1. Integrating Charitable Giving
FIDELITY CHARITABLE SERVICES ®
Integrating Charitable Giving
Into Legacy Planning
Good morning (or afternoon). My name is _____________ and I am a Planned Giving Consultant (or Associate) at Fidelity Charitable Services®.
Charitable giving as a marketplace is big business. It’s an enormous market that continues to grow year over year.
SO WHY SHOULD YOU CARE?
I’ll tell you why: the information I will share with you today can help you add value to your client relationships and help you grow your business. HOW? By…
Providing a more sophisticated wealth management offering to your clients
Offering your clients tax and wealth management strategies that they will thank you for
Strengthening your client relationships
Differentiating yourself and your practice

2. Today’s Objectives Provide an update on charitable giving trends
Review income tax planning strategies
Review estate planning strategies
Discuss the benefits of donor-advised funds
Learn about Fidelity Charitable Services® Advisor Resources
Good morning (or afternoon). My name is…(Note to speaker: State your name, title and your professional background and tenure with Fidelity.)
In this seminar today, we’re going to get more familiar with the many benefits of donor-advised funds (DAFs), especially the sophisticated ways they can complement or substitute for other charitable-giving vehicles.
Specifically, we’ll examine: (Note to presenter: Read each bullet on slide.)
• The current environment for charitable giving
• Income tax planning and which assets it may be better to give during your lifetime
• Estate planning and which assets it may be better to gift at death; and
• Different types of structured giving vehicles, including donor-advised funds and private foundations.
And finally, we’ll look at some of the resources Fidelity Charitable Services offers advisors like you.
Please note that this presentation is for informational purposes only and should not be construed as legal or tax advice. It is only intended to highlight key points. When we discuss taxes it is only at the federal level as state laws on charitable giving vary.
Are there any questions? (Note to speaker: Wait a few seconds; answer any questions that arise.)
Great. Now let’s begin…

3. Update on Charitable Giving Trends
First, I’d like to do is give up an update on the charitable giving market…

4. Growth in Charitable Giving
Source: Giving USA 2007
Growth in Charitable Giving
($ Billions)
$23
$32
$55
$83
$105
$139
$238
$295 $0
$50
$100
$150
$200
$250
$300
$350
1971
1976
1981
1986
1991
1996
2001
2006
2007
$306.4
As you can see from this chart, charitable giving continues to grow. For example… (Note to speaker: review growth depicted in graph on the slide.) Americans gave about $238 billion to charity in 2001, about $295 billion in 2006, and about $306 billion in 2007.
One interesting trend to note is that donor-advised funds are becoming an increasingly popular technique for charitable giving, according to the latest data compiled by The Chronicle of Philanthropy. (Source: Donor Funds Are on the Rise Again,” The Chronicle of Philanthropy, May 27, 2004.)
There are currently more than 901 public charities with donor-advised fund programs in the United States; 861 of those participated in a survey1. To show that the number of individual DAFs is now almost 80,0002 (Of these DAF accounts, the Fidelity Charitable Gift Fund has more than 45,000 as of June 30, 2007.)
Additionally, according to a recent study, only 33% of HNW investors actually talk to an advisor about their charitable giving*. This may be a potential way for you to deepen your client relationships by talking to your clients about their charitable plans.
1Chronicle of Philanthropy, May 2006
2Chronicle of Philanthropy, April 2005
*”Wealth and Advice: Charitable Giving Behavior.” HNW for Fidelity, 2004.

5. Charitable Assets in Structured Giving Vehicles
Only 15% of HNW households use structured giving vehicles.1
But, 52% of HNW individuals show an interest in discussing charitable planning with an advisor.2
Now, let’s look at the ways that some of these benefactors give to charity. Keep in mind that only a small percentage of HNW households actually conducted their giving with structured giving vehicles. A much larger percentage of HNW individuals show interest in discussing charitable planning with an advisor.
(Note to presenter: Read bars and how much comes from each one.) 3
1HNW defined as households with $2MM+ in investable assets (all assets except primary residence, closely held business partnerships, restricted stock, vested/unvested options, insurance and annuities, defined contribution assets)
22004 Fidelity Study on Wealth and Advice.
3 Includes community foundation donor-advised fund assets. Charitable gift annuities are not included in the IRS Statistics of Income, Bulletin – Winter 2007
Sources: The Foundation Center’s Foundation Yearbook, June 2007; Chronicle of Philanthropy, May 2007; IRS Statistics of Income, Bulletin – Winter 2007

6. Sources of Charitable Giving
Source: AAFRC Trust for Philanthropy/Giving USA 2008
2007 Sources of Charitable Giving
($ Billions)
Individuals
$229.30
Corporations
$15.69
Foundations
$38.52
Bequests
$23.15
74.8%
12.6%
5.1%
7.6%
So, let’s take a look at who gives to charity.
According to the AAFRC Trust for Philanthropy/Giving USA, in 2006: (Note to presenter: Read sources and percentages on slide.)
• Individuals were responsible for over 75 percent of all charitable donations;
• Private Foundations accounted for about 12.4 percent;
• Bequests 7.8 percent; and
• Corporations accounted for just under 4 percent of all charitable donations.

7. Legislative Environment
Pension Protection Act of 2006 contains several important charitable provisions (August ’06)
The law includes:
A statutory definition of “Donor Advised
Fund” as part of the Internal Revenue Code
Charitable IRA Rollover provision to certain
qualified charities for taxpayers over 70½
Special substantiation and deductibility rules
for certain charitable contributions
An extension of rules surrounding “excess
business holdings” in donor advised funds
U.S. Treasury results from the review of DAFs is due in late 2007
Increased scrutiny around taxation of carried interest
Now I’d like to spend a few minutes on a charitable legislation update as of September 2006…
In August 2006, Congress passed the Pension Protection Act. Among other elements, the new legislation included the following provisions:
- For the first time, the Act creates a statutory definition of a donor-advised fund as part of the Internal Revenue Code. The statute provides that a donor-advised fund is a separate fund (or account) of a sponsoring charitable organization with respect to which a donor (or person named by the donor) can recommend grants to other charitable organizations, or may make investment recommendations.
- IRA Rollover: this provision permits people 70 ½ and older to make direct transfers of IRA assets to qualified public charities without paying income tax on the withdrawals. Donors are able to exclude the charitable IRA rollover from their taxable income, and are therefore not permitted also to take a deduction for a charitable contribution. (Limited to $10,000 and expires at the end of 2007)
- The Act tightens up the documentation requirements for charitable contribution deductions. Under the Act, a donor must have documentary evidence (a canceled check or a receipt from the charity) for any contribution in any amount (previously required only for contributions of $250 or more). (This may make DAFs advantageous as a central place for donors to simplify their recordkeeping.)
- The Act extends the “excess business holdings” rules, which previously only applied to private foundations, to donor-advised funds and Type III Supporting Organizations. Under this rule as applied to donor-advised funds, an individual donor-advised fund will be limited in the percentage (generally 20%) of an enterprise the donor-advised fund can hold, also taking into account the ownership interest of the donor and related persons. Under this rule, especially relevant to donors of closely held stock, the donor-advised fund must dispose of the shares within five years by redeeming them or finding a buyer.

8. Evaluating Different Structured Giving Vehicles
Let’s spend a few minutes comparing the different types of structured giving vehicles clients typically use, with a focus on donor-advised funds and private foundations.

9. Selecting the Right Giving Solution
Donor-Advised Fund
Split Interest (PIF/CRT*)
Private Foundation
No start-up fees**
PIF***: No start up fee
CRT: Legal expenses to draft documents, plus additional fees
Start-up fees
Typically no annual distribution is required at account level****
Provides income stream to non-charitable beneficiaries
5% annual distribution for charitable purpose required
Generally does not include excise taxes
Income taxes to non-charitable beneficiaries
Excise taxes
Deduction limitation 50/30 (federal)
Capital gains tax avoided or deferred
Deduction limitation 30/20 (federal)
Generally, choice of anonymity or recognition on grants
Choice to name PIF or CRT as you wish
Foundation information is publicly available via IRS Form 990-PF and
Create a legacy of giving
Create a legacy of giving
The greatest differences between a DAF, Split Interest Vehicles and Private Foundations are the following:
Tax deduction limitations: A DAF affords 50% deduction for irrevocable contributions of cash and 30% deduction for appreciated assets while a PF offers 30% deduction for cash and 20% for appreciated assets. Contributions to a CRT are eligible for an immediate partial tax deduction and defers capital gains tax on appreciated assets.
Establishment and ongoing administration: A DAF is simple to establish and easy to administer. Tax reporting & recordkeeping are generally handled by the DAF. A private foundation is run like a business generally requiring board members, salaried employees. A CRT must be set up by an attorney (with corresponding expenses) and a PIF account is simple to establish.
Donor’s role in investment: A DAF donor can recommend investment allocation among investment pools offered by the donor-advised fund while a foundation owner is able to exercise control over investment management. A CRT also affords control over the investments while a PIF offers no control since the assets are put into the pool itself.
Donor’s role in grantmaking: A DAF donor can recommend grants to eligible IRS-qualified public charities while a foundation owner has complete control over grantmaking.
Anonymity: A DAF donor may have the option to remain anonymous on grants to charities anonymously, while a foundation owner must file an annual IRS form 990-PF which is a public record of assets, contributors and grants. For CRT’s, the trust itself can be named generically to protect anonymity, i.e., “The Dallas Trust for Charity”
Create a legacy of giving
Donor-recommended distributions and investments must be approved by sponsoring charity’s board
Control over distributions and investment management (CRT only)
Control over grants and investment management
* Charitable Lead Trusts are not considered here.
** Sponsoring Charities for DAF programs will generally assess administrative fees.
***Fidelity Charitable Gift Fund Pooled Income Fund
**** Certain minimum account activity requirements generally apply.

10. Private Foundation or Donor-Advised Fund?
Questions to Ask
Private Foundation
Donor-Advised Fund  
1. Do you have $1 million or more to contribute? 
2. Do you want control over the investments? 
3. Do you want control over grantmaking? 
4. Want to hire family to oversee your philanthropy? 
5. Are you looking for simplicity? 
6. Do you want the largest tax deduction possible?
In selecting a vehicle for their philanthropic endeavors, many people face a choice between a private foundation and a donor-advised fund. Although many HNW clients can benefit from both, you can ask the following preliminary questions to direct them to the option that comes closest to meeting their goals.
(Note to speaker: Read/click/advance questions on the slide.) 
7. Do you want the option to remain anonymous on grants?

11. Regulatory Considerations
TYPE OF ASSET
ALLOWABLE DEDUCTION*
Key Regulations
CASH
Private Foundation
Charity with DAF program
30% of AGI
50% of AGI
PUBLIC SECURITIES
Private Foundation
Charity with DAF program
20% of AGI; generally deductible at FMV
30% of AGI; generally
deductible at FMV
If shares are subject to Rule 144, it would continue to apply after those shares are donated
OTHER SECURITIES
Private Foundation
Charity with DAF program
20% of AGI; generally
limited to cost basis % of AGI; generally deductible at FMV
Self-dealing and Excess business holdings rules apply (IRC Sec. 4943)
This chart summarizes the limits on deductions and key restrictions that apply to lifetime donations of cash and various types of appreciated property to private foundations and charities with donor-advised fund programs.
(Note to speaker: Read chart to audience. For 3rd section, in restrictions, add:)
. . . which prohibits a private foundation and disqualified persons together from owning more than 20% of the value of the entity. (No matter what these people own, the foundation is allowed to hold no more than 2% of the interests in a business.) The foundation has five years to dispose of the excess holdings—say by redeeming the shares or finding a buyer.
*For assets other than cash, deductions assume that the property has been held at least 12 months; if held less than one year, then deduction is generally limited to cost basis.

12. Regulatory Considerations (cont.)
TYPE OF ASSET
ALLOWABLE DEDUCTION*
Key Regulations
PRIVATE COMPANY STOCK
Private foundation
Charity with DAF program
20% of AGI; generally
limited to cost basis
30% of AGI; generally deductible at FMV
Rule against self-dealing; excess business holdings rule
REAL ESTATE
Private foundation
Charity with DAF program
20% of AGI; generally limited to cost basis
30% of AGI; generally deductible at FMV
Rule against self-dealing
(Note to speaker: For 4th section, add:)
So, for a client with private company stock from ownership of a family business, a private foundation might not be the best vehicle because they may be limited to the cost basis for deductibility for contributions to the foundation.
(Note to speaker: For 5th section, add:)
… if there’s a mortgage on the property, the donation could be treated as a bargain sale, so that the donor would have to pay income tax on the remaining mortgage debt.
*For assets other than cash, deductions assume that the property has been held at least 12 months; if held less than one year, then deduction is generally limited to cost basis.

13. Considerations for Administrating Private Foundations
Monitor income and expenditures
Assist in monitoring, calculating, and distributing 5% annually
Verify the IRC Section 501(c)(3) status of potential grant recipients
Issue grant checks
Coordinate preparation of foundation’s federal return
Compliance monitoring
Fidelity Private Foundation Services can essentially serve as the back office for a private foundation, handling details such as:
(Note to speaker: Read bullets on slide)
This service might be especially appealing to clients whose foundations have recently split into one or more smaller ones, and now find that running them is an administrative burden.
Foundations that retain Fidelity Private Foundation Services must have a Fidelity Brokerage Account or work with a Registered Investment Advisor on the Fidelity Investments Institutional Brokerage Group’s platform. Fidelity Private Foundation Services clients must establish a Fidelity account for grantmaking and expense payments.

14. Assets and Funding Considerations for a Private Foundation
Tax deduction may be limited to cost basis for some assets, not fair market value (FMV)
Foundation may need to liquidate assets to distribute required 5% of the FMV of its investments each year
Self-dealing transactions
Jeopardy investments
Excess business holdings
Clients with a diverse portfolio of assets may need to identify the best ones for funding a private foundation. Since certain restrictions apply. Here’s what to consider:
(Note to speaker: Read/explain bullets on slide)
First, depending on the type of asset donated, the tax deduction a client can take may be limited to cost basis, not fair market value (FMV).
Next, avoid “self-dealing” transactions—such as: the sale, exchange or leasing of property; lending money or extending credit or furnishing any goods, services or facilities for any charge—with disqualified persons. This broad group of individuals includes foundation officers, directors or trustees, and substantial contributors. It also covers their spouses, ancestors, descendants, and entities owned by any of them. (Siblings aren’t included.) Clients who disregard this rule can face stiff penalties: an excise tax of 5% of the amount involved for each year that the self-dealing continues. However, a foundation may pay a disqualified person for personal services to the foundation.
Other restrictions include:
• Jeopardy investments: Any investment that jeopardizes the Foundation’s ability to carry out its tax-exempt purposes. Subject to close scrutiny are margin trades, commodity futures, oil and gas investments, short sales, warrants, puts, calls and straddles.
• Excess business holdings: Ownership of more than 2% of the voting stock and 2% of the value of all classes of stock in any corporation in which the foundation or any of its "disqualified persons" own more than 20% of the corporation's stock. A foundation that receives such excess business holdings has 5 years to divest.

15. Unwinding a Private Foundation?
Time to unwind a Private Foundation?
Are the administrative responsibilities of your foundation too burdensome?
Would you prefer to remain anonymous on grants?
Are you bothered by constant solicitations for charitable grants?
Do family members disagree about grantmaking priorities?
Do you worry about who will run your foundation in the future?
Ways to unwind a Private Foundation?
Distribute assets into more than one entity
Merge or consolidate with another private foundation
Distribute assets to a public charity, such as one with a donor-advised fund program
So, what if a client approaches you, wanting to unwind a private foundation?
As an advisor, it’s important to figure out which giving vehicle is best for your clients by understanding their philanthropic needs and goals.
So to determine if a private foundation is still in their best interest, ask these questions. “Yes” answers may indicate that it may be best to unwind.
(Note to speaker: Read Time to Unwind set of questions on slide:)
Private foundations can be over utilized by clients who are too anxious without knowing the details involved in running them. As much as advisors are discouraging clients from setting up small foundations (those with less than $5 million in assets), there is a growing trend of foundation “divorce,” in which existing entities split into smaller ones. In these cases, clients may be looking to reduce the administrative burden or shift that responsibility to another foundation by merging with it.
Typical reasons: shrinking endowments, weary of administrative hassles, no succession plan in place, board members not getting along. So now, if a private foundation no longer meets the client’s needs, it is easier to unwind it. Here are some ways…(Note to speaker: Read/explain Ways to Unwind bullets on slide.)
In light of these rulings, it generally is no longer necessary to get a private letter ruling from the IRS ensuring that unwinding the entity won’t generate a termination tax. (Although many advisors have never heard of someone actually paying this fee, it’s nonetheless possible.)
Also, keep in mind that liquidation requirements vary by state. IRS requirements include filing a final Form 990-PF.

16. What is a Donor-Advised Fund?
DAFs have been around since the 1930’s, but witnessed significant growth starting in the 1990’s
One can make an irrevocable contribution to a charity with a DAF program and be eligible for an immediate tax deduction, advise how their contributions are invested, and recommend grants from their DAF to their favorite charities, often with the option of remaining anonymous
A DAF allows your client to combine the most favorable tax benefits with the flexibility to support their favorite charities on their own timetable
In the last decade, many people have discovered that with a DAF, they are able to better support their favorite charities

17. How to Establish a Donor-Advised Fund
All donors may be eligible for an immediate tax deduction for their irrevocable contributions.
Step 1
Step 2
Step 3
Step 4
Charity accepts additional contributions from donor and 3rd-party contributors for allocation to the DAF.
Donor establishes DAF with contribution to charity. Donor names DAF and designates Account Holders, who have recommendation privileges over the DAF.
Account Holders recommend grants to qualified charities.
When making the minimum initial contribution required by the charity for establishing a donor-advised fund, donors can decide whether they want to recommend grants themselves or give others this privilege.
(Note to speaker: Read flow chart.)
Donors who establish a donor-advised fund typically have a choice about what to name the DAF and whom to designate as Account Holders.
Once a DAF is established, additional contributions are typically welcome by the charity, not only from the original donor(s), but from third-party contributors as well.
All donors, including third-party contributors to a public charity that runs a donor-advised fund program, are generally eligible for an immediate income tax deduction for their irrevocable contributions.
Only named Account Holders or authorized interested parties (i.e., advisors) have grant recommendation privileges.
If you consider the Fidelity Charitable Gift Fund for your clients, you should know that the minimum initial contribution is $5,000. A $1,000 minimum applies for additional contributions.*
*$100,000 minimum for corporate DAFs, w/ $5,000 minimum additional

18. Benefits of Donor-Advised Funds
Financial benefits 
Potential immediate federal income tax deduction* 
Usually no tax on appreciation of donated capital gain property 
Ability to support multiple charities from the proceeds of the sale
of a single block of stock 
Flexibility to recommend charitable grants on donor’s own timetable (often subject to minimum grant activity requirements)
Personal benefits
Consolidate charitable giving
Instill a spirit of giving in future generations
Build a charitable legacy by naming successors to assume privileges over the DAF 
Enable more support to charities
Let me quickly summarize the potential benefits of donor-advised funds or DAFs.
A DAF is a giving vehicle offered by a public charity. It offers certain philanthropic, financial and personal benefits. First, let’s review the financial benefits. Donors may be eligible to take an immediate federal income tax deduction…up to 50% of AGI for cash contributions; and up to 30% of AGI for donations of long-term appreciated securities. You generally will need to itemize to take the deduction and other deduction limits may apply.
(Note to speaker: Read rest of financial benefits…then personal benefits on screen. After last personal benefit, add:)
Donors can choose to be acknowledged for having grants recommended or to make them anonymously.
* You may need to itemize deductions and certain other limits may apply

19. Complement to a Private Foundation
Advantages of public charity with a DAF program:
Helps to groom children to run a private foundation – teaches them about philanthropy
Maximizes charitable tax deductions
Fund private foundation up to the limit
and
Contribute to a public charity with a DAF program for the difference between the deduction limits of the two
DAFs can also complement a private foundation.
(Note to speaker: read bullet points on slide.)
I also have to point out that in a recent development the Senate Finance Committee has recommended that “in order to prevent circumvention of foundation anti-abuse rules, private foundations would be prohibited from making grants to donor-advised funds.” Keep in mind, however, that at this time this is pending legislation.

20. Combining DAFs with Split-Interest Giving Vehicles
Public Charity with DAF program
Donates Assets
Charitable Remainder Trust (CRT)
Distributes
Remainder
Client/Donor
Pays Income
Becomes eligible to take a partial tax deduction
Pays lifetime income from assets back to client and/or other income beneficiary(ies)
At donor’s death, distributes remaining assets to charity with DAF program
One potential approach to charitable giving combines DAFs with split-interest giving vehicles, like charitable remainder trusts (CRTs). So let’s look at how this approach can work if all the applicable laws and regulations are met.
• Client/donor donates assets to a charitable remainder trust (CRT) and may be eligible to take a current tax deduction for the donation. This may help reduce tax liability in a high-income year. The charitable remainder interest must be at least 10%. And the non-charitable beneficiary’s interest must be no greater than 90%. At this point, there’s no need to decide which specific charities will receive grants from the charity with the DAF program.
• The CRT, in turn, pays the client/donor income (no less than 5% and no greater than 50%) for as long as he or she specifies…a period of time (no more than 20 years)…or for a lifetime.
• At the client/donor’s death, the CRT sells the assets that remain in trust…without capital gains tax liability…and distributes the proceeds to a public charity with a donor-advised fund program where the donor’s heirs or successors can recommend grants to charity. When the client/donor first establishes the trust, there’s no need to decide which specific charities will receive grants from the beneficiary charity that has the DAF program.
You can have a charitable remainder annuity trust (CRAT) or unitrust (CRUT). An annuity trust is valued upon creation of the trust. However, you cannot add assets to a CRAT. The CRUT is valued each year so that the client essentially retains a variable annuity. Keep in mind that if you are working with a client who has a hard-to-value asset, the unitrust might not the be the most appropriate vehicle.
[For speaker’s info only: A pooled income fund is part of a public charity, generally, where the charity establishes an irrevocable trust fund that provides a stream of income to the individual for life based on his initial irrevocable contribution and the fund’s rate of return. Client may be eligible to take a partial income tax deduction and avoid capital gains tax on long-term appreciated securities. At his death, the charity usually distributes the remainder of the PIF account to charity with a donor-advised fund program named as remainder beneficiary.]

21. Why Charitable Planning for Your Practice?
Helps advisors:
Deepen client relationships
Differentiate your practice from others
Become involved in legacy planning, which potentially leads to new relationships with future generations
As advisors, you can add value to your clients by showing them ways to give more effectively and helping them understand the role philanthropy can play in their overall financial plan.
(Note to speaker: Read bullets on slide.)

22. Income Tax Strategies: Assets to Consider Giving During Life
Now, let’s move on to our next topic…income tax planning with charitable giving...

23. Contributing Special Assets to Charities
Private C-Corp Shares
Private S-Corp Shares
Certain LLC and limited partnership interests
Residential Real Estate
Other Real Estate
Cash Value of Life Insurance
Art & Collectibles 
Over the past few minutes, we’ve talked about giving approaches you can use with clients who want to donate assets like securities or real estate.
Although most clients contribute cash or publicly traded securities, it’s also possible to contribute special assets to certain charities that operate donor-advised fund programs. In addition to the asset types listed here, charities with DAF programs, like the Fidelity Charitable Gift Fund, can also accept real estate, restricted stock and stock subject to lock-up.
(Note to speaker: read chart.)
For C-Corps shares and S-Corp shares, the exit strategy is acquisition/merger or corporate redemption.
As many of you know, clients do extensive financial planning with S-Corp shares and limited partnerships. These are also great assets to use for charitable planning.
So let’s look at that in a little more detail now…

24. Save More Taxes, Do More Good: Hypothetical Case Study
Situation:
Married couple
$100,000 of long-term appreciated securities
Cost basis: $40k; unrealized long-term gains: $60k
Strategy:
Contribute securities directly to charity rather than selling them first
Sell securities & donate net cash proceeds to charity ($91,000) or Contribute securities to the Gift Fund ($100,000)
Benefits:
Less in taxes, more in charitable contributions
With a direct donation to the charity, the donor’s federal income taxes are reduced by an additional $12,150 and the charity receives $9,000 more
Current Fair Market Value of Securities
Federal Long-term Capital Gains Tax Paid* (15%)
Assumes cost basis of $40,000, and long-term capital gains of $60,000
Charitable Contribution/Charitable Deduction**
Value of Charitable Deduction Less Capital Gain Taxes Paid* (Assumes donor was in the 35% federal income tax bracket)
Sell securities & donate net cash proceeds to charity
$100,000
$9,000
$91,000
$22,850
Contribute
securities to the Gift Fund
With a direct donation to the charity, the donor’s federal income taxes are
reduced by an additional $12,150 and the charity receives $9,000 more $0
$35,000
Of course, it’s important for advisors to work with their clients to contribute assets in the most tax-efficient manner.
Now, here’s a hypothetical case study where a couple own securities with long-term unrealized gains and need to decide which giving strategy will work best…sell the securities and donate the proceeds to charity OR give the securities directly to the charity. Before we actually look at the potential tax benefits of each side by side, does anyone want to take a guess at what strategy may be more appealing? (Note to speaker: Encourage responses; field answers from audience.)
Well…let’s first look at what happens if they sell the securities and donate the proceeds to charity. (Note to speaker: Read appropriate column in the chart on the slide.)
Now let’s look at what happens if they give their securities directly to their favorite charity. (Note to speaker: Read last column on chart on slide.)
So, with a direct donation to charity, the donor’s federal income taxes are reduced by an extra $12,500 and the charity receives an additional $9,000.
Obviously, the clients will usually save more in taxes and do more good for their designated charity if they donate appreciated securities, instead of cash.
Clients should generally be eligible to take an immediate tax deduction of for the contribution. If the securities were held longer than one year, they generally should be able to deduct the fair market value of the securities on the day they were donated. If they were held one year or less, the deduction is limited to cost basis.
Note, however, that the deduction may be reduced because of the application of other tax laws as in this example.
They should generally be able to avoid paying capital gains taxes; and best of all;
They may be able to give more to charity.
* Assumes all realized gains are subject to the maximum federal long-term capital gain tax rate of 15%. Does not take into account any state or local taxes.
**Availability of certain federal income tax deductions may depend on whether you itemize deductions. Charitable contributions of capital gain property held for more than one year are usually deductible at fair market value. Deductions for capital gain property held for one year or less are usually limited to cost basis.
This is a hypothetical example for illustrative purposes only. State and local taxes, the federal alternative minimum-tax and limitations to itemized deductions applicable to taxpayers in higher-income brackets are not taken into account.

25. Charitable Venture Capitalist: Hypothetical Case Study
Situation:
Venture capitalist with portfolio of non-publicly traded stock
Shares in S-Corps, Private C-Corps, and interests in limited partnerships
Wants to give to a variety of charities, but does not have much cash to give at this time
Strategy:
Contribute assets to a public charity with a DAF program
Benefits:
Recommend grants from a single DAF
Eligible for a tax deduction for the fair market value of the contribution as determined by an appraisal
Avoid tax on gain from the sale of the donated property since the property, at the time of the sale and thereafter, is the asset of the charity and not that of the donor.
At Fidelity Charitable Services, we’ve seen a lot more activity in this particular area. Interestingly, the Gift Fund has a relationship with the National Venture Capital Association (NCVA). So if you have clients that are members of the NVCA, let us know. Because of this relationship with NVCA, your clients can benefit from the association’s preferred pricing.
Now let’s take a look at how a hypothetical case. (Note to speaker: Review slide.) Let’s say your client is a venture capitalist with a diverse portfolio of closely held stock that he has taken back from the companies he funded, including shares of S-Corps, C-Corps, and interest in limited partnerships.
After a four-year lull, several of these companies are on the verge of liquidity events and are about to merge or be acquired. Although the client does not have a lot of freely transferable property right now, he wants to give to a variety of charities. You suggest helping him arrange to contribute some of his holdings to a public charity with a DAF program. Here’s what you’ll want to keep in mind
Make sure there is no prearranged sale. The charity must have a choice about whether or not to sell the asset. If a deal has been signed—or even voted on—and the client is just waiting for a closing date, it’s probably too late to make the donation without paying tax on the gain.
Consider the contribution and the sale (or redemption) as two different steps. For instance, 1.) donor contributes shares of stock to the charity and 2.) charity will independently sell the shares, either to a 3d party or to the issuing company for redemption.

26. Why Donate Real Estate? Key potential benefits for donors:
Avoid capital gains tax on unrealized appreciation
Deduct fair market value of the property
Carry forward deduction for up to five years if client’s contribution exceeds limit on charitable deductions
While you’re working with your clients to decide which types of assets may be best for them to contribute while they’re alive, think about real estate.
Real estate, which has continued to gain value in many markets, might be the ideal property for some clients to gift. Why? Because it offers key potential tax benefits to donors. (Note to presenter: Read bullet points on slide.)
By gifting real estate, donors may be able to:
• give more to charities they support
• avoid capital gains tax on any long-term appreciation in the property;
• deduct the fair market value of the property donated (up to 30% of the donor’s adjusted gross income (AGI)), if the sale of the appreciated property by the donor would have resulted in long-term capital gains for the donor;
• usually carry forward the tax deduction for it for up to five years. . .if their contribution exceeds the limit on charitable deductions.
In the past few years, charities with donor-advised fund programs, including the Fidelity Charitable Gift Fund have expanded the types of assets they accept, especially in light of the recent stock market downturns where stock appreciation was not as significant as in other years. The Gift Fund, for example, will consider donations of real estate on a case-by-case basis where the property is easily marketable, free of title problems and environmental hazards, and free or about to be free of debt. The property must have a minimum value of $1.5 million to be considered by the Gift Fund for acceptance.
(Note to speaker: Let the audience know that any time you mention limits on deductions during this discussion, the five-year carryover rule applies.)

27. Ready to Retire: Hypothetical Case Study
Situation:
Married couple; age 70; AGI: $6 million
Recently sold family business; wants to sell home and retire
Strategy:
Clients contribute home to a charity with a DAF program
Charity sells the property for $3 million
Charity allocates the proceeds to four DAFs of $750,000 each - one for each adult child
Benefits:
Tax deduction for donation
Avoids capital gains tax
Enable more support to charities
Client contribution of $3 million to charity
DAF with $750K for child #1
DAF with $750K for child #2
DAF with $750K for child #3
Now, let’s take a minute to look at a hypothetical case study that illustrates how to avoid gain, take a tax deduction, involve family in philanthropy and give donors the opportunity to share their charitable values.
Let’s say your clients, a married couple in their 70s, have an AGI this year of $6 million due to their sale of the family business. Now they are ready to sell their home and retire. Their primary residence, purchased 30 years ago for $500,000, is worth $3 million. They are entitled to take a tax deduction of $500,000 of their gain from income, and would like to avoid capital gains on the rest.
Here’s how they could sell their home, retire, gain some tax advantages…and still give to their favorite charity.
1. Clients contribute their home to a charity with a DAF program.
2. Charity sells the property for $3 million.
3. Charity allocates the proceeds to four donor-advised funds of $750,000 a piece—one for each of the couple’s adult children
Not only are they eligible to take a tax deduction for their donation, but they also avoid capital gains tax on the sale of their home.
DAF with $750K for child #4

28. Contributions of Private Company Stock: Hypothetical Case Study
Situation:
Client wants to contribute stock of a privately held company.
Client is philanthropically inclined, but some of the charities they want to support do not have the resources or experience to accept or efficiently liquidate private company stock.
Strategy:
Client contributes privately held stock to a charity with a DAF program
In order to claim tax deduction of $5K or more for a contribution of a non-publicly traded asset, donors must obtain qualified appraisal.
Benefits:
Tax deduction for donation
Avoids capital gains tax
Enable more support to charities
With all the types of assets that some charities can accept, advisors must make sure that clients are aware of the appraisal process. This is especially true of the hard-to-value assets or in cases where a donation of any property not publicly traded could amount to $5K or more.
The first thing clients should be aware of is that a qualified appraisal must be done by someone who is in the business of doing such valuations. In this context, for private company stock, an appraiser would typically look at the company’s audited financial statements, as well as those of comparable businesses.
The next thing they should know is that the privately held stock can’t be appraised more than 60 days before the donation. Also, it must be completed by the time the income tax return is due.
Another point they’ll want to be aware of is that it must be included on Form 8283 which the donor files with their tax return, signed by the appraiser, with acknowledgement by the charity.
And last but not least, Charity must file Form 8282 if it sells the asset within 2 years of receiving it. The IRS may use the information on this form to match the sale with the donor’s Form 8283 reporting the contribution.
Speaker Info Only: Know one or two appraisers in the region. For example MPI (Management Planning Inc.) or Empire Valuation.

29. Estate Planning Strategies: Which Assets to Give at Death
We’ve just spent some time talking about income tax planning... And the types of assets donors may want to gift to charity while they’re still living.
Now, I’d like to focus our attention on estate planning...and the types of assets donors may want to gift at death.
Before I continue, are there any questions so far?
(Note to speaker: Answer questions posed by members of the audience. Continue.)

30. Why Make Charitable Giving Part of an Estate Plan?
Clients want to:
Continue charitable donations beyond death
Make their wishes known
Specify the most tax-efficient assets to donate
Reduce taxes for heirs
Specify one or more charities as beneficiaries in their will or trust in case family members pre-decease them
There are several good reasons advisors like you should raise the subject of charitable giving whenever you draft or revise a client’s estate plan.
• Wills and trusts name a contingent charitable beneficiary in the event that no family member survives the donor.
• You can reduce taxes for heirs —the estate tax charitable deduction decreases the estate tax that is owed.
In addition, clients generally appreciate the opportunity to make their wishes known. You can remind them that if the estate plan does not specifically mention gifts to charity, the client’s heirs and executors will be left to guess what the client would have wanted.
Certain assets like stock, real estate, or tangible personal property get a stepped-up basis at the owner’s death. This reduces the capital gains tax heirs must pay on appreciated property if they decide to sell it. Clients may, therefore, want to leave this type of property to their heirs, rather than to charity. On the other hand, different assets might be better suited for different bequests.

31. Estate Planning Benefits of Gifts to Charities with DAF Programs
Clients can:
Decrease estate taxes by reducing size of the taxable estate by contributing to charity with a DAF during their lifetime or by making a bequest to a charity with a DAF
Teach heirs about philanthropy by giving family members recommendation privileges on DAF
Get flexibility in planning for a charitable legacy
Making a gift to a charity with a donor-advised fund program has advantages besides income tax savings.
• The client can recommend a successor to the DAF, recommend a public charity as beneficiary, or a combination of the two.
One more thing I’d like to mention about gifts to a charity with a DAF program. They can be made outright or through a charitable lead trust. However, CLTs are not tax-exempt entities. They are subject to income tax and can take unlimited charitable income tax deductions for the contributions to charity they make.
Speaker’s Info Only: Since these trusts are not enormously popular, you probably don’t want to spend a lot of time on them. However, it’s worth mentioning that with interest rates still relatively low, it’s a good time to set up a charitable lead trust. The reason is that calculating the value of the shares of the charitable and non-charitable beneficiaries requires the use of the Section 7520 rate, set each month by the Internal Revenue Service. For April, it was 5.6%, for May it was 5.8% and for June it is 6.0%. (The latest rates are available online at In calculating the value of the two interests, one of which counts as a taxable gift to family members, clients are allowed to use the best rate from the current month or the prior two months.

32. Leaving a Charitable Legacy
Naming a Charity with a DAF Program as Beneficiary in a Will
If donors name a charity with a DAF as:
A Primary beneficiary
A Contingent beneficiary
Charitable beneficiary in a split-interest trust established at death
They will benefit from these advantages:
Name a DAF as beneficiary and no need to decide today which causes the contribution will ultimately support
At death, gift to the charity with a DAF program, family members or advisors can recommend which charities to support
For clients who want to leave a charitable legacy, a DAF is a way for children and grandchildren to carry on the client’s philanthropic efforts.
There are several ways to name a charity with a DAF program as charitable beneficiary in a will: (1) as a primary beneficiary; (2) as a contingent beneficiary; and (3) as the charitable beneficiary in a split-interest trust established at death—either a charitable lead trust or a charitable remainder trust.
With split-interest trusts, once the funds are distributed from the trust to the DAF, family members whom the client has designated as advisers can make grant recommendations and have other recommendation and advisory privileges.
Let me just say a few more words about trusts.
• A charitable remainder trust is tax-exempt; a CLT is not.
• A CRT is the reverse of a charitable lead trust: individual beneficiaries receive the income interest first, and the remainder goes to the charity with the DAF program. As an example, a CRT can specify something like this: “Income to my son for life; remainder to the Fidelity Charitable Gift FundSM.”

33. Which Assets to Consider Gifting at Death
IRD*-Producing Assets: 
Non-qualified stock options 
Restricted stock 
Installment sale notes 
At death, certain kinds of assets produce IRD - which means “income in respect of the decedent.”
IRD assets would have been subject to income tax during the client’s lifetime, but weren’t actually taxed because the individual chose to defer it. Examples include: (Note to speaker: Read assets in chart on slide.)
Before we move on, I’d like to point out one last thing about IRD assets. For restricted stock, it is important to note that these assets can be contributed to charity even if they remain restricted. The client could not recognize income and therefore did not have to pay taxes.
Retirement plan assets
*Income in respect of the decedent

34. Tax Benefits of Giving IRD Assets to Charity
Benefits to the decedent:
Decedent’s estate can take a charitable deduction for the assets donated to charity
Benefits to the charity:
The charity is not required to pay taxes on IRD
Not surprisingly, with the growth of retirement assets, planning for IRD assets has become a significant part of many advisors’ practices. In fact, an IRA may be your client’s largest single IRD asset.
When IRD assets are inherited, income and estate taxes together could consume up to 80% of a person’s inheritance. Leaving IRD assets to a public charity, such as one a donor-advised fund program, may be much more tax-efficient.
Here’s how to do it:
Since money in a retirement account passes outside of a person’s will, it’s important that the IRA beneficiary designation form spell out the client’s wishes to leave it to a charity with a DAF program. If a client chooses to do this, they will have several options, including:
make the charity a 100% beneficiary of the IRA; or
indicate that the charity is a beneficiary of a certain percentage of the IRA, and that the rest should go to individual beneficiaries in specific shares; or
specify that the family can disclaim an inherited IRA and have it go to the charity; or
require that the IRA be contributed to the charity, and recommend that the assets be allocated into multiple DAFs, with each child or grandchild having recommendation privileges over his or her own DAF.

35. Disclosures
Information provided is general and educational in nature. It is not intended to be, and should not be construed as, legal or tax advice. Fidelity does not provide legal or tax advice. Content provided relates to taxation at the federal level only. Availability of certain federal income tax deductions may depend on whether you itemize deductions. Rules and regulations regarding tax deductions for charitable giving vary at the state level, and laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of the information provided. Charitable contributions of capital gain property held for more than one year are usually deductible at fair market value. Deductions for capital gain property held for one year or less are usually limited to cost basis. Consult an attorney or tax advisor regarding your specific legal or tax situation.
Fidelity makes no warranties with regard to the information provided or results obtained by its use. Fidelity disclaims any liability arising out of your use of, or any tax position taken in reliance on, the information furnished herein.
Fidelity Charitable Services, Fidelity Private Foundation Services®, and the pyramid logo are registered service marks of FMR LLC.
The Fidelity® Charitable Gift FundSM (“Gift Fund”) is an independent public charity with a donor-advised fund program. Various Fidelity companies provide non-discretionary investment management and administrative services to the Gift Fund. Charitable Gift Fund and the Charitable Gift Fund logo are service marks, and Giving Account® is a registered service mark, of the Trustees of the Fidelity Investments® Charitable Gift Fund. Fidelity and Fidelity Investments are registered service marks of FMR LLC, used by the Gift Fund under license.
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