1. A for Annuity, B for Bequest, C for Charitable Remainder Trust…
The ABCs of planned giving – the most commonly used vehicles, their benefits to the donor and to your charity, the assets with which they can be funded and other practical considerations.

2. We’ll Cover Definition of Common Types How They Work
Assets/minimums to Fund
Benefits
Practical Considerations
Relevance/Importance
Q & A

3. B as in Bequest
a legal provision in one’s will (or living trust) that names charity as the recipient of a portion or all of a donor’s estate

4. Common Types
Specific: charity is beneficiary of a particular asset or dollar amount
Residuary: charity is beneficiary of the remainder of the estate once expenses & specific bequest obligations met
Contingent: charity is beneficiary if all of the beneficiaries pre-decease the donor

5. Assets to Fund
Cash
Real estate
Securities
Personal property

6. Benefits For the Donor Easy to understand
Control of asset distribution
Revocable
Possible estate tax deduction; no current charitable income tax deduction
No minimum to fund
Costs nothing during lifetime

7. Benefits For the Charity
Market to everyone – no age/wealth limitations
Often, a donor’s largest gift
Can be used to ‘endow’ annual gift
Steady, future stream of income

8. Practical Considerations
After donor dies, distribution won’t be immediate
Disgruntled relatives, children, etc. may contest
Bequest administration
Be prepared to respond to donors’ requests for information

9. Relevance 8% have included a charity in will 42% die without a will
21% had no prior affiliation with charity
Most popular -- 80% of all mature planned gifts
Only 1 in 3 told charity about bequest in advance

10. B as in Beneficiary Designation
a provision outside the will naming charitable organization as beneficiary of a portion or all of a particular asset

11. Assets to Fund Insurance policy Retirement plan and IRA
Brokerage or bank account .

12. Benefits For the Donor No age minimum
Easy to do -- beneficiary designation form
Control of asset distribution
Revocable
No dollar minimum
Doesn’t require an attorney
Costs nothing during lifetime

13. Benefits For the Charity
Relatively easy to administer
Market to everyone – no age/wealth limitations
Distribution may be faster because asset not going through probate

14. Insurance Policy Policy that is no longer needed
Make charity owner and beneficiary of paid-up policy
Donor gets charitable income tax deduction
Removes asset from gross taxable estate
Charity receives policy benefits upon death of donor

15. Retirement Plan Assets
Most retirement plans income-tax deferred
Donor avoids income and estate tax
Even if estate not subject to estate tax, income from IRA is taxable upon transfer to heirs [income in respect of decedent (IRD)]
Gift IRA assets to charity; leave non-taxable assets to heirs
Donor still makes withdrawals during lifetime

16. Financial Accounts Transfer on Death Investment Account (TOD)
Assets remaining in account pass directly to named beneficiaries
Beneficiaries must provide original death certificate (usually, to a brokerage firm)
If beneficiaries predecease owner, remaining funds become part of owner’s probate estate

17. Financial Accounts Payable on Death Bank Account (POD)
Money left in account will be paid to named beneficiaries
Beneficiaries must provide original death certificate to bank
If beneficiaries predecease owner, remaining funds become part of owner’s probate estate

18. C as in Charitable Gift Annuity (CGA)
Contractual arrangement
Individual transfers cash or marketable securities to charity in exchange for fixed, annual payments for up to 2 annuitants for life
Charitable income tax deduction for portion of gift in year gift was made
Remaining balance passes to charity when contract terminates

19. CGA, cont’d.
Annuity payments are part taxable and part tax free; possible capital gains tax portion
Payout rates recommended by American Council on Gift Annuities (ACGA)
Charity sets funding minimums

20. Types of CGAs Immediate: payout to annuitant/s begin immediately
Deferred: payout to annuitant/s begin on a pre-determined future date
Flexible: payout to annuitant/s begin in a future date range, but not for at least one year after the gift has been made

21. Assets to Fund a CGA Cash
Appreciated securities - a portion of capital gains tax is avoided
Real estate [unencumbered]
The capital gains is allocated between what the charity receives at donor’s death (the gift portion); and what donor receives in payments (the annuity portion) and taxed over the lifetime (s) of the annuitant (s)

22. CGA Benefits for the Donor
Annual fixed payments for life; amount doesn’t fluctuate with the market
Professional asset management
Provide for selves, aging parents, college tuition, others
Immediate charitable income tax deduction; possible estate tax deduction
Diversify portfolio to produce fixed income

23. Benefits for the Charity
Often, good “starter” gift
Donors often create more than one
Can re-engage lapsed donors

24. Practical Considerations
Charity should be registered in each state in which it is offering CGAs
Backed by all of the general assets of the institution
Optimal to use third party to administer
Forms required – application, contract, disclosure statement
Obligation to pay annuitants for life

25. Relevance Great way to begin cultivating a donor
Very popular with lots of charities
Your donors may already know about them from their other charities – good news for you
Marketing opportunity when rates change

26. CGA Example: Donor, age 80, donates $10,000 Gift date - 3/6/14
Charitable deduction - $5,020
Payout rate - 6.8%
Annual payment - $680

27. Charitable Remainder Trusts (CRTs)
Trust created by the donor that stipulates a payout from the assets to the donor & or donor’s beneficiary for life or term of years
Donor selects a trustee (sometimes charity)
Donor sets payout rate, but 5% minimum
Lawyer drafts trust documents
Irrevocable

28. Two Main Types of CRTs Charitable Remainder Annuity Trust [CRAT]
Established during life or inter vivos
Payout is fixed amount, regardless of value of trust principal
Donor selects annuity amount at trust’s creation
Donor cannot add assets to the trust

29. CRTs, cont’d Charitable Remainder Unitrust [CRUT]:
Can be established during life or inter vivos
Pays a fixed percentage (at least 5%) based on annual fair market valuation of the trust
Amount of payout can change annually
Donor can add to the value of the trust
May be a hedge against inflation

30. CRTs, cont’d. Works well in conjunction with bequests
Donor establishes a CRT during her life to fund department Chair upon her death
Balance of Chair funded through a bequest; both mature at same time, funding Chair

31. Assets to Fund
Typically, $100,000 minimum due to costs associated with set up/administration
Cash
Highly appreciated, low yield property
Real estate

32. Benefits For the Donor Possible reduction in taxable estate
May bypass taxation of capital gains
May increase income
Diversification of assets
Charitable income tax deduction for ultimate gift
Doesn’t require involvement of charity
Flexibility as to income recipients
Helpful in retirement planning

33. Benefits for Charity Trust is irrevocable
Typically six-figure gifts or more
Support for mission

34. Practical Considerations
Although trust is irrevocable, charitable beneficiary selection may not be
Principal can be invaded if trust earnings are down – be conservative in your trust illustrations for donors
Involves professional advisors – at least an attorney (typically cost to donor)

35. Residence with Retained Life Estate
Donor makes irrevocable gift of residential real estate
Donor retains the right to live in & use property for life
Donor still responsible for maintenance, taxes, insurance, other costs
Donor gets charitable income tax deduction

36. Practical Considerations
Burden of out-of-town property management until property sold
Selling property
Real estate market [fluctuating]
Real estate gift acceptance policy

37. Q and A

38. Gayle S. Union Manager, Planned Giving Marine Corps Heritage Foundation