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An Overview of Charitable Giving Options

An Overview of Charitable Giving Options. Southwest Washington Estate Planning Council October 14, 2014 Presented by Bill Zook Vice President PG Calc Incorporated. Charitable Giving . Nature of Giver Nature of Gift Nature of Recipient Parties Other Than Giver and Recipient

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An Overview of Charitable Giving Options

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  1. An Overview of Charitable Giving Options Southwest Washington Estate Planning Council October 14, 2014 Presented by Bill Zook Vice President PG Calc Incorporated

  2. Charitable Giving • Nature of Giver • Nature of Gift • Nature of Recipient • Parties Other Than Giver and Recipient • What’s Timeless, What’s Timely Overview of Charitable Giving Options

  3. Definitions • Planned Giving/Gift Planning • Planned Gift • Estate/Legacy Planning Overview of Charitable Giving Options

  4. Characteristics of Planned Gifts • Assets vs. Income • “Assisted Giving” vs. Solo Endeavor • Donor’s Timing vs. Charity’s Timing • Heart vs. Head • Endowment (vs.) Other Use • Deferred (vs.) Current Overview of Charitable Giving Options

  5. Types of Charitable Recipients • Various Public Charities • Community Foundations • Supporting Organizations • Private Operating Foundations • Private Non-operating Foundations Overview of Charitable Giving Options

  6. Various Public Charities • Many Organizations, Many Missions • Gifts: Unrestricted vs. Restricted • Superior Tax Benefits for Donors Overview of Charitable Giving Options

  7. Community Foundations • “Special” Public Charities • Make Grants to Other Pub. Chars. (Mostly) • Foci/Constituencies • Types of Funds Overview of Charitable Giving Options

  8. Community Foundation Funds • Unrestricted/Discretionary • Area-of-Interest • Designated • Donor Advised Overview of Charitable Giving Options

  9. Supporting Organizations • Three Types • Established by Donor or by Public Charity • Treated as Public Charity • Often Paired with Donor Advised Fund Overview of Charitable Giving Options

  10. Private Operating Foundations • Do What Public Charities Do • Not Publicly Supported • Treated as Public Charity Overview of Charitable Giving Options

  11. Private Non-operating Foundations • Make Grants to Public Charities (Mostly) • Not Publicly Supported • Inferior Tax Benefits for Donors Overview of Charitable Giving Options

  12. Continua of Control Public Charity Private Non-operating Foundation Donor Advised Fund Discretionary Fund Overview of Charitable Giving Options

  13. Universe of Planned Gifts • Current • Deferred Overview of Charitable Giving Options

  14. Current Gifts • Outright Transfers of Various Types of Assets (Irrevocable) • Bargain Sales (Irrevocable) • Charitable Lead Trusts (Irrevocable*) Overview of Charitable Giving Options

  15. Deferred Gifts • Bequests (Revocable) • Beneficiary Designations (Revocable) • Charitable Gift Annuities (Irrevocable) • Charitable Remainder Trusts (Irrevocable*) • Pooled Income Funds (Irrevocable) • Retained Life Estates (Irrevocable) Overview of Charitable Giving Options

  16. Outright Transfers • Cash • Long-Term Appreciated Capital Assets (Don’t Sell!) • Ordinary Income Property • Special Case: Tangible Personal Property Overview of Charitable Giving Options

  17. Outright Transfers: What Can Go Wrong • LTCG Assets Sold, Not Transferred • STCG Assets Used to Make Gift • Loss Assets Used to Make Gift • Tangible P. P. Dynamics Not Understood • Transfer Delays • Valuation Misunderstood Overview of Charitable Giving Options

  18. Charitable Bequests • Three Basic Ways to Structure • Contingency Options • Estate Tax Benefits Overview of Charitable Giving Options

  19. Bequests: What Can Go Wrong • Wrong Charity Is Named • Donor Loses Capacity to Revise • Changes in Estate Size Skew Unrevised Plan • Donor Fails to Clear Restrictions with Charity Overview of Charitable Giving Options

  20. Beneficiary Designations • Bank/Brokerage Accounts • Life Insurance Policies • Some Commercial Annuity Contracts • IRAs/Qualified Retirement Plans • Probate & Other Estate Planning Issues Overview of Charitable Giving Options

  21. Beneficiary Designations: What Can Go Wrong • Designation Not Coordinated with Rest of Estate Plan • Custom Beneficiary Designation Resisted by Financial Institution • Pecuniary Designation Incapable of Being Fulfilled Overview of Charitable Giving Options

  22. “IRD” Assets • Basis Can’t Be Stepped up • IRD Not Taxable for Charities • Mix and Match Overview of Charitable Giving Options

  23. Lifetime Gifts of IRA/QRP Assets • A Wash at Best • Withdraw Cash, Give LTG Capital Assets • “Charitable Rollovers” (IRA vs. QRP) Overview of Charitable Giving Options

  24. Charitable Gift Annuities • Contractually Fixed Annual Payments for 1 or 2 Lives • Typically Funded with Cash or LTCG Marketable Securities • Attractive Rates • Immediate or Deferred Payments • Partial Charitable Deduction • Favorable Taxation of Payments Overview of Charitable Giving Options

  25. CGAs “vs.” Commercial Annuities • Extent of Regulation (by WA, Other States, & U.S.) • Payment Options • Annuity Rates • “Reinsurance” Options Overview of Charitable Giving Options

  26. Gift Annuities: What Can Go Wrong • Gift Not Coordinated with Rest of Estate Plan • Donor Regards Arrangement as Strictly Financial • Charity Exhausts Contribution Overview of Charitable Giving Options

  27. Charitable Remainder Trusts • Two Types: CRATs & CRUTs • Various Conditions Must Be Met • Typically Funded with LTCG Assets • Partial Charitable Deduction • Payment Taxation Depends on Investment Results Overview of Charitable Giving Options

  28. CRTs (continued) • Payments Can Be “Deferred” with Some CRUTs • Trustee Issues/Options • “Non-Qualified” CRTs Overview of Charitable Giving Options

  29. CRTs: What Can Go Wrong • Payout Rate Is Too High • Inappropriate Structure Selected • Improper Assets/Investments • Trust Taxation Not Understood • Incompetent Trustee • Insufficient Assets • Trust’s Name Exposes Donor’s Identity Overview of Charitable Giving Options

  30. Charitable Lead Trusts • Two Types: CLATs and CLUTs • CLTs Are Not Tax Exempt • Still, Certain Conditions Must Be Met • Grantor vs. Non-grantor • Current Appeal of CLATs Overview of Charitable Giving Options

  31. CLTs: What Can Go Wrong • Improper Assets/Investments • Payout Rate Too High/Trust Term Too Long Overview of Charitable Giving Options

  32. “Charitable GRAT” Alternative • GRAT Basics • No Choice of Discount Rate • Donor Shares GRAT Benefit with Charity • Benefit Can Be Cash or Securities Overview of Charitable Giving Options

  33. Retained Life Estate Arrangements • RLE Basics • Low Discount Rate = Higher Deduction • Options If Donor/Tenant Wants to Move Overview of Charitable Giving Options

  34. RLEs: What Can Go Wrong • Life Tenant Fails to Maintain Property Adequately • Life Tenant and Charity Fail to Agree on Details If Property Needs to Be Repaired or Sold Overview of Charitable Giving Options

  35. Charitable Bargain Sales • Mechanics • Tax Deduction • Prorating of Basis • Suitable Types of Assets • Installment Option Overview of Charitable Giving Options

  36. Bargain Sales: What Can Go Wrong • Capital Gain Recognition Out of Sync with Availability of Charitable Deduction Overview of Charitable Giving Options

  37. Relevant Categories of Life Insurance • Whole Life • Universal Life • Term Overview of Charitable Giving Options

  38. Giving Options with Life Insurance • Transfer of Paid-up Policy • Transfer of Policy with Premiums Owing • Purchase of New Policy • Choices for Charity, Once It Owns Policy • Beneficiary Designations • Other Options??? Overview of Charitable Giving Options

  39. Life Insurance: What Can Go Wrong • If Payments Still Need to Be Made on Policy Owned by Charity, Donor Stops Making Them • Charity Makes Disposition of Policy It Owns That Upsets Donor Overview of Charitable Giving Options

  40. Wealth Replacement Insurance • Outright Gifts vs. Life Income Gifts • What Is Amount of Wealth to Be Replaced? Overview of Charitable Giving Options

  41. Dispositions of CRT Income Interests • Complete or Partial “Cash-out” • Complete or Partial Gift to Remainder Beneficiary(ies) • Conversion to New Life Income Arrangement Overview of Charitable Giving Options

  42. Tax Considerations • Cost Basis of Income Interest Is Zero • Low Discount Rate = Major Roadblock for Some CRUTs • The More Beneficiaries, the More Complexity • Appraisal Required If Charitable Disposition Made Overview of Charitable Giving Options

  43. Non-tax Considerations • Spendthrift Provision Can Be a Problem • Court or Attorney General May Need to Be Involved • Winding up Trust Requires Careful Attention Overview of Charitable Giving Options

  44. Dispositions of Other Non-charitable Interests • CGA: Cash out, Surrender, Convert to New CGA • PIF: Cash out, Surrender, Convert to CGA • RLE: Addressed Previously • CLT: Charity Cash-out May Be Possible Overview of Charitable Giving Options

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