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July 2014 Newsletter

Newsletter Archives

Planned Giving Mentor

Professional Partnerships: Hospice Philanthropy Group L.L.C.

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Ethical issues and trends in gift planning for seniors - Part 1

There are several current trends and realities which make gift planning for seniors increasingly difficult.

1. There is increasing complexity in the legal issue seniors face due to the broadening array of totally incomprehensible government benefit programs. Think about social security and Obama care options.

2. Seniors are facing information overload and do not know what to believe. Think about all the marketing messages you receive in a day and how many contacts it takes for your message to stick.

3. There is increasing sophistication of marketing aimed right at seniors, including on-line targeted ads based on their age and financial profiles. Think about the various TV ads, (drug and retirement) targeted at seniors and the various senior pictures you can easily purchase for your brochures.

4. Many seniors have scattered families without close family living nearby. Such conditions force seniors to rely on advisors and other support systems (sometime charity), especially when faced with medical or financial issues.

5. Seniors are living longer and in many cases enjoy an extended quality of life which can produce both enjoyment and anxiety. Often this leads to the concern they will outlive their resources.

6. Seniors have a broad array of options for receiving care and housing with many choosing active adult communities. This leads to greater socialization, oversight of others, and a spread of information among residents.

How do the above trends effect gift planning interactions as PG professionals regularly come in contact with elderly donors? Perhaps this issue raises more questions than answers. When will I know if I am overstepping and driving a donor’s decision to my expected outcome?

Throughout the United States, lawsuits challenging the validity of wills and trusts (or specific provisions in them) have become increasingly common. For those involved in gift planning, identifying prospective donors and obtaining a commitment for a substantial gift to be provided upon a donor’s death are simply the initial steps for insuring the gift will be received. Gift planning professionals must now consider how to minimize the risks that instead of the gift, they receive a summons to answer a lawsuit when the donor dies.

Mental Capacity

First, as planned gift professionals we have to be concerned about the mental capacity required to make a gift decision. Do I have a long standing relationship with this probable donor? Do I sense mental capacity may be an issue? Can the donor explain back to me their gift decision and/or the strategy I am suggesting? Have I documented all conversations and contacts with the donor for others to understand their motivations and desires?

Will the gift decision be made in consultation with family or advisors? Will the advisor have a non-charitable agenda or financial options competitive to the gift option proposed? Will the advisor’s option be in the best interest of the donor or the advisor? Do you sense undue influence over donor decisions? If the gift decision is made, will the donor’s family challenge the decision now or upon the donor’s death?

Often we have to determine if the donor has the mental capacity to understand in a reasonable manner the nature and the consequences of the proposed transaction. Have we provided sufficient time for the donor to think through all implications and the meaning of their actions?

The standard for any advisor to implement a Will or Power of Attorney(POA) is it must reflect the desires of the donor. It should be a very high standard and if the advisor senses a concern they should consult with others, especially if they suspect the donor has lucid and non- lucid periods. This may be a temporary condition brought on by the effects of medication or treatments or more permanent in nature.

Should the Power of Attorney (POA) document include gifting powers to family and/or charity to implement financial transactions that benefits the individual during their lifetime or to complete a pledge to a campaign or projects close to the donor’s heart? Is this gift consistent with the donor’s prior practice of charitable giving?

Does the family or the advisor sense an approaching Alzheimer’s condition? Does the individual remember all their prior gift commitments?

Summary: Every PG professional must have a mental capacity check list so the end result is everyone is pleased with he gift decision.

Next issue: Intra-Family Issues

(adapted from presentation by Brian Black, J.D., “Gift Planning for Seniors” to Susquehanna Planned Giving Council, Harrisburg Pennsylvania)

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Talking to Heirs..... New York Times article "What's Almost as Certain as Death? Not Talking About the Inheritance" makes several important points to remember in your planned giving conversations.

This fits with my long standing belief that one of the negative motivators to major outright or planned gifts is "What will my children think when they learn I gave $100,000 or more to charity." Your job is to probe carefully about how the probable donor thinks about gifting, and if or when they will involve their children.

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2 in 1 issue.....The recent issue of National Geographic had two planned gift ads in one issue. This indicates the power in repeating the message in a different or similar format. NatGeo chose a similar format but two separate messages. Fighting for space in house publications is a major issue for all development activities. The NatGeo issue shows their commitment to increasing the development message. Click here to view AD1 and AD2.

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Technical Tips: Driving web site traffic..... Here are some ideas on driving traffic to your web site. 1) List your PG web site address in your e-mail signature, 2) Put web site link address on your business card, 3) Develop a postcard announcing your web site, 4) End every financial article published in house publications with a link to web site, 5) Put articles on financial planning on your facebook page with link to web site, 6) Put web site link on all inhouse or purchased brochures, 7) Make sure your monthly emails on financial planning have web site link, and 8) Develop a special business card for your professional advisor council with benefits of web site with links to information on bequests, gift annuities, charitable trusts and other gift options.

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End of life tips?......Check out the "Big Book of Everything" a free online download to record the data you need to have when someone dies. While it is tedious and a not very pleasant task everyone will benefit from the recording of life information and events to fulfill the deceased wishes. _________________________________________________________________________________________________________

Quickie Quiz Answer.....Securian Financial polled 903 U.S. pet owners and found that 44% have made plans for what would happen to their pets if the owners passed away or were no longer able to care for them (80% of the owners had dogs; 65% cats, and 14% had “other”).

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Laminated Gift Annuity Rate Charts.....The American Council on Gift Annuities announced new
gift annuity rates effective in 2012 which are also effective for 2014. The ACGA will meet again in April, 2015.

If you would like a laminated rate chart for the most recent rates simply request one using the following E-mail request and put Laminated Chart in the subject line.

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Gift Annuity Facts......I am repeating in this issue the recent 2013 ACGA survey of gift annuities. The survey is very important as it provides some benchmarks for comparing your CGA program or to convince your board of the power of life income agreements.

The survey is available from the ACGA and a summary was printed in the recent Sharpe Group June 2014 issue of Give and Take.

378 organizations participated in the ACGA survey which now has 20 years of background data. First appearing as a fund raising strategy in 1831 gift annuities are a time tested gift planning vehicle.

• 20% of CGA programs were started in the last 10 years, many organizations (18%) are expanding their promotion of gift annuity agreements in 2014-15.
• Annuities terminated in 2013 showed a 64% initial gift residuum to charity. The residuum is reflective of the difficult investment environment during the recent economic downturn and recession.
• Gift annuities do not seem to compete with annual fund efforts. Infact 30% of charities reported they saw increased annual gifts from their gift annuitants, while 63% saw no effect on annual gifts.
• Gift annuities seem to drive or go hand in hand with bequest giving. 54% of charities reported gift annuitants included a bequest to their organization in their will.
• The average age of immediate payment gift annuities has been consistent over the past 20 years with a median age of 79 years. About 75% of annuitants are over age 75. There are currently over 26,000,000 age appropriate individuals most likely to create gift annuities.
• The annuity pool is female dominated with 57% female annuitants and 43% male annuitants.
• One of the fastest growing area for gift annuities is the deferred payment gift annuity as these contracts currently represent 12% of all annuity contracts , doubling since 1994, an increasing number of charities offer the Flexible Deferred Payment option.
• As a time tested gift planning tool, charities should be talking to all loyal donors about the advantages of increasing their income and decreasing their taxes while they support your mission.

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News and Notes....TWO OUT OF THREE - 65% of all individual tax returns filed in 2011 (95.0 million out of 145.4 million) reported less than $50,000 of adjusted gross income (source: Internal Revenue Service).

WERE YOU AVERAGE? - The net worth of an average American increased by +10.8% over the 12 months ending 3/31/14, including gains from stocks, bonds and real estate holdings (source: Federal Reserve).

WHO WILL SUPPORT THESE FOLKS? - 277,000 American seniors will turn age 65 each month during calendar year 2014 (source: Government Accountability Office).

THE WRONG DIRECTION - There were 16 American workers for every 1 Social Security retiree receiving benefits in 1950. It is estimated that there will be just 2.1 American workers for every 1 Social Security retiree receiving benefits in 2035 (source: Social Security Trustees 2013 Report).

DEMOGRAPHIC COMPOSITION - By the year 2056, the number of Americans at least age 65 will exceed the number of Americans less than 18 years old (source: Census Bureau).

AGGREGATE WEALTH - From 12/31/09 to 3/31/14 (a total of 17 quarters), the total net worth of Americans (stocks, bonds, real estate, equipment and businesses) increased by $22.78 trillion (to $81.76 trillion), an average gain of $15 billion per day (source: Federal Reserve).

AGING POPULATION - The percentage of the US population that is aged 65 and older is projected to grow from 14% to 21% between today and the year 2039, i.e., 25 years from now (source: Congressional Budget Office).

WHERE IT COMES FROM - 23 of 50 US states collect more money in the form of state sales tax revenue than they collect in personal income tax revenue. 5 states do not have any statewide sales tax: Alaska, Delaware, Montana, New Hampshire and Oregon (source: Rockefeller Institute of Government).

TAX DATA - The 5.25 million tax returns from 2012 that reported at least $200,000 of adjusted gross income (AGI) represent 3.6% of all returns filed, received 33.4% of all AGI nationwide and paid 55.1% of all the federal income tax that was paid for the year (source: Internal Revenue Service).

OLDER AND STILL WITH DEBT - The number of American seniors age 65 and older with mortgage debt on the homes they own has increased from just over 1 in 5 (22%) to nearly 1 in 3 (30%) over the last decade (source: Consumer Financial Protection Bureau).

PRETTY SMALL AMOUNT - Collection of federal estate taxes amounts to approximately $18 billion annually, equal to what Uncle Sam spends in 44 hours (source: Tax Foundation).

LUMP-SUM NEEDED - A present value (PV) amount of $196,000 is required to fund a $1,000 per month payment for 20 years with a 3% annual increase for maintenance of purchasing power assuming a +5% annual rate of return is maintained into the future. The PV amount is $269,000 if the required payment period is 30 years. The calculations ignore the impact of taxes and are for illustrative purposes only and are not intended to reflect any specific investment alternative (source: BTN Research).

TAXES - Americans filed 144.9 million tax returns in 2012. 64% of the returns (93.1 million) paid federal income tax while 36% of the returns (51.8 million) did not pay any federal income tax (source: Internal Revenue Service).

NET WORTH - The top 3% of household income earners owned 54.4% of the wealth in the country last year, up from 44.8% in 1989, largely a function of a rising stock market benefiting the top group (source: Federal Reserve).

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Kudos Corner - Celebrating gifts of all types and sizes

In this section I periodically highlight some recent gift expectancies and gift program elements I think will be helpful and informative, not all gifts are included.

Evangelical Hospital, Donna Schuck, Director of Development secured two gift annuities, a 1 life agreement of $15,000 for a donor age 83; and a two life agreement for a couple age 71/72 for $40,000.

Chapters Health System, John Wilbur, Senior Major Gift Officer, secured the 11th gift annuity from a couple age 90/86 for $10,000 with total gifts now exceeding $100,000. Your current gift annuitants are your best prospects.

Santa Fe Opera, Brian Dailey, Director of Planned Giving reports several recent planned gifts. The Opera received $56,000+ from a 2 life matured Charitable Remainder Trust as a partial beneficiary. The original donor died at age 90 and the second beneficiary just passed at age 84 resulting in the distribution.

A recent benefactor died in her mid 80s leaving her home valued at $875,0000, and a partial beneficiary of her two IRA accounts. The first account distribution was $192,000 and the second account just entered the distribution process.

An additional $1.3 million is expected from the residuary estate of a donor who died two years ago bringing the estate's total distribution to the Opera to over $8 million dollars.

York College of Pennsylvania, Mark Rank, Director of Principal and Planned Gifts worked with a CGA donor age 66 to terminate her immediate payment CGA contract resulting in a $6,000+ immediate gift to the donor's endowment fund.

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James E. Connell and Associates is a national consulting service devoted to increasing resources for charities using the power of charitable estate and gift planning techniques.

Pinehurst office: PO Box 3335, Pinehurst, NC 28374
Phone: 910-295-6800
Northeast office: 20982 Bayside Avenue, Rock Hall, MD 21661