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February Newsletter 2012

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Planned Giving Mentor

Of Counsel: Winton C. Smith, Jr., JD

Quote for today: It's easy to make a buck. It's a lot tougher to make a difference. ~Tom Brokaw


Past issues of Newsletter are available in the Newsletter Archives

On the To-Do List - Types of Bequests......The February issue of this newsletter noted 65% of American adults have not written a will. Today we will cover the many ways to make a bequest.

Bequests, the foundation of most planned gift programs, come in many shapes, sizes and styles. The PG officer must learn the various structures of bequest intentions and then match their purpose to the donor’s objectives.

A bequest may come from a will, a living revocable trust, a testamentary trust, a charitable trust, or through a bequest substitute, i.e. beneficiary designations of insurance policies or retirement plans. Donor action is required to fulfill their charitable intentions as state intestate laws never include charitable bequests.

An attorney approved bequest wording brochure with examples should be available at all times for professional advisor and prospect inquiries. It should be included on your web site and easily downloaded. It should include specific reference to the legal name and tax exempt number of the charity; i.e. ABC University, a Pennsylvania not-for-profit corporation located in Philadelphia, Pennsylvania, Federal Tax ID Number xx-xxxxxxxx, I leave......

While most common bequests flow from cash, stocks, bonds, mutual funds or real estate held as part of an estate, donors may bequeath any item of tangible personal property. A donor may express their bequest by listing asset, an amount, percentage, or shares. A bequest would lapse if the individual does not own the asset at death. A charity can always refuse to accept a bequest (maybe you do not want grandma's old antiques).

Specific asset bequest delivers to the charity or individual beneficiary an item described by the donor. Example: Martha Washington drew little pictures of her prized possessions in order to insure their delivery to her beneficiaries. More common language would be, “I leave my 1890 grandfather clock to ABC Historical Society.” Some states permit an individual to create a written list referenced in the will of personal property to be transferred at death.

Specific amount or general bequest delivers a set dollar amount to the beneficiary. Example: “I leave $10,000 to Memorial Hospital, a not-for-profit organization located at 123 Main St, Anytown, NC, Federal Tax ID number 12-3456789.” The impact of a specific amount bequest may be substantially less due to the impact of inflation.

Percentage bequest delivers a stated percentage of either the donor’s entire estate, residuary estate or a specific asset to the named beneficiary. Example: “I leave 10% of all my estate to North College;” or “I leave 25% of the rest, residue and remainder of my estate after payment of all bequests to St. Nicholas Church, a not-for-profit organization located at 123 Main St, Anytown, NC, Federal Tax ID number 12-3456789;” or “I leave a 50% interest in the 5,000 acres of timberland I own on Magic Mountain to Save the Earth, a not-for-profit organization located at 123 Main St, Anytown, NC, Federal Tax ID number 12-3456789 .”

Residuary bequest delivers the balance of an estate or a designated percentage or share of the balance to the named beneficiary after all estate administrative cost, and bequests have been fulfilled.

Contingent bequest delivers the stated asset to a beneficiary if some event occurs. Generally a charity is listed as a contingent beneficiary after the death of a prior beneficiary. Example: “I give to my nephew, Leroy Jones, $100,000 providing he survives me and if not I give a like amount to Helpful University, a not-for-profit organization located at 123 Main St, Anytown, NC, Federal Tax ID number 12-3456789.”

Bequest purpose: Bequest language should include wording stipulating its purpose. Bequests may be for either general use or for a designated purpose such as a scholarship fund or a hospital department. Stipulations have implications for the proper accounting of bequest income and ensures donor support will be applied for its intended purpose.


Taxes come and go but, death stays the same.....Is the title of an article I authored for "Leave a Legacy" News York County, PA. It provides a good summary of what is ahead for individuals IF Congress does not act to continue, modify or expand the Bush era tax policies. Of particular not for high income earners is the tax on dividends will increase 300% from 15% to 43.4%. The value of deductible items such as charitable gifts will rise in a higher rate environment and therefore SHOULD be deferred until 2013. Charities must make a compelling case to motivate "tax motivated" donors in 2012. Link to full article.


Has your marketing message gone stale?.....Messaging is a critical part of your charities success. In creating, defining and refining your charity message, your first goal is to make crystal clear what you do. The second is to pique the reader's interest, leving them feeling as if they might be making a mistake if they do not at least find out more about your planned gift program.

Before you do any marketing, conduct your own messaging strategy session by asking the following five questions.

1. What are the challenges our charity can help prospects overcome?

2. What are the words our prospects use to describe their challenges?

3. What is our solution (using words prospects can relate to)?

4. What are the specific benefits of our planned gift program?

5. List your benefits with clear messaging targeted to each prospect.

Your message is your first impression. Make sure it's one that gets people coming back to find out more.


Social Security goes paperless in 2013.....All federal benefits recipients will begin to receive their payments by direct deposit to a bank, credit union or loaded onto a Direct Express Debit Master Card beginning on March 1, 2013.

MORE ARE WILLING TO WAIT - At age 62, Americans workers may begin receiving Social Security retirement benefits, albeit with a 25% reduction from the benefit otherwise available at the program’s normal retirement age. Only 26.9% of Americans at least age 62 that had not begun to receive retirement benefits at the beginning of 2011 started those benefits during 2011, the lowest percentage to do so since 1976 (source: Social Security).

At the present time, Social Security income is not taxed until modified adjusted gross income meets certain thresholds. Fifty percent of Social Security and all tax-exempt interest is included to determine whether you meet the threshold. For a single person, the thresholds are $25,000 and $34,000; for a married couple filing jointly, the thresholds are $34,000 and $44,000. Social Security benefits are not taxed until your modified adjusted gross income exceeds the first threshold, and then 50% of benefits are subject to federal tax. Once the second threshold is met, 85% of benefits are subject to tax.


New Gift Annuity Rates Effective January 1, 2012.....The American Council on Gift Annuities has announced new gift annuity rates for 2012. This is the result of the decreasing return on the fixed income bond component of the ACGA investment return assumption. Handouts from both the Sharpe Group and Crescendo further explain the rational for change.

If you would like a laminated rate chart for the 2012 rates simply request one using the following E-mail request.


Board member's role in fundraising/planned giving....Do you set expectations for board members in fundraising and planned gift understanding? Here are some thought to consider as you work with members.

1. Do they make a personal gift to the annual, capital and planned gift efforts?

2. Are they part of the fundraising planning and evaluation process?

3. Do they identify, evaluate and cultivate prospective donors?

4. Are they willing to sign personal appeals, letter or notes to prospects?

5. Will they write or phone "thank you" to donors?

6. Are they willing to leverage relationships to make introductions to probable donors?

7. Are they advocates for your charity raising awareness of your mission?

8. Do they participate in solicitations when appropriate?

9. Do they understand the power in planned gift arrangements to increase a donor's income and decrease their taxes while preserving the economic power of their assets?


News and Notes....

GETTING OLDER - Life expectancy at birth of Americans has increased by 10.5 years in the last 60 years (i.e., 1950-2010), reaching 78.7 years today. Thus since 1950, life expectancy at birth has increased by 2 months every year (source: Center for Disease Control).

RICH NEIGHBORS - 1 out of every 13 households in the United States has a net worth of at least $1 million not counting the value of the family’s primary residence (source: Joint Center for Housing Studies of Harvard University, Spectrem Group).

RETIREMENT - Only 59% of American workers (both union and nonunion) have access to any type of retirement plan, e.g., pension plan or 401(k) plan (source: National Institute on Retirement Security).

TOO MANY HOMES - At the end of 1989, there were 60 million families that owned a home and 34 million families that rented a home or an apartment. At the end of 2011 (i.e., 22 years later), there were 75 million families that owned a home, i.e., an increase of +25%, and 39 million families that rented, i.e., an increase of +15% (source: Department of Housing and Urban Development).

EVERY DAY - An estimated 7,600 Americans turned 65 years old each day in 2011. An estimated 11,400 Americans will turn 65 years old each day by the year 2029 (source: Government Accountability Office).

I’M NOT FEELING WELL – An average American couple retiring at age 65 today would need a present value lump sum of $230,000 to cover future health insurance premiums and out-of-pocket medical expenses over the remainder of their lives (source: Fidelity Investments).

NET WORTH - The total net worth of Americans was $58.5 trillion as of 12/31/12, down 0.6% in the last year (source: Federal Reserve). ______________________________________________________________________________


Kudos Corner

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.

Kudos to the Chapters Health System Sharon Jones FAHP, VP Development, John Wilbur, and Amanda Maynor, who continues to expand the gift annuity program with $145,000 in agreements during the first quarter.


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

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