1. “Update on Planned Giving Tax Strategies” Hampton Roads Gift Planning Council January 8, 2015 Jennifer Pierson, Manager Estate, Gift and Trust Services

2. Items to cover  Comparing Planned Giving Techniques – 2013  Charitable Stats from 2013 and 2014 (mid year)  Charitable Giving Trends  Impact of “NEW” tax law on Planned Giving

3. Planned Giving Techniques Number of Vehicles Established and the % Change over 2012  Donor Advised Fund – 217,367 [5.7%]  Charitable Remainder Unitrust – 90,380 [-1.0%]  Private Foundation – 84,350 [7.3%]  Charitable Lead Trusts – 6,480 [-.3%]  Charitable Remainder Annuity Trusts – 13,660 [-6.5%]  Pooled Income Funds – 1,230 [-7.2%] Source: IRS and National Philanthropic Trust

4. Planned Giving Techniques – cont. Value (in billions) of Charitable Vehicles and the % Change over 2012  Donor Advised Fund – $53.7 [19.8%]  Charitable Remainder Unitrust – $88.1 [3.4%]  Private Foundation – $614.9 [5.7%]  Charitable Lead Trusts – $26.8 [13.2%]  Charitable Remainder Annuity Trusts – $6.2 [-3.7%]  Pooled Income Funds – $1.2 [-2.4%] Source: IRS and National Philanthropic Trust

5. Charitable Giving 2013 (billions)  Individuals - $241.32 72%  Foundations - 50.28 15%  Bequests - 26.81 8%  Corporations - 16.76 5%  Total - $335.17 100%  Source: IRS & Giving USA Foundation

6. Charitable Giving 2013 – Change over 2012  Individuals - 4.2%  Foundations - 5.7%  Bequests - 8.7%  Corporations - (1.9%)  Overall 4.4%*  Source: IRS & Giving USA Foundation *3.0% increase adjusted for inflation

7. Charitable Giving Sectors (Billions) - 2013  Religion- $103.89 [31%]  Education- $53.62 [16%]  Human Services- $40.21 [12%]  Public Society/Benefit- $23.46 [7%]  Health- $33.51 [10%]  Arts, Culture, and Humanities- $16.75 [5%]  International Affairs- $13.40 [4%]  Environment/Animals- $10.05 [3%]

8. Individual Giving – % of Disposable Income (40 years) Disposable Income – As defined by Bureau of Economic Analysis (US Department of Commerce)  1972 - 2.2%  1982 - 2.0%  1992 - 1.8%  2002 - 2.2%  2013 - 2.0%  Source: Giving USA Foundation

9. Individual Giving – 2013 Giving Trends  Last 4 Years – 12.3% increase since 2009 (end of recession)  Key Factors  95.4% of households give to charity  Per capita by individuals - $1,016  Per US household - $2,974  As financial situations improve…so does giving  Source: Giving USA Foundation

10. Corporate Giving – 2013 Giving Trends  Decline – Slower growth in pre-tax profits  Corporate Giving as % of pre-tax profits =.8%  Source: Giving USA Foundation

11. 2013 Giving Trends – Gift Recipient  Educational gifts – most growth  Religious giving remains slow  Declining affiliations  Increase in religious-oriented charities  International affairs slowed  Fewer disaster-relief contributions  Public-society benefits, arts, environment/animal, and health orgs  All experienced growth  Source: Giving USA Foundation

12. Charitable Receipts – Mid 2014 Percentage or responding organizations reporting change in charitable receipts, mid-2014 compared with mid-2013

13. What Lies Ahead?  Substantial growth in Donor Advise Funds (DAF) gifts in 2013  +9.9% to Community Foundations  Consistent with prior years  Grant payouts continue to be HIGH >20%  Projections – DAF “will” continue to grow  DAF grant-making at $10 to $53 billion in assets  Private Foundations at $54.7 to $614.9 billion in assets  Source: NPTrust.org

14. Comparison of DAF and PFs Donor Advised FundPrivate Foundation Start-up CostsNominal; Services provided by custodian Substantive legal, accounting & admin. Income Tax Deduction Limitation Cash: 50% AGI Securities: 30% AGI Cash: 30% AGI Securities: 20% AGI Estate Tax Deduction100% Excise TaxesNone2% of annual income Required DistributionNone5% of average FMV annually Donor’s ResponsibilitiesRecommend charitable beneficiaries Manage assets, keep records, prepare federal & state filings, select charities, administer grants & verify non-profit status Public ExposureDonor may remain anonymous Form 990-PF is public record

15. What Lies Ahead? – cont.  Gifting of Different Types of Assets  Not been a common practice  Non-Traditional Assets  Private equity interest  Closely held entities  Illiquid  Hard to value  Real estate/Tangible property  More frequently  Organization are advancing strategies  Source: NPTrust.org

16. 2013 Estate Tax Return – Charitable Bequests  # of Returns - 10,568  # Charitable Bequest - 2,527  # of Virginia residence - 266  # of Charitable bequest - 63  Source: IRS

17. Estates and Trusts – 2001 to 2013  Total income increased  $58 million (2003) to $175 million (2008)  Declined to $87 million in 2010  $161 million in 2013  Types of Returns  2001 to 2013 Complex trusts - 1.2 to 1.5 million annually Simple trusts – 700,000 annually Estates (Form 1041) – 400,000 annually Grantor trusts – 600,000 annually (largest decline) Bankruptcy estate, charitable trusts, etc. – 37,000 annually  Source: IRS (SOI)

18. Impact of Charitable Giving - Estate & Gift Tax  $14,000 Gift annual exclusion  Exemption  $5.34 million for 2014  $5.43 million for 2015 Top Rate  40%  Portability  Allows Surviving Spouse to use Deceased Spouse Unused Exemption  Many estates (2011, 2012 and 2013) filed returns in order to obtain decedent’s exemption

19. Tax Rate Changes – “Continue” to Impact on Charitable Giving  Discretionary Trusts  2013 returns caught fiduciaries “off guard”  Top Rate 39.6% - > $ 12,150 Taxable Income (2014)  Net Investment Income Tax – 3.8%  Big impact for capital gains  65 Day Rule

20. Individuals – 2015 Rates  New 39.6% rate applies…  MFJ > $464,850 AGI  Singles > $413,200 AGI  HH > $439k AGI  MFS > $232,425 AGI  Medicare 3.8% Surtax * applies…  Taxpayers MAGI > $200k/$250k  Net Investment Income  Supplemental Medicare Tax *.9% applies…  Taxpayers MAGI > $200k/$250k  Part of FICA (Hospital Insurance Tax) * The Patient Protection and Affordable Care Act

21. Charitable Organizations  2013 – 1,536,084 charitable organizations in US  Public charities in 2012  Reported over $1.65 trillion in revenue  Over $3 trillion in total assets  Source of revenue  73% - Program services  21% - Contributions, gifts & government grants  6% -Dues, event income, rental income, etc.  Foundations in US  86,192 in 2012  5.3% increase over prior year  Online giving  2013 increased by 13.5%  Of all 2013 charitable giving – online giving represented 6.4%

22. Conclusion  Charitable giving on the rise  Tax law continues to impact charitable giving  Focus on planning for the 3.8%

23.  Thank you!!