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January 2015 Newsletter

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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 4: False Motivators and Donor Confidentiality- parts 1, 2 & 3 are in the Newsletter Archives

False Motivators: Seniors are faced with several choices and sources for estate planning advice. One of the most common false motivators is the avoidance of the probate and the costs associated with the probate process.

Probate is the legal process by which a person's final debts are settled and legal title to property is formally passed from the deceased to his or her beneficiaries and heirs. There are many arguments for and against probate and its value in an estate plan. Many seniors fall victim to promoters of the Revocable Living Trust solution to the probate process.

A revocable living trust is a popular estate planning tool that you can use to determine who will get your property when you die. Most living trusts are “revocable” because you can change them as your circumstances or wishes change. Revocable living trusts are “living” because you make them during your lifetime.

While living trusts are appropriate in some states and under certain circumstance they are not a seniors' solution for every situation.

There are also aggressive annuity sales pitches to prey on the low rates of current income return that senior receive.

Aggressive tax avoidance and charitable giving schemes are often touted as solutions to problems with individual assets. These plans sometime sound too good to be true but act as motivators to get prospects to the planning table. Many investment advisors are not experienced with charitable giving strategies and how those strategies may increase donor's income and decrease their taxes. Educate advisors to spot those few prospects where charitable giving strategies may make a significant difference for their clients.

Confidential Information: Respect for donor confidentiality is built into many professional standards of behavior. Often donors will make significant gifts and do not want their children to know about their commitment. They wish to be listed in any report as an Anonymous Donor. Sharing of donor confidential information must be done selectively so and spread widely. Often donors will relate information, attitudes and circumstances facing their children. While this information may be interesting by itself if it is of a disparaging nature think carefully about writing it down for other to see and spread.

As development offices document donor interactions and intentions it is most important they mark sensitive information confidential as this information may be read years in advance by other professionals. Sensitive information should only be shared with those that require it and may be important backup if the gift intentions of a donor is legally challenged.

Office discussions of confidential information should be strictly prohibited unless the donor has consented to sharing their information.

With confidential information the less discussion the better should rule your behavior.

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

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Senate Finance Committee Approves IRA Charitable Rollover Extension.....On July 21st the Senate Finance Committee approved by a 23-3 vote a $95 billion tax extenders package that would retroactively renew 52 expired tax provisions – including the IRA Charitable Rollover – through the end of 2016. This vote marks the latest step in Congressional efforts this year to revive the Rollover, which lapsed once again at the end of 2014.

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Technical Tips.....IRS Records for Charitable Deductions (source: Crescendo eNotes, March 23, 2015)

In IR-2015-48, the IRS outlined the required records for substantiating charitable deductions. The basic requirement is that gifts are made to a qualified charity. The Select Check online tool at www.irs.gov shows qualified nonprofit's. Even though they are not on the IRS web site, gifts to churches, synagogues, temples, mosques and government agencies are also deductible.

Most documentation must be in your possession before filing your tax return. You must itemize deductions on Schedule A of Form 1040 to claim these charitable deductions.

1. Gifts Over $250 – To claim a charitable contribution deduction, donors must get a written acknowledgement from the charity for all contributions of $250 or more. If you give property, the acknowledgement must include a general description of the property.

2. Property Gifts over $500 – A non cash gift with a value greater than $500 requires you to file IRS Form 8283. If the non cash gift has a value greater than $5,000 ($10,000 for family business stock), then an appraisal by a qualified appraiser is required.

3. Vehicle Donations – A deduction over $500 for a car, boat or airplane donation is usually limited to the gross sale proceeds. Your charity will send you Form 1098-C, which you should submit with your tax return.

4. Clothing and Household Goods – Gifts of furniture, furnishings, electronics, appliances and linens generally must be in good used condition or better to be tax-deductible. An exception is available for gifts of clothing or household items over $500 if you obtain a qualified appraisal.

5. Cash – You must have a bank record or a written receipt from the charity in order to deduct any donation of cash. The record must show the name of the charity and the date and amount of the contribution. Bank records include canceled checks, and bank, credit union and credit card statements with the name of the charity, the date, and the amount paid.

6. Credit Card Gifts – The statements should show the name of the charity, the date and the transaction posting date. For payroll deductions, you should retain a pay stub or Form W-2 wage statement from your employer showing the gift amount, along with your charitable pledge card.

7. Year-end Gifts – Contributions are deductible in the year when made. Valid checks sent by U.S. Mail by December 31 are deductible. Gifts charged to a credit card before the end of 2014 count for 2014, even if the credit card bill is paid in 2015.

The IRS has a helpful mini-course on these charitable giving rules that may be found on its web site (www.irs.gov) entitled “Can I Deduct My Charitable Contributions?”

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CNBC Millionaire Survey..... of high-net-worth families with investable assets of $1 million or more found 44 percent have not told their children about their future inheritance, and 27 percent waited until their child was over age 30 to do so.

"They may not share information [about their estate], because they think it might negatively impact their child's work ethic or because of confidentiality-if they think their children might talk about it with their friends or other family members," said Connie Torabian, senior vice president and market trust director for U.S. Trust, who works exclusively with high-net-worth clients. "It depends on the child's age and maturity."

The survey also found 40 percent of those with assets between $1 million and $4.9 million are planning to give between 1 percent and 10 percent of their personal wealth to charitable causes after they die.

Thirty-one percent of those with assets of $5 million or more plan to leave that amount, according to market research firm Spectrem Group, who provided the research for the study.

It's worth noting that the percentage of wealthy Americans who are likely to leave between 1 percent and 10 percent of their wealth to charity gets higher as age increases. Thirty-one percent of the youngest age segment (55 and under) plan to do so, while 40 percent of those ages 56 through 69 and 43 percent of those 70 and older will follow suit, the survey found.

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Quickie Quiz Answer.....According to the Center for Retirement Research at Boston College 48% of women and 42% of men signed up for Social Security at age 62 in 2013, down from around 60% for women and 55% for men in 2005.

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Gift Annuity Rate Update and Laminated Gift Annuity Rate Charts..... The American Council on Gift Annuities (ACGA) Board of Directors, at its semi-annual meeting on April 13, 2015, voted to leave its schedule of suggested maximum charitable gift annuity (CGA) rates unchanged. The rate schedule announced on November 7, 2011 and originally published as of January 1, 2012 will continue in effect until further notice.

As part of its ongoing review process, the Rates Committee of the ACGA monitors on a weekly basis certain interest rates that underlie the investment return assumptions used to create the rate schedules. The committee also evaluate annuitant mortality and other assumptions as appropriate.

The ACGA uses the results of a study of gift annuitant mortality study it commissioned in 2010 when calculating a schedule of suggested gift annuity rates. They do this because historically charitable gift annuitants have been shown to have longer life expectancies than both the general public and the population of individuals who purchase commercial annuities.

Rate Chart....... 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 and include your full mailing address.

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Devine Consulting joins Helpful Links.... If you are in New England and your development program needs consulting services contact Devine Nonprofit Consulting, Nancy Devine Principal. Services are provided in Development, Major and Planned giving, Annual appeals, and Board training. Link to brochure for complete information.

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IRS Tax Info.....The standard mileage rates for 2015 are: Business $57.6, Medical/Moving $23.0, Charitable $14.0.

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News and Notes....YOUNGER THAN YOUR AGE- 60% of seniors feel younger than their chromaticall age (source: Sharpe Give and Take, January 2015)

SMALL AMOUNT - An estimated 4,600 decedents in calendar year 2015 (out of 2.688 million projected deaths this year) will generate $14.6 billion of federal estate tax receipts for the US government, just ½ of 1% of our estimated annual tax revenue (source: Tax Policy Center)

SELF-INFLICTED - US health care spending was $2.9 trillion in 2013. An estimated 75% of the $2.9 trillion (i.e., $2.2 trillion) is spent each year on medical care for chronic illnesses that are preventable, i.e., the illnesses are a function of avoidable behavior including obesity, poor diet, smoking, excessive alcohol consumption, lack of physical activity and poor oral health (source: Institute of Medicine).

BOUNCE BACK - The value of Americans’ equity in their real estate peaked at $10.31 trillion as of 12/31/07, fell to $6.39 trillion by 12/31/11, then climbed back to $11.13 trillion as of 12/31/14 (source: Federal Reserve).

STATE AND LOCAL TAXES - For every $100 that the average American pays in state income tax in a single year, he/she also pays $103 in sales tax (on consumer purchases throughout the year) and $145 in property taxes (source: Tax Foundation).

LONGER AND LONGER - An average 65-year old male has a life expectancy of 21.6 years (to age 86.6 years of age), an increase in life expectancy of 24 months in the last 15 years. An average 65-year old female has a life expectancy of 23.8 years (to age 88.8 years), an increase in life expectancy of 29 months in the last 15 years (source: Society of Actuaries).

REAL ESTATE - Home prices have appreciated +24.5% over the last 5 years (12/31/09 to 12/31/14) in the Pacific states, double the +11.6% growth experienced nationwide (source: Federal Housing Finance Agency).

MORE GOING IN THAN COMING OUT – An average “high income” American couple (defined as having a joint income of at least $125,000 today) that will retire in 2020 (i.e., 5 years from now) will pay $909,000 of lifetime Social Security taxes but receive just $756,000 of Social Security benefits, i.e., for every $1 paid in taxes, the couple will receive $0.83 in benefits (source: Urban Institute).

YOUNG AND OLD - The number of Americans at least age 60 (62.83 million) exceeds the number of Americans less than age 15 (61.09 million) today, the first time that has occurred in US history (source: Census Bureau).

NICE INCOME - To rank in the top 1% of all wage earners (for tax year 2012) required an adjusted gross income level of $434,682 (source: Internal Revenue Service).

FLIP-FLOPPED - Government spending during fiscal year 2015 (the 12 months ending 9/30/15) is projected to be 69% mandatory spending and 31% discretionary spending. Government spending during fiscal year 1962 (the 12 months ending 9/30/62) was 32% mandatory spending and 68% discretionary spending (source: Office of Management and Budget).

LOW EXPECTATIONS - 47% of nearly 3,300 workers surveyed in March 2015 expect Social Security to go bankrupt before they retire (source: T. Rowe Price Retirement Saving & Spending Survey). __________________________________________________________________________________________________________________

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.

Spectrum Health Foundation, Grand Rapids, MI - Shelly Westbrook, Foundation Director and Laurie Tissue, Development Coordinator of Spectrum United & Kelsey Hospitals and Tara Werkhoven, Planned Giving Director, Spectrum Foundation and Larry Jongekrig, Finance Director finalized a several gift agreements and gift annuities for more then $1,000,000.

Santa Fe Opera, Brian Dailey, the Opera's Planned Giving manager received a $100,000 bequest from Frank Magee, former Business Manager of The Santa Fe Opera, received $55,336.94 from estate of Ann & Robert Huntoon of Tubac, AZ, and $34,673.96 from estate of Dr. Harold and Norma Brown of Santa Fe.

Chapters Health System, John Wilbur, Senior Major Gift Officer, secured the 12th gift annuity from a couple age 90/86 for $10,000 with total gifts now exceeding $100,000. Sharon Jones, VP Development finalized a $10,000 gift annuity from a 93 year old donor. The HPH Hospice division of Chapters Health System received several estate payments.

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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