The nature of planned gift fundraising (and sometimes outright giving as well) is that there are times when donors, gift plans, and assets present situations where there is little gift component. Even worse, some “gifts” create a net liability in terms of the asset or reputational damage. Nonetheless, there are danger signals that a gift may be problematic and procedures to prevent accepting gifts with traps.
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People to continue to ask, “can’t we establish a Gift Annuity with funds from an IRA?” The short answer is that you absolutely can, and can also establish a charitable remainder trust using money withdrawn from a qualified retirement plan.
What are you planning for your year-end planned giving marketing campaign? It’s not too early to be solving this problem. While mailing to your donors is important year-round, the fall, before Thanksgiving, can be a particularly opportune time to communicate with donors. This is especially true for planned gifts, as many of these gifts are completed late in the year.
Since the Tax Cuts and Jobs Act of 2017 was signed into law, much has been written about its effect on the number of U.S. taxpayers who will itemize their deductions. The new law, which became effective on January 1, 2018, made several changes that have greatly reduced the number of taxpayers who itemize. Among the most significant of these changes are a near doubling of the standard deduction, which is $24,400 for a married couple in 2019 (add another $2,600 if both spouses are over 65), and the limitation of the deduction for state and local taxes (SALT) to $10,000. Estimates are that the number of itemizers for 2018 declined from 30% of taxpayers to just 12% of taxpayers.
After the bequest and beneficiary designation, the gift annuity is the most popular planned gift vehicle. Donors like them because they are easy to understand, offer reliable payments at attractive rates, and help them support the causes they love.
In today’s age of digital marketing, many so-called experts will tell you direct mail is dead. They call it “old school” and rant about ROI and low responses. They opine…
“Why spend money on copy, layout, printing, postage and mailing when most people are spending their time online.”
“It makes more sense to just advertise online.”
“Not only is it cheaper, but does anybody actually pay attention to ads in the mailbox these days?”
Don’t believe a word!
The planned giving conversation often revolves around shifting the donor’s thinking from cash to assets. When you are asking for cash, you are asking small; when you are asking for assets, you are asking big.
Blending planned gifts with outright gifts is an essential part of turning the gift discussion to assets. The Qualified Charitable Distribution (QCD), known to many fundraisers as the charitable IRA rollover, is not a planned gift vehicle per se. Nonetheless, thoughtful gift planning using the QCD can put a valuable asset on the table that may not have been considered by a donor making current gift.
You can’t say they hadn’t warned us. For years, the experts had cautioned that stocks were severely over-valued, and that a major reversal was coming. We had ended the previous 9 calendar years – 2009 through 2017 – with positive returns on stocks. We were enjoying one of the longest bull markets in history. Surely, we knew it couldn’t last forever, right? And in the first 3 quarters of 2018, stocks kept going higher and higher, to record levels. But then, in the 4th quarter of 2018, everything suddenly changed. The S&P 500, the Dow Jones Industrial Average, and the NASDAQ started crashing. Maybe some would say that’s an overstatement, but in general terms, there was a dramatic correction; the S&P came within a few percentage points of the dreaded 20% decline that marks entry into a bear market. And we ended the year of 2018 on a negative return, for the first time since 2008.
Life income donors have a variety of charitable gift vehicles to choose from: Pooled Income Funds, Charitable Remainder Unitrusts, Gift Annuities, and Charitable Remainder Annuity Trusts. Each vehicle has its own special rules for funding, permissible terms, taxation, and management. Nonetheless, life income gifts can be divided into two primary categories. First are life income gifts that pay income that varies from year to year depending on the vehicle’s investment performance. Second are life income gifts whose payments are fixed and do not fluctuate regardless of how the gift vehicle is invested and stock market conditions.
There are 9.5 trillion reasons why charities should be paying attention to IRA accounts. That is the amount that is estimated to have been in IRA accounts as of the Third Quarter of 2018.* With the IRA charitable rollover (technically known in the financial planning community as the Qualified Charitable Distribution or QCD) now being a permanent part of the tax law, gift officers should be targeting IRA accounts for major outright, planned, and blended gift commitments. But these gifts do not come without complexities. Gift officers should educate themselves to have a basic knowledge of what is permitted, what is strictly prohibited, and when to say, “Consult your advisor.” As you read the Dos and Don’ts below, be vigilant of not crossing the red line of giving the donor tax or legal advice – a red line that often can be difficult to navigate.