PG Calc Featured Articles

Common Recommendations from Our Consulting Audits

PG Calc is a pretty exciting place to work – especially if you like projects as interesting as reviewing planned giving programs of every size, shape, and maturity. We are often asked to uncover key problems that hinder the effectiveness of planned giving efforts. This article outlines a few of the more common recommendations that we give to clients. While it’s clear that all of these problems rarely exist in one place, the four categories of recommendations are the recurring themes.

Discouraging Bad Gifts

A bad gift can be defined as one that leaves a charity worse off than if no gift had been made.  Some gift planners might argue that even a gift that produces some benefit for the charity can still be a bad one if either (1) dealing with it draws heavily upon resources that would clearly be better devoted to other gifts or (2) the gift simply results in a lot of headaches and hassle.

Anyone who has been involved with a bad gift is loath to repeat the experience if at all possible.  Fortunately, adopting – and adhering to – sound gift acceptance policies can go a long way toward helping a charity avoid bad gifts.

Conditions are Ripe for the Step Lead Trust

A charitable lead annuity trust is a way for a wealthy donor to pass assets on to heirs at little or no gift or estate tax cost while providing a generous gift to one or more charities at the same time. During its term, the lead trust makes payments each year to the charity(ies). Whatever assets remain in the lead trust when it terminates are distributed to individuals named by the donor, typically family members. Unlike a charitable remainder trust, which is tax-exempt, a charitable lead trust is a taxable entity, so trust investments need to be managed with this in mind.

Four Proposals to Reduce the Tax Benefits of Making a Gift

In December 2010, Congress passed the Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010. Among its numerous provisions, the 2010 Act extended the income tax rate reductions enacted during the Bush administration through December 31, 2012. This means that income and capital gains tax savings from lifetime charitable gifts of cash or other assets will remain unchanged at least until the year following the next presidential election.

In the event that Congress does not act in the meantime, on January 1, 2013 tax rates will revert to those in effect when President Clinton left office; the top income tax rate would be 39.6 percent, capital gains would be taxed at a 20 percent rate, and dividends would be taxed at ordinary income tax rates, potentially as high as 39.6 percent. These changes would increase the tax incentives for charitable giving.

Planned Giving Across State Lines

If your organization has a purely “local” donor base, your planned giving program may not be affected by the laws of any state other than your own. But what happens when a key supporter moves to another state yet still wants to benefit the organization, whether through a charitable gift annuity or simply a bequest? Even charities that routinely work with donors throughout the country have to be mindful of all the ways legal and operational issues can have an impact on planned giving activity.

Beyond Charitable Rollovers: IRAs and their IRD Cousins

It’s clear – even to Congress – that donors and charities have been very pleased with the temporary IRA charitable rollover provision contained in the Philanthropy Protection Act of 2006.  Although the IRA charitable rollover expired at the end of December 2014, the gift planning community is working hard to convince lawmakers to continue, and ideally to expand and make permanent, the tax incentives for using IRAs to make charitable gifts during life.