A person's actuarial age for computing a charitable deduction and choosing an ACGA suggested gift annuity rate is his or her age on the birthday that is closest to the date of gift.
Definitions - General Gift Planning
The challenge when in a low IRS discount rate environment is to maximize your donors’ options, including – when appropriate – acquainting them with novel approaches. In certain situations, one such approach in particular can be especially "gratifying."
Cost basis is the amount that a person paid for an asset.
The cost basis of cash equals the face value of the cash. The cost basis of inherited property equals the fair market value of the property at the time it was inherited. The cost basis of property received as a gift from a living person equals the cost basis of the person from whom the property is received.
A person's cost basis may be adjusted for tax purposes to account for depreciation taken on previous tax returns.
Also known as the AFR or Applicable Federal Rate, the IRS discount rate is used to determine the charitable deduction for many types of planned gifts, such as charitable remainder trusts and gift annuities. The rate is the annual rate of return that the IRS assumes the gift assets will earn during the gift term.
All planned giving donors are philanthropically motivated, but many cannot or choose not to make major gifts. By learning about the donor's financial and psychological situation, you can often find a planned giving vehicle that will appeal to the donor who otherwise is not willing to make a gift. The options are many, ranging from a small revocable bequest commitment to a large irrevocable planned gift arrangement.
Life income gifts offer solutions to a variety of donor situations that an outright gift cannot address. One situation they can address very nicely is a donor's desire to supplement retirement income with additional cash flow. From a development point of view, the techniques we are about to discuss have the added benefit of widening the pool of prospects to which your planned giving program can appeal.
Planned giving is a business that is preoccupied with designing gifts for "older donors," but there is no magic age at which one becomes eligible for a planned gift. While it is true that the economics of most planned gifts begin to work well for the donor and for the charity when the donor is around age 70, there are gift vehicles that can appeal to a demographic younger than the more familiar arrangements. What is "younger?" Planned giving is almost never an option for donors in their 20s and 30s or younger.
The monthly IRS discount rate has hovered around 2.0% since August of 2013. Before that there was a stretch of rates that averaged 1.2% for 22 months. Although the rates have been slightly better recently, IRS discount rates have set an historical all time low. How does this effect gift planning?
For gift planning offices at most not-for-profit organizations (NFPs), FASB accounting is the last thing on the list. Activities are geared towards bringing in new planned gifts, ongoing administration, and donor stewardship. The financial office asks for a FASB liability report once a year (at a few NFPs, once a quarter). Someone in the gift planning office runs off a new report using similar assumptions to the previous year. If there is an outside gift administrator, they can be asked to produce the report.