2 Gifts of Estates and Assets Leadership Conference September 26, 2012

3 Intergenerational Wealth Transfer $44 trillion to $135 trillion dollars in the next 50 years $6 trillion to $25 trillion dollars in charitable bequests alone

Intergenerational Wealth Transfer 4 In Minnesota more than $47.9 billion will transfer from one generation to the next over the 20 years,

5 Charitable Giving Marketplace: Who Makes Charitable Gifts?

6 Where the money is

7 Charitable Giving Marketplace: Who Receives Charitable Gifts?

8 Everyone Can Make An Estate Gift

9 Fundraising Strategies Annual GivingSpecial or Major GiftsPlanned Giving Donor’s Source of Funds for Contribution Primarily income or cash on hand Contribute (or sell) assets or make multi- year pledges Estate Wealth Charity’s Use of Contribution On-going operations Special projects or unique needs Unrestricted, Capital and Endowment Target AudienceAny and all active constituents Prospects with linkages, interest and liability Anyone who might be interested in the cause Target AudienceAnnual solicitationOpportunistic strategy seeks Continuous education, long term cultivation

10 A Generation-Based Approach to Giving A Under Age 50 B Aged 50 – 70 C Over Age 70 All donors find themselves at some stage of life…

11 …all donors have certain assets and income… 1 Highest Wealth & Income Range 2 Average Wealth & Income Range 3 Below Average Means

12 …all donors find a “home” YoungerMiddle-AgedOlder WealthyA1B1C1 Moderate Means A2B2C2 Limited Means A3B3C3

13 Common Donor Concerns Dying too soon Living too long Illness or loss Disability

14 Gift Planning Solutions A. Benefits to Charity in Near Term B. Benefits to Charity Deferred C. Full Benefit to Charity Outright Gifts of Cash and Appreciated Assets Bequests via Wills, Trusts, Life Insurance & Retirement Plans D. Split Benefit to Charity Charitable Lead Trusts Term of years, CRT Assignment of Income Charitable Remainder Trusts, Charitable Gift Annuities, & Pooled Income Funds

15 Charitable Gift Planning Vehicles -50 YOUNGER50-70 MIDDLE-AGED70+ OLDER WEALTHY A1 Outright gifts B1 Charitable Remainder Trust for Term of Years C1 Bequests, Charitable Trusts for Life, Charitable Lead Trusts MODERATE MEANS A2 Outright gifts B2 Charitable Trusts for Life, Pooled Income Funds C2 Bequests, Charitable Trusts for Life, Charitable Gift Annuities, Retirement Plans LIMITED MEANS A3 Outright gifts B3 Outright gifts, Bequests C3 Bequests, Charitable Gift Annuities, Retirement Plans, Life Insurance

16 When Assets are Often Gifted During Lifetime: Cash Stock – publicly traded or closely held Mutual Funds Real Estate Life Insurance Crops At Death: Retirement Plan Assets Bonds Life Insurance

17 Types of Planned Gifts Bequests Beneficiary Designations Life Income Gifts Gift Annuities and Trusts Gifts of Life Insurance Retained Life Estates Real Estate

18 Life Income Gifts Simple definition: “An asset in exchange for an income”

19 Life Income Gifts Gift AmountFixed PaymentVariable Payment (Inflation) $10,000 to $100,000 Charitable Gift Annuity $100,000 and upCharitable Remainder Annuity Trust Charitable Remainder Unitrust

20 Charitable Gift Annuity Contractual promise to pay Payments are fixed at the time of the gift Usually provides tax-free income Two types, payments can start now or later

21 Basic Concept: “The right to hold an asset can be separated from the right to receive income from the asset.” Charitable Remainder Trusts

22 Charitable Remainder Trusts Common Elements Irrevocable gift Established either inter vivos or testamentary Income payments are made at least annually The remainder beneficiary must be a charity Income for lifetime or term of years

23 Charitable Remainder Unitrusts Variable income stream Additional contributions can be made Minimum payout of 5% 10% Rule 4 types of unitrusts

24 Charitable Remainder Annuity Trusts Fixed income stream Cannot make additional contributions 10% Rule Charitable remainder The 5% Probability Test Corpus exhaustion

25 Retained Life Estate Donate home to charity, but retain the right to live in it Charitable deduction in the year the gift is made Donor is responsible for maintenance, taxes and insurance Property maintains homestead status

Case Studies

27 Donor Profile #1 “I want to make a gift, but I can’t afford to do so now.”

28 Solution: Estate Gift Charitable bequest or Beneficiary designation of A will or trust life insurance or retirement plan assets

29 Donor Profile #2 “I have enough assets and I want to see my gift at work.”

30 Solution: Outright Gift Cash vs. Stock Gift Gift of:CashStock Contribution deduction $10,000 Income taxes saved (28%) $ 2,800 Capital gain taxes saved (15%) $ 0$ 1,200 After tax cost of gift $ 7,200$ 6,000

31 Donor Profile #3 “I want to make a gift, but I really could use the income.” Donor Age 80 $10,000 cash

32 Solution: Charitable Gift Annuity Donor Remainder to charity $8,200 $ 10,000 Cash 6.8% Charitable Gift Annuity Income tax deduction $4,607 Annual Income $680 Charity

33 Donor Profile #4 Husband & wife, ages 70, 70 $100,000 in appreciated stock $10,000 cost basis Currently receives 2% dividend Would like more income

34 Solution: Charitable Remainder Unitrust Donor Remainder to charity $149,729 $100,000 Property $ 10,000 Basis 5% Unitrust Income tax deduction $40,825 Gains not taxed $90,000 First Year Income $5,000 Charity

35 Solution: Charitable Remainder Unitrust 5% Charitable Unitrust Gross Principal$100,000 Net Principal$100,000 Charitable Deduction$40,825 Total Before-Tax Benefit to Income Recipients $133,053 Donor Principal$0 Benefit to Charity$149,729 Total Benefit$323,607

Most Important Factor When making a charitable gift, donors rank the following factors in order of importance:When making a charitable gift, donors rank the following factors in order of importance: 36

Thank You! Your thoughts?