Planned giving can lower taxes and provide income to donors by allowing them to trade gifts for tax benefits and lifetime payments. However, planned giving options often seem complex, involving charitable gift annuities, charitable remainder trusts, and pooled income funds. In reality, planned giving only does two things: lower taxes and trade gifts for income. The document provides an overview of various planned giving vehicles and how they accomplish these two objectives. It aims to simplify an area that nonprofits, donors and financial advisors should understand and use to benefit charities and clients.
4. Gift planning
can do two
things.
Fundraisers
should use it
for two
reasons.
Financial
advisors
should use
it for two
reasons.
5. Gift planning can do two
things
• Lower taxes
• Trade gift for income
6. If gift planning can only
do two things, how can it
get so complicated?
7. Trade for
Income
Charity-Backed
CGA
Immediate fixed $
payments for
life/lives
Immediate CGA
Delayed fixed $
payments for
life/lives
Deferred CGA
Donor Asset-
Backed
CRT
Fixed $ payments
for life or years
CRAT
Fixed % payments
for life or years
CRUT
Capped at yearly
income
NICRUT
With IOUs if
income below
fixed payment
NIMCRUT
Capped until
event occurs
Flip-CRUT
Pool of Different
Donors’ Assets
PIF
8. Trade for
Income
Charity-Backed
CGA
Immediate fixed $
payments for
life/lives
Immediate CGA
Delayed fixed $
payments for
life/lives
Deferred CGA
Donor Asset-
Backed
CRT
Fixed $ payments
for life or years
CRAT
Fixed % payments
for life or years
CRUT
Capped at yearly
income
NICRUT
With IOUs if
income below
fixed payment
NIMCRUT
Capped until
event occurs
Flip-CRUT
Pool of Different
Donors’ Assets
PIF
9. Lower Taxes
Capital Gains
Taxes
Give
appreciated
property
To charity in
exchange for
income
CRAT, CRUT, CGA, PIF
To charity
Income Taxes
Donor’s
Deduction for current gift
Deduction for committing
to future transfer to charity
PF, DAF, Grantor CLT, Remainder Deed
Deduction for current gift
in exchange for income
CRAT, CRUT, CGA, PIF
Heirs’
(retirement account
charitable beneficiary)
Estate Taxes
Give to charity
at death
Will, CRT, CGA,
Remainder Deed
Fixed
payments from
assets to
charity, excess
growth to heirs
estate tax free
Non-Grantor CLT
10. Lower Taxes
Capital Gains
Taxes
Give
appreciated
property
To charity in
exchange for
income
CRAT, CRUT, CGA, PIF
To charity
Income Taxes
Donor’s
Deduction for current gift
Deduction for committing
to future transfer to charity
PF, DAF, Grantor CLT, Remainder Deed
Deduction for current gift
in exchange for income
CRAT, CRUT, CGA, PIF
Heirs’
(retirement account
charitable beneficiary)
Estate Taxes
Give to charity
at death
Will, CRT, CGA,
Remainder Deed
Fixed
payments from
assets to
charity, excess
growth to heirs
estate tax free
Non-Grantor CLT
11. Lower Taxes
Capital
Gains Taxes
Give
appreciated
property
To charity in
exchange
for income
CRAT, CRUT,
CGA, PIF
To charity
Income Taxes
Donor’s
Deduction for current gift
Deduction for committing to future
transfer to charity
PF, DAF, Grantor CLT, Remainder Deed
Deduction for current gift in exchange for
income
CRAT, CRUT, CGA, PIF
Heirs’
(retirement account
charitable beneficiary)
Estate Taxes
Give to
charity at
death
Will, CRT,
CGA,
Remainder
Deed
Fixed
payments
from assets
to charity,
excess
growth to
heirs estate
tax free
Non-
Grantor CLT
Trade for Income
Charity-Backed
CGA
Immediate fixed
$ payments for
life/lives
Immediate CGA
Delayed fixed $
payments for
life/lives
Deferred CGA
Donor Asset-
Backed
CRT
Fixed $ payments
for life or years
CRAT
Fixed %
payments for life
or years
CRUT
Capped at yearly
income
NICRUT
With IOUs if
income below
fixed payment
NIMCRUT
Capped until
event occurs
Flip-CRUT
Pool of Different
Donors’ Assets
PIF
Yes, it can get
complicated.
But, it still only
does two things.
12. Gift planning can do two
things
• Lower taxes
• Trade gift for income
Fundraisers should use it
for two reasons
• If you are asking for cash, you
are asking small
• A donor says the magical
phrase, “I wish I could do
more, but …”
13. If you are asking for
cash, you are asking
small
14. Wealth is not held in cash.
It is held in assets.
If you are asking from the cash bucket, you
are asking from the small bucket.
15. 99%
1% Financial assets held by families
(U.S. Census 2007)
Other financial assets
(stocks, bonds,
retirement accounts,
life insurance, mutual
funds)
Cash: Checking,
savings, money
market deposit
accounts, and similar
17. The magical phrase,
“I wish I could do more, but …”
• I have to save for retirement
• I am on a fixed income
• I don’t have the cash right
now
• Everything is tied up in the
business/farm
• Maybe I’ll leave a gift in my
will
• I only have so much money
and I might live a really long
time
• Etc., etc., etc.…
18. The magical phrase:
“I wish I could do more,
but …”
The magical response:
“What if there was a way
you could do both?
Would you like to hear
about that?”
20. Donor Charity
$100k Cash
Donor Charity
Income tax deduction
($100,000 x 39.6%)
$39,600
+
Avoid capital gains tax
($90,000 x 23.8%)
$21,240
Income tax deduction
($100,000 x 39.6%)
$39,600
$100k Stock
21. Donor Charity
$100k low
basis stock
$100k
cash
immediately buy
identical stock
(100% basis)
The charitable swap
No “wash sale” rule
because this is gain
property, not loss
property
22. Donor Charity
$100k low
basis stock
$100k
cash
immediately buy
identical stock
(100% basis)
A FREE tax benefit you lose
every time you give cash
24. Gift planning can do two
things
• Lower taxes
• Trade gift for income
Financial advisors should
use it for two reasons
• To provide dramatic benefit to
highly desirable clients
• To increase (multi-
generational) assets under
management
25. 0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
$2.0 million <
$3.5 million
$3.5 million <
$5.0 million
$5.0 million <
$10.0 million
$10.0 million <
$20.0 million
$20.0 million or
more
Estates including charitable planning
by estate size
(IRS Statistics of Income 2008)
26. Selling and reinvesting a highly appreciated
non-income producing asset
Simple Sale
$1,000,000 asset
$1,000,000 gain (if zero basis)
$288,000 tax (23.8% fed + 5% state)
$722,000 left to invest
Charitable
Remainder Trust
$1,000,000 asset
$1,000,000 gain (if zero basis)
$0 tax (CRT pays no tax)
$1,000,000 left to invest
& $100,000+ tax deduction
27. Tax-free growth environments
• Growth inside a
donor advised fund
is tax free
• Growth inside a
charitable remainder
trust is tax free (only
distributions are
taxed)
• Growth inside a
private foundation is
tax limited (either
2% or 1% rate)
28. Multi-generational management
Inheritance
• Small pools after
division by 1/n
children and estate
tax
Private
Foundation/DAF
• Individual
relationships
with each
heir
• High
maintenance
/ personal
losses
• Big pool with
no division
and no estate
tax
• Preexisting
position as
pool manager
• Low
maintenance/
charitable
organization
losses
29. Gift planning
can do two
things.
Fundraisers
should use it
for two
reasons.
Financial
advisors
should use
it for two
reasons.
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HERE
convince my bosses that continuing to build and
post these slide sets is not a waste of time. If
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32. If you clicked on
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Thank
You!
33. This slide set is from the curriculum for
the Graduate Certificate in Charitable
Financial Planning at Texas Tech
University, home to the nation’s largest
graduate program in personal financial
planning.
To find out more about the online
Graduate Certificate in Charitable
Financial Planning go to
www.EncourageGenerosity.com
To find out more about the M.S. or
Ph.D. in personal financial planning at
Texas Tech University, go to
www.depts.ttu.edu/pfp/
Graduate Studies in
Charitable Financial Planning
at Texas Tech University