Are We Speaking the Same Language? Critical Issues Track Sponsored by: Are We Speaking the Same Language? Brief Bios Introduction Speaker etc

Today’s Plan Planned Giving v. Gift Planning- some antics with semantics Understanding advisor relationships Who are they? Opportunities and pitfalls Where does the philanthropic advisor fit? Securities IRA Rollovers- what to understand Life Insurance- can be as good as cash Life Insurance Audits- can free up some cash © 2017 David K. Cahoone and Brian S. Nielson

Operating Assumption As philanthropic advisors we are not fully serving our donors; as a result they are missing opportunities for joyous giving and we are not receiving all the resources available for our institutions. We are leaving dreams unfulfilled. We always think that what we know is known by everyone. You may be the best source of information for the donor. Curse of the ‘educated’. © 2017 David K. Cahoone and Brian S. Nielson

What is Planned Giving/ Gift Planning? “A gift that requires forethought, and often the participation of one or more professional advisers” R. Daniel Shepard, Currents, Oct 2015 ‘Are You Leaving Money on the Table?’ Deferred v. Outright The Bequest Misnomer Why should we care Part 1 We ignore categories (bequest/ devise/ beneficiary) because too complicated, but then expect donors to track annual/ major, etc. © 2017 David K. Cahoone and Brian S. Nielson

The Wooster’s Promise Campaign Why should we care Part 2 When Securities, Charitable Trusts, IRA Rollovers, etc are accounted for, at least 60% of the campaign so far has required advice or planning. Planned Cash $17,483,717.82 Other Cash $51,293,543.91 Securities $25,919,798.77 Real Estate $4,750,000.00 Other $2,563,689.47 Life Insurance $510,385.29 Pledged $ 19,199,444.30 Deferred $ 51,478,225.00 $173,198,804.56 Forethought and Advice $102,705,816.35 0.592993795 John List- didn’t know about appreciated securities For some deferred gifts, donor has made the gift already, so we are the ones thinking about the deferral. Courtesy of The College of Wooster

Who Might Be in the Conversation? Donor Insurance Accounting Investments Legal Business Charities Family Our goal is to show how many people may be trying to have conversations with the donor. Also important to note that most of the time, there is only one or two from this list. And don’t underestimate the impact of the hairdresser conversation. © 2017 David K. Cahoone and Brian S. Nielson

Learning the Field The Industry The Advisor Possible ‘advisor’ role Value of services Frequency of Interaction A note about financial planners Exact work / Role Training required Common advice Method of compensation Consequence of a gift Note abou © 2017 David K. Cahoone and Brian S. Nielson

Does Philanthropy Language Help? Development Advancement Engagement Investment Commitment Partnership Impact Major/ Principal/ Annual/ Leadership Planned Giving/ Gift Planning Officer Purpose: To show that our internal may sometimes be a block and that we can be just as isolated. © 2017 David K. Cahoone and Brian S. Nielson

Possible Planning Opportunities Ready to sell a business Caring for … Looking to retire Not enough cash Your favorites? Is there a summary article- Have our own list © 2017 David K. Cahoone and Brian S. Nielson

Securities Some principles An Example Market Value The BIG idea Deductibility Some ‘Gross’ Issues Pending changes Why not just give cash? Not just the stuff you don’t want Google Stock $10,000 FMV $1,000 basis $9,000 built-in gain Tax Rate: 20% Tax $1,800 $10,000 - $1,800 = $8,200 Net after tax “Value” of the charitable income tax deduction is determined based upon the fair market value of the stock or real property that was owned for more than one year Built-in gain is not taken into account to reduce the value of the contribution nor the amount of the charitable income tax deduction So what is the true value of $10,000 of Google stock to you in these examples? When we look at your purchasing power, isn’t it actually only the net after tax amount determined by your tax rate for the year you sell the Google Stock. Purchasing Power of $10,000 cash = $10,000 However, if you give the Google stock to MBC the value of your charitable income tax deduction is $10,000, the same as if you give $10,000 in cash. (only difference is AGI limitation of 30% (stock) versus 50% (cash). If 30% of your AGI is high enough to utilize all charitable deductions for the year then no difference Critical to make sure when making gifts of stocks, including mutual funds, that the actual property given away is LTCG. Held for more than one year. If not, you’re deduction is limited to your basis in the stock. Ideal gifts are stocks held long-term that are most highly appreciated. Remember, if you like the stock so much you don’t want to give it to MBC….give it anyway. You can buy more and get a current cost basis at no extra charge. Coordinate your stock transfer with your financial advisor and MBC. If you don’t have an advisor, coordinate with MBC and their financial advisor. Work with your tax advisor on all income tax aspects of the your charitable gifts. Your financial advisor will appreciate if you don’t wait until after Christmas to initial a gift of stock to MBC. It can take a couple of days for the transaction to take effect. © 2017 David K. Cahoone and Brian S. Nielson

IRA Rollovers, ie Qualified Charitable Distributions (QCD) 2007 Response to Katrina, now permanent Up to $100,000 Must be at least age 70.5 Meets required minimum distribution Is not subject to income taxation Starting in 2007 Congress created an additional source of assets, Individual Retirement Accounts (“IRAs”), to consider using to make charitable gifts. Under the “Charitable IRA Law” if you are the owner of an IRA and are more than 183 days past your 70th birthday you are permitted to make certain Qualified Charitable Distributions (“QCD”) of amounts up to $100,000 directly from your IRA to a qualified charity or multiple charities, such as MBC, your church, your favorite college or other “public charity.” Under the “Charitable IRA Law, QCD will not be treated as taxable income to you and will therefore not be included as income on your income tax return. There are a several requirements to obtain QCD status: 1. You must be more than 183 days past your 70th birthday at the time of the QCD. If the distribution occurs anytime before that date, it will not be considered a QCD.   2. The QCD must come from a regular IRA (distributions from qualified plans and 401(k) plans do not qualify). IRS Notice 2007-7 clarifies that the QCD can come from virtually any type of IRA including a Roth described in IRC Section 408A and deemed IRA described in IRC Section 408(8) that is neither an ongoing SEP IRA under Section 408(k) nor an ongoing SIMPLE IRA under Section 408(p). 3. The QCD must be made directly from the IRA by the custodian of the IRA to MBC. 4. The maximum amount of the QCD is $100,000 in any calendar year. You may ask your IRA custodian to make a QCD of any amount less than $100,000. Check with your IRA custodian to determine if it has established guidelines on processing QCD requests and whether it has set QCD minimum amounts for administrative purposes. 5. The QCD will not be treated as taxable income and is not subject to withholding.  6. You are not be entitled to a charitable income tax deduction for the QCD.  7. The amount of the QCD will be applied toward your minimum distribution requirement for the year. © 2017 David K. Cahoone and Brian S. Nielson

Retirement Assets for bequest giving Retirement assets may be subject to income tax when left to family Qualified charities don’t pay income tax All of the retirement asset is available for charity Other parts of the code reduce/ eliminate taxes for securities, houses, life insurance, etc. © 2017 David K. Cahoone and Brian S. Nielson

Life Insurance- Gifts ‘Permanent’ Insurance v. Term Insurance Whole life v. Variable v. Universal Riders and options Purposes changed, built-in cash value New Philanthropic vision, funded in the future Payment through charity may be deductible © 2017 David K. Cahoone and Brian S. Nielson

Life Insurance Audits The life insurance (and annuity) industry is always changing Laws Markets Possible to convert and modify policies to: More death benefit Lower and stop premiums © 2017 David K. Cahoone and Brian S. Nielson

Language you can use ‘In my experience, donors are often surprised to learn that … Retirement accounts are subject to the most tax at death Stocks can make more sense than cash Private companies can really benefit ‘Other advisors have suggested that… ‘I recently learned… © 2017 David K. Cahoone and Brian S. Nielson

Did we cover it all? Questions? Planned Giving v. Gift Planning- some antics with semantics Understanding advisor relationships Who are they? Opportunities and pitfalls Where does the philanthropic advisor fit? Securities IRA Rollovers- what to understand Life Insurance- can be as good as cash Life Insurance Audits- can free up some cash © 2017 David K. Cahoone and Brian S. Nielson

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