services in
return. Only the amount of the gift in excess
of the quid pro quo is deductible.
193. Quid Pro Quo
• Incidental (insignificant) benefit is ignored
• Token items, like coffee mug or t shirt can be ignored,
when the gift is $48 or more.
• Token items for 2010 can be ignored if valued at the
lesser of 2% of the gift or $96.
• Intangible religious benefit can be ignored
• Membership benefits offered in exchange for a gift of
$75 or less can be ignored if the rights to use them
can be exercised frequently
194. Documentation
• For value of the quid pro quo, donor can rely
on the charity’s own good faith estimate of
the value, unless the donor knows the
estimate is false.
195. Gift of Patents
• Donor gives patent or intellectual property.
– Initial deduction is lesser of basis or FMV.
– In succeeding years, donor is allowed deduction
for a portion of the income the charity receives
from the property.
196. Limitations Based on Income
• Say the gift is deductible:
– Whether the deduction can actually be used, or how much
of it can actually be used, will depend on donor’s Adjusted
Gross Income (AGI)
– And it will depend on the type of charity to which the gift
is given.
– And it will depend on the type of property given to that
type of charity.
198. Terminology to Memorize
• 50% charity – a public charity, like a college,
United Way, religious organization, hospital,
and also a private operating foundation.
• 30% charity – a private foundation, and also
veterans orgs, certain cemetery associations,
and fraternal orgs.
199. Percentage Limits to Memorize
• 50% orgs – gifts of cash are deductible up to a
limit of 50% of AGI.
• 30% orgs – Gifts of cash are deductible up to
30% of AGI.
200. The AGI Limits
Type of Property Gifted To 50% charity To 30% charity
Cash 50% 30%
Ordinary Income Property 50% based on lesser 30% based on lesser of
of basis or FMV basis or FMV
Long term Capital Gain 30% 20%
Property
Tangible Property Unrelated to 50% 30%
Tax-Exempt Purpose
Note: Unused deduction can be carried
forward and used over five more years
201. Step Down Election
• An election is available whereby donor can
reduce the amount of the deduction for long
term capital gain property to basis.
• If the election is taken, the deduction limit is
50% of AGI, rather than 30%.
• Election must apply to all to such property
gifted in a tax year.
202. Thought Process with Donors
• “Where will you make the gift?”
• “What will you give?”
• “What is your Adjusted Gross Income?”
• “What others gifts have you made this year?”
• “Has your accountant said you have hit your AGI
charitable deduction limits?”
• “Per your accountant, do you have charitable
deduction carry forwards from prior years?”
203. Your Role
• You are not a CPA!
• Be should be familiar with the rules, but CPA or tax
attorney should apply rules to given case.
• Avoid making simple statements like, “Your
deduction is…; your tax savings is….”
• Care should be taken with planned gift software that
shows the dollar value of deductions.
204. 8283 and 8282
• For noncash contributions
• These forms, one from donor, and one from
the charity, are used by the IRS as a check and
balance.
• They are designed to discourage donors and
charities from inflating the deduction.
205. 8283 Part A
• Filed by taxpayer for gifts of noncash property of
$500 or more.
• Form asks for FMV, cost basis, how and when
acquired, description of property, and how valued.
• If appraisal was used, signed appraisal is attached.
• Failure to file results in deduction being disallowed.
206. 8283 Part B
• Noncash gifts over $5,000 generally require
Part B of 8283. (Unless the gift is of
marketable public securities.)
• Part B requires a qualified appraisal by a
qualified appraiser.
• Note: For gifts of closely held stock the
threshold is $10,000.
• Note: Qualified appraisals are often costly.
207. Appraisals
• Qualified appraisers are an important player
on the advanced planning team.
• Development pros whose clients have
noncash assets, such as closely held business
interests, will want to cultivate a network of
qualified appraisers.
• Significant penalties apply to substantial or
gross valuation misstatements
208. Gifts of Art
• For gifts of art, valued at $50,000 or more, the
tax payer can ask the IRS to provide a
statement of value.
• A user fee is charged for this, $2,500 for up to
three items.
209. Deduction for Federal Transfer Tax
• Similar to, but not identical to, income tax
• Generally, a death time transfer to an eligible
charity is deductible for estate tax purposes,
without an upper limit.
• Gift must be made by the decedent to eligible
charities.
210. Eligible Charities
• Note that income tax deduction is generally
not available for gifts to organizations outside
the US.
• However, such gifts are permitted for estate
tax purposes.
211. “Made by Decedent”
• To qualify for the estate tax deduction, the gift
must be made by the decedent through the
appropriate legal documents.
• If the gift is left to the executor’s discretion, or
occurs by operation of the state intestacy
laws, the deduction is not available.
212. State Law
• State laws differ on how charitable gifts are
treated at death.
213. Best Practices of Asking the Philanthropic
Question
• Whatever your seat – for big cases lead with
an open-ended question
• As opposed to what?
– A donor pyramid
– A case statement
– A pitch
– A fact finder
– A gift illustration
214. Your Seat at the Table
PLAN
C
O
N S
F E
E L
R L
E
ADVISE
Scott and Todd Fithian, The Right Side of the Table
216. Open Ended Prompts
• If your family had a • When you were
crest what would be the younger were there
motto? things you wanted to
• What keeps you awake accomplish in life you
at night? have not yet done?
• What would you like to • How might you get back
change or preserve in to that while you have
the world? time?
217. More Probing Questions
• Where do you want to • Do you serve on any
have an impact? Boards?
• What nonprofits have • What gifts have given
meant most to you? you the most
• Where do you satisfaction?
volunteer? • Would you give more if
• Do you think it is you knew you could
important for kids to afford it?
volunteer? • What is next for you?
218. Discernment Process
• Open ended prompt • Confirmation
• Encouragement – What I hear you saying
– Tell me more is….
– Interesting…. – So, you are trying to….?
– And then what? • Transition towards
– So, how did that feel? solution
– Are you satisfied with – Would it help if?
that?
219. Listen for Story
• What plan unites the
client’s origin, present
I was I am state, and desired end?
• What makes a happy
I wish I I wish to ending for this life?
was be • Legacy, posterity,
impact
I will be
220. Summary Close for Process
• Let me play back what I think I have heard….
• Your situation is….
• Your goals are….
• Your concerns are…
• We have agreed that….it would help if…
• Our next steps are….
221. • Goals and objectives
Discovery/Agreement
Memo • Current situation
Best practice is a follow-up memo
• Issues and
considerations
• Options to discuss with
Advisors
• Next steps
222. • Clients need and want a
human touch.
Above The Line Planning
• Finding client goals is key to
success
• Do not assume the
attorney has done this
• Huge opportunity to
reopen cases with high net
worth prospects
223. • Begin with exploration of
Process is key
goals, dreams, aspirations,
areas of interest as to
impact
• Touch gently on tools
• Then go into the process
appropriate to your seat at
the table
• Detailed explanation of
tools comes later
225. WHERE WILL YOUR LIFE HAVE IMPACT?
Impact?
How? • On self
• Plans • Family
• Tools • Community
• Gifts
Why?
• What kind of person do you want to be?
• In what kind of world?
227. PETER’S QUESTIONS
What is your vision of a better world?
What conditions are needed to realize it?
What are the obstacles?
What parts of the vision are realistic and what ideas,
strategies and plans can make it so?
231. THEORY OF SOCIAL CHANGE
William Schambra At Bradley Center for
Philanthropy and Civil Society
• Conservative
• Grassroots
• Community centered
• Uneasy with engineered
solutions from either
government or big
foundations
232. The Philanthropic Learning 1. Give passively when asked
Curve via The
Philanthropic Initiative 2. Begin to investigate
Many financial services clients are
“proto-philanthropists,” who are not charities and programs
yet on the curve at all, or only giving
small amounts passively. 3. Fully engaged, an expert
How many years or generations before
the client reaches stage three?
in an issue area,
Can we shorten the curve?
collaborating with others
to move the needle
233. 1. Set, prioritize, and
CPA Planning Process
quantify goals
From Charitable Strategies
2. Gather data
Written by and for CPAs
3. Develop strategy
How does your process differ?
4. Communicate strategy
What do you add?
How do you “team up”?
5. Implement strategy and
compliance procedures
235. From Client money and goals to impact – Your role
in the process?
Impact?
How? • On self
• Plans • Family
• Tools • Community
• Gifts
Why?
• What kind of person do you want to be?
• In what kind of world?
• With what commitment of assets?
236. • Estate planner
Team • Financial planner
•
Work with others
CPA
Or they will work against you
• JD
The bigger the case, the more team-
intensive
• Insurance
• Investments
• Gift Planner
237. Sources and References
1. “The Right Side of the Table: Where Do You Sit In The Minds of The Affluent? “
by Scott Fithian and Todd Fithian
2. “Wealth in Families” by Charles Collier
3. “Inspired Philanthropy” by Tracy Gary w/ Nancy Adess
4. Phil Cubeta, H. King McGlaughon, Jr. – current and form holders of
Sallie and Willam Wallace Chair in Philanthropy – American College
5. Chartered Advisor in Philanthropy course material – Richard D. Irvin Graduate
School - The American College, Bryn Mawr. PA
6. Immediate LegacyTM -GTBK Marketing LLC, Charitable Concepts, LLC,
Planned Giving Design Center – www.pgdc.com
Community Foundation of Greater Atlanta – www.cfgreateratlanta.org
American Council on Gift Annuities - www.acga-web.org
Partnership on Philanthropic Planning - www.pppnet.org
Notes de l'éditeur
What kind of life? What kind of world? Where do you want to have an impact? Do your advisors who do the “how” know what you want?
What kind of life? What kind of world? Where do you want to have an impact? Do your advisors who do the “how” know what you want?
