Gift Planning Without Tax IncentivesCHICAGO COUNCIL ON PLANNED GIVINGMAY 30, 2019
Presented By:Frank MintonFrank Minton, LLC16538 Beach Dr. N.E.Lake Forest Park, WA 98155Phone: 206-365-5154E-mail: [email protected]
Changes In Top Federal Income Tax Rate
1980 – 70%
2019 -37%
New Cost of $100,000 cash gift by a High-Income Donor
1980 - $30,000
2019 - $63,000
Net Cost of a Gift of Appreciated Securities by a High Income Donor
FMV of Securities $100,000Cost Basis $20,000Net Cost in 1980 $7,600Net Cost in 2019 $40,000
How would indexing basis for inflation affect gifts of appreciated property?
Changes in Standard Deduction Federal Income Tax – Joint Filers
1980 - $3,400
2019 - $24,400
If over age 65, $27,000
-Only 10% of taxpayers will itemize deduction in 2019
Increase in Federal Estate Tax Exemption
1980 - $161,000
2019 - $11,180,000
Number of Estates Subject to Federal Estate Tax
1980 – 20 out of 1000, which included majority of planned gift donors
2019 – 1 out of 1000, very few donors affected by the tax
Changes Regarding Charitable Remainder Trusts
1980 – No limit on number of and age of beneficiaries because no minimum remainder interest
2019 – Minimum remainder interest and payout rate, imposes limitations on who can be beneficiaries
1980 – Pooled income fund, most popular life income gift
2019 – Many pooled income funds have expired
Pooled Income Fund
Positive Developments
IRA Rollover Easier to make charity beneficiary of retirement
plan Flip Unitrust Deduction ceiling for cash gifts to 60% of AGI
On Balance, Tax Incentives Have Diminished
1980
2019
How Reduction in Tax Incentives has Affected Charitable Giving
Some say minor effect because giving has continued to increase
Other say total giving is lower than it would have been with retention of incentives
My Position
Tax incentives seldom motivate giving, but they influence the amount, type, and timing of gifts
Thus, we should continue to educate for measures that would stimulate giving
However,
If tax incentives were mostly eliminated…
PEOPLE WOULD STILL MAKE CHARITABLE GIFTSand
THE PLANNED GIVING PROFESSION AND CCPG
WOULD STILL EXIST
THERE ARE NINE REASONS THIS IS SO
Reason 1 – There are Non-Tax-Related Financial Benefits
Reason 2 – People Give to a cause with which they feel connected
Reason 3 – Most People Are Empathetic
Reason 4 – People Have an Impulse to Give Back
Reason 5 – Religious Convictions Engender Gifts
Reason 6 – Many Wealthy Individuals Have a Sense of Noblesse Oblige
Reason 7 – Donors May Receive a Personal Benefit
Reason 8 – Most People Enjoy Recognition
Cobb Lecture Hall
University of Chicago
Reason 9 – Human Desire to Overcome Mortality
The primary driver of legacy gifts
Pyramids of Giza, constructed more than 4,000 years ago
Religious Answers to Mortality
Resurrection to eternal life
Immortal soul
Reincarnation
Extending Life Through Science
Imagine a world where aging has been abolished, where you can run a marathon at age 94, and start a new career at age 110, where replacing a heart, liver, or kidney grown from your own body cells is as common as a knee or hip replacement is today.
Consciousness of Mortality Prompts Estate Planning
Difficulty of Deciding How to Divide Property
What a Gift Planner Can Offer
An extension of life through a charitable legacy
Why do stressed trees often produce an abnormally heavy crop of seeds?
Humans, like these trees, as they approach the end of life also focus on legacy.
Biological Legacy – genes transmitted to heirs.
Cultural Legacy – through creations and
charitable gifts that perpetuate one’s name,
values, and influence.
Some people have a bucket list
Hike the Himalayas See Machu Picchu Parachute Swim on the Riviera Go on a safari
This list is backward looking
Other people have a fountain list
This list is forward looking, as it refers to what will flow from our life.
An endowment is like a fountain
Example of a person who created 20 Fountain Legacies
Floyd and his late wife, Delores
Cotton Picker – Stock Picker – Philanthropist
How do you talk to donors about issues that remind them of mortality?
Which of the following would you normally choose?
a. Would you consider including our organization in your estate plan?
b. Would you consider including our organization in your will?
c. Have you ever thought about arranging a legacy gift to our organization?
d. Have you ever thought about leaving a bequest to our organization?
a. If you should predecease your spouse, payments would continue to (her/him).
b. If you die before your spouse, payments will continue to (her/him).
c. Have you made preparations in case something happens to you?
d. Have you made the necessary preparations before the end of your life?
Mortality by Increments
Life expectancy increased by two years, but only six months were healthy.
Escape cancer and heart attack only to get Alzheimer's.
40% of individuals over age 85 have some degree of dementia.
Guidelines for Talking to the Aging
Exercise patience in listening to repetitive stories. Remember that the donor was once young and vigorous
like you. Do not be patronizing. Be sensitive to competency issues if a gift is to be
arranged. Talk about what they most value and how they would like
to be remembered. Respect their religious beliefs whether or not you agree
with them. If they have made or will be making a legacy gift, help
them visualize how they live on through that gift.
Role of the Gift Planner
Know the tax law, have a command of the gift instruments, and know how to apply them
Help donors experience a sense of immortality through their legacy gifts and be a friend and comforter in the final stage of life
What do you do and say when a donor dies?
Guidelines for the Condolence Letter
1. No platitudes like “He’s in a better place,” or “At least he died doing what he loved.”
2. Refer to a positive memory of an actual event.3. Reference the impact of the person’s life.
Legacy Gifts
Legacy gift from charity’s standpoint: sum of money, usually given at the end of the donor’s life, and often for an endowment
Legacy gift from the donor’s standpoint: a way of overcoming mortality by leaving footprints.
The Central Role of Gift Planning
As gift planners, we have the unique opportunity to further the work of our institutions while helping individuals find meaning in their lives.
This noble role is not dependent on tax incentives.
Yes, tax incentives are important
And we should seek as favorable a tax regime for charitable giving as possible Replace income tax deduction with tax credit Expand charitable IRA Retain life income plans Make PIF appealing again Possible reduce estate tax exemption to address
inequality
But Gift Planning is Not Dependent on Tax Incentives
Because you can appeal to powerful motivators that are not tax-related
And
Because legacy gifts address the fundamental human quest to overcome death
Books Every Planned Giving Officer and Estate Planner Should Read
Leo Tolstoy, The Death of Ivan Ilyich Ernest Becker, The Denial of Death Elizabeth Kübler-Ross, On Death and Dying Stephen Cave, Immortality, The Quest to Live Forever
and How it Drives Civilization Sherwin Nuland, How We Die Atul Gawande, Being Mortal Leonard Hayflick, How and Why We Age