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January Newsletter

Obama Charitable Giving.....For a complete list of the Obama's charitable giving check out the 50 organization that received support on this special New York Times e-mail supplement

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Interest rates may remain low for a while. That's not good.....I bet they are wrong!!!!!! So they never heard about the power in gift annuities and the combined power of the payment rates and the charitable deduction. While older folks are thinking longer about gift options the charitable gift annuity continues to be the number one life income arrangement. Gift annuities are not without longevity and investment risks and are ultimately 50% gifts for your charity but they should lead to a larger conversation about bequest giving and charitable inclusion in donor's will or trust. (Fortune Magazine, March 25, 2010 on Yahoo Finance)

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The fearful prospect.... I recently read an article about a financial advisor and how he deals with fearful clients, in the "New Normal" investing climate. Here are the takeaways for prospect/donor work.

1. Allow more time for your initial meeting, don't try to fit the donor into your time schedule. The one-and-a half meeting are now over two hours meetings.

2. End each meeting with the same question. "Do you have any questions or concerns?"

3. Make sure the prospects is convinced of your mission and you will use the money appropriately, even after their death.

4. Provide a written detailed summary of the meeting and send the summary to the prospect and keep one in their file.

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Americans adjusting to new economic conditions ....According to a recent study by Northwestern Mutual - Americans have adjusted to near-term challenges and are increasingly optimistic about long term economic prospects. There was a 60% year-over-year increase in Americans are accepting the "New Normal." Americans are increasing their time horizons and instituting a long-term approach to their goals.

Comment: For philanthropy this means individuals will extend the time between learning of a planned gift arrangement and executing a gift agreement. The old rule of thumb was an 18 month timeline but I would guesstimate it may now take up to two years between initial contact and a gift agreement. Stay close to your best prospects during this time so they do not lose interest and update them with any changes, i.e. tax policy changes or gift annuity rate changes.

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Good bye comfortable retirement.....The number of Americans who are worried they wouldn't be able to afford a comfortable retirement stands at 51% according to a study by Scottrade.

Comment: Remember the benefits of the flexible deferred gift annuity as a supplemental retirement program for

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Only 51 percent of Americans have estate planning documents... such as wills, trusts or power of attorney, indicate findings from Lawyers.com.

This figure, which is compared with a rate of 64 percent in 2007, represents a decline of 13 percent, not especially surprising news considering that 71 percent of those surveyed say focusing on saving money is more important than the long-term planning of their estate.

Meanwhile, findings indicate that 35 percent of Americans have wills (down from 45 percent in 2007); 29 percent have power of attorney for finances or health care (down from 46 percent on 2007); and 18 percent have a trust (down from 31 percent in 2007).

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High cost of getting old....Healthcare is and will be continue to be one of the biggest expenses in retirement. Qualifying for Medicare coverage at age 65 helps, but retirees will continue to have significant out-of-pocket costs. According to the Center for Retirement Research at Boston College, a typical 65-year-old married couple without chronic conditions will need $197,000 to pay for out-of-pocket medical costs throughout retirement and have a 5% chance that healthcare costs not covered by insurance will exceed $311,000. Here are the results of other studies:

Fidelity Investments estimates that a couple, both age 65 in 2009, will need approximately $240,000 to cover medical expenses throughout retirement. Employee Benefit Research Institute determined that a 65-year-old couple in 2009 will need $210,000 to have a 50% chance of affording their retiree health expenses and $338,000 to have a 90% chance.

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New Medicare tax on unearned income...In the Healthcare bill (Patient Protection and Affordable Care Act, 2010) there is a provision which has donors and accountants talking. It involves an 3.8% additional tax on unearned income (interest, dividends and passive income from real estate investments) for high income taxpayers ($200,000 single taxpayer or $250,000 married couples). Effective in 2013 this new tax already has planners thinking about investment options.

This tax will effect the gift annuity income and charitable trust income of high income taxpayers.

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Topic for your next bequest advertisement....

"Will your children create a legacy with your nest egg? Or will you?" Unique titles are need to catch the attention of today's prospects. ________________________________________________

Kudos Corner

This is a new section where I will be highlighting some gift expectancies and gift program elements I think will be helpful and informative, not all gifts are included.

Kudos to Alice Moss, Executive Director of the Beaufort Memorial Hospital Foundation on her recent $41,000 flexible deferred gift annuity. The donor age 69 has two annuity contracts he wanted to cash in. The annuity accounts when cashed resulted in taxable income on the dividend income. To offset the tax on the income the donor established a flexible deferred gift annuity which generated a $21,000 charitable deduction. The target date was 2015. The resulting charitable deduction offset the taxable income so the total program strategy was to create a tax neutral situation. He also created a large future gift. To enhance the program the donor kept the cash from the annuity contracts and donated appreciated securities to establish the FDCGA. He reinvested the cash into other investment assets, solved a future capital gains tax problem and can turn on the annuity agreement at any future date.

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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, 15 Pinewild Drive, Pinehurst, NC 28374
Phone: 910-295-6800
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