I was recently in Vero Beach on behalf of the Indian River Community Foundation and the United Way of Indian River County for several audiences: an advanced AFP group to address trends and best practices; a professional advisor audience to discuss current gift planning techniques; and a donor audience to focus on articulating personal and charitable planning goals before seeing their professional planner. They had some great questions!
From the advanced AFP group: What are the current trends you see in gift planning and how does this impact our role as senior fundraisers and managers?
Gift planning has changed dramatically over the years from a very technical focus on complex gift forms (such as charitable remainder trusts, charitable lead trusts, or charitable gift annuities) to a focus on the donor and the donor’s charitable goals. Rather than deferred and split interest gifts representing a separate fundraising department, these gifts are now powerful tools used to achieve a donor’s major gift goals. This means that the major and deferred gift officers work closely together to meet a donor’s needs in annual fundraising and in capital campaigns. Senior gift officers and managers should encourage this collaboration focused on their donors to build those donor relationships and create significant gifts.
From the advanced AFP group: How do deferred gifts (planned gifts) fit into a capital campaign?
The term “capital campaign” is rarely used any more – rather, major fundraising efforts are referred to as “campaigns” that include current capital needs, current endowment needs, and long-term endowment or other deferred needs. There are several keys to success. First, clearly articulate the goals and projected outcomes of the campaign, both current and deferred. Second, match the current and deferred campaign dollar goals to the current and deferred objectives. Generally, the deferred portion of the campaign is no more than 20 percent of the total campaign. Finally, create an engaging case statement for support that encourages donors to partner with the institution to achieve the expected outcomes on a short-term and/or long-term basis. Most nonprofits find this approach expands a donor’s giving potential since many donors will make current gifts and augment those gifts through their estates.
From the professional planners audience: What is the most significant impact of the American Taxpayer Relief Act (ATRA) of 2012 on charitable planning?
There are at least two significant impacts of ATRA of 2012 on charitable planning. First, higher income tax rates – both ordinary income tax and higher capital gains rates – provide greater incentives for donors in gift planning. The higher the tax rates, the greater the net benefit to the donor. Second, the higher estate and gift tax exclusion amounts ($5.25 million per individual in 2013) creates greater flexibility for giving. For testamentary gifts in non-taxable estates, taxpayers have much greater flexibility in planning gifts that either split the interests in property between charity and individuals or represent partial interest gifts if the split-interest/partial interest rules are not applicable (because the taxpayer does not need the charitable deduction). For example, the taxpayer could provide that a brokerage account distribute all the income to family members for a specific number of years and then transfer the assets to charity. Or, the taxpayer could direct the reverse, a distribution to charity for a term with the balance to heirs. This type of split interest gift would not qualify for a charitable deduction but without the need for a charitable deduction the planner can be more creative in meeting donor goals.
From the donor audience: Estate planning has become so complicated and the rules and deductions change on a constant basis. How do we get our arms around the rules so that we can be conversant when we are talking with our attorney (or planner)?
The most important thing you can do to prepare for a meeting with your estate or financial planner is to clearly list and prioritize your goals in planning. This is a task you are uniquely suited to do and that no one can do for you. For example, your goals may be to ensure you have sufficient assets to care for yourself and your family during life, to take care of your parents in the event something happened to you prior to their deaths, to ensure there are sufficient funds to get a child or grandchild through college, to care for a special needs child, and to leave a significant gift to a charity that has had importance during your life. Make a list of those goals, prioritize the list in order of importance, and to the degree possible assign a cost to each of those goals. Give this list to the planner – along with a list of of your assets – and let the planner use the current rules and planning techniques to achieve those goals.