Under Republican leadership, Congress is working feverishly to complete the details of sprawling tax reform legislation, the Tax Cuts and Jobs Act, and have it on President Trump’s desk for his signature by the end of this year. The House bill was voted on and approved on November 16. On the same day, the Senate Finance Committee approved their version of the package.
Charitable Gift Types
There is one important – and often overlooked – question to ask spouses who are funding a charitable gift annuity (CGA) with appreciated securities: “Who owns the securities?” Not knowing the answer to this question can result in a triggering of capital gains taxes never anticipated by the donors - and a donor relations nightmare for the gift officer.
Including revocation language serves two purposes. First, it may enable the donor to avoid making a taxable gift to the annuitant. Second, it preserves flexibility in the event of a change in circumstances, such as the dissolution of a marriage. The decision on whether to include the revocation language is ultimately the donor’s, but it is helpful if the charity understands the issues to help inform that decision.
Mutual funds are easy to purchase, simple to understand, and they allow for continual reinvestment of income over the long run. As planned gift donors review their financial assets and determine which ones to use as the funding for charitable gift annuities, mutual funds present an obvious choice. But gift planners should be aware of some particular aspects of mutual funds that can cause significant complications in the process. Read about the complexities in mutual funds transactions and tax accounting.
Have you ever hoped that a donor would walk away from a gift? Why would any gift officer want that, unless perhaps the charity was at some risk of liability as a result of accepting the gift? Your goal is to close gifts – to cultivate and engage the donor with the hope of a (big) gift. Read about various scenarios in which walking away from a gift makes sense for both parties.
Fundraisers consider a well-functioning gift annuity program the cornerstone of a robust planned gift fundraising effort. Although bequests and beneficiary designations typically produce most of the realized planned gift revenue, offering gift annuities is usually the mark of a mature planned giving program. Nonetheless, among those charities that have offered gift annuities, many frequently worry about the continued viability of offering them.
One of the most awkward tasks faced in the Gift Planning office is having to ask for the return of a payment – or payments – made under a gift annuity arrangement with your organization. Generally, this occurs where payments have been made after the death of the last surviving income beneficiary. This situation is of particular importance at year end.
The end we are talking about is the end of calendar year 2016. Are you ready? Most charities concentrate on year-end giving in the fourth quarter and for good reason. A study conducted by the Center on Philanthropy at Indiana University focused on high-net worth donors found that 42.7 percent of those surveyed gave more during the holidays than the rest of the year. Nonetheless, in addition to soliciting and encouraging gifts at the end of the calendar year, it is also a time for planned giving departments to prepare and plan.
The persistently low IRS discount rates over the past five years has had a chilling effect on charitable remainder annuity trusts (CRATs). One reason is that these low rates have made 1-life CRATs unavailable for beneficiaries younger than their early 70s. Beneficiaries of 2-life CRATs must be even older. The roadblock has been the 5% probability of exhaustion test.
Gift planners are often surprised to see that the state named in the Governing Law paragraph in an annuity agreement is not always the same as the donor’s state of legal residence. Here’s why these states sometimes differ: