1. Planned Giving with Non-Cash and Unusual Assets: From Acceptance to Disposition Bryan Clontz, CFP® President, Charitable Solutions, LLC bryan@charitablesolutionsllc.com (404) 375-5496 All Materials Copyright 2008-2009, Charitable Solutions, LLC

2. 2 Agenda Non-Cash Asset Market Overview Non-Cash Asset Types A 5-Minute Non-Cash Tax Seminar Legislative Update Reasons Non-Cash Assets are Declined Top Ten Non-Cash Questions Three Case Studies Non-Profit Management and Disposition

3. 3 Non-Cash Asset Market Overview Source: Spectrum Group and Reality Times, June 2004 More than half of affluent investors’ assets are held in non-cash assets; cash only represents 3-5% Aggregate stock market value is approximately $14 trillion; non-cash market estimates are $40-60 trillion Of the $300 billion in donations last year, non- cash assets are estimated to be 3% or less

4. 4 Non-Cash Asset Types Real Estate –Residential vs. Commercial, Encumbered vs. Unencumbered, Partial vs. Entire Interests Privately-Held Interests –C-Corp and S-Corp Stock, Limited Partnerships or LLCs Restricted Stock Tangible Personal Property – Art/Collectibles (New PPA Rules) Weird Stuff –Quarterhorse, Seat on New York Mercantile Exchange, Gold Bullion, Euro-Denominated Bond, Beach House in Mexican Land Trust, Paris Condo, UPREIT Partnership Units, Patents, Timber Deeds, Clay Mineral Rights, Book Royalties, Oil & Gas Interests, Hedge Fund Carried Interest, NFL Team, and finally, Dead Animals

5. 5 A 5-Minute Non-Cash Seminar Cash BAD – Everything else GOOD! Capital gain property receives a fair market value deduction AND an elimination of capital gains tax if donated to a public charity If donated to a private foundation, donations of non-cash assets during life only receive an adjusted cost basis deduction Public charities do not have a 5% payout requirement – private foundations do Donor advised funds are especially attractive for multiple grants

6. 6 Appraisal Considerations Appraisal may occur 60 days prior to gift at the earliest, and the latest being the time the donor files the tax return – Donor completes Form 8283 and Charity completes Form 8282 Pension Protection Act Key Changes –Extended Form 8282 to 3 years, Tightened Definition of Substantial and Gross Valuation Misstatement, Increased Appraisal Penalties and Definition of a Qualified Appraiser –Tightened Deductions Related to Partial Interests in Tangible Personal Property

7. 7 80% Of All Non-Cash Gifts Rejected Tax and Legal Complexity (UBTI, Bargain Sale, Palmer/Blake/Ferguson Pre-arranged Sale Issues, Agreement Complexity, Self-Dealing, Excess Benefit, Private Inurement) Environmental Issues (Due Diligence, Remediation, Disclosures, Deep Pockets) Management Issues (Holding Period, Insurance Changes, Contract Changes, Appropriate Filings and Paperwork) Charity’s Internal Process (Timeliness, Thoroughness, Risk Tolerance, Weak Gift Acceptance Policies/Procedures) Perceived Risk/Reward Ratio

8. 8 Top Ten Non-Cash Questions Asset Description/Expected Value Asset Ownership Partial or Entire Interest Debt or Other Encumberances Outright, Life-Income or Testamentary Capital or Ordinary Asset Tax Implications Potential Buyers and Offer Status Holding Period and Management Issues Transfer Timing

9. 9 Dechomai Foundation, Inc. Flow Dechomai Foundation, Inc. DONOR CONTRIBUTES NON-CASH ASSETS Step 1 Step 3 Step 2 Sweet Spot: $750K+ Fees: 1-3% (1.7% Average) For illustrative purposes only. Grant to Referring Charity ASSET IS SOLD $100 Million+ Since 2003

10. 10 Case Study #1 Commercial Real Estate Contribution For illustrative purposes only. $1.2 million/20% Interest Community Foundation Four Donor- Advised Funds Four Doctors Owned $6.0 Million Medical Building Building Purchased by Publicly-Traded REIT Multiple Grants To Multiple Charities $1.2 million/20% Interest Four 7 Percent Charitable Remainder Trusts For Life

11. 11 Case Study #2 Limited Partnership Gift For illustrative purposes only. DECHOMAI FOUNDATION DONOR ADVISED FUND Family Limited Partnership Owns $1.6 Million Montana Working Farm Property Farm Purchased by Adjoining Land Owner Entire Interest CHARITY’S CAPITAL CAMPAIGN

12. 12 Case Study #3 Closely-Held Business For illustrative purposes only. NATIONAL HEALTH CARE CHARITY Family Business C-Corporation Partial Interest Corporate Redemption 1.Donor Contributes Stock – Receives Full Deduction 2.Company Buys Stock Back 3.Minority Interest Holders Increase Percentage Ownership With No Gift Tax 4. Donor Creates Named Research Fund

13. 13 Non-Profit Management and Disposition Assign One Staff Person Non-Cash Responsibility to Follow Gift Acceptance Policies/Procedures Document/Transaction/Asset Due Diligence Self-Dealing, Conflict-of-Interest, Private Inurement Due Diligence Prudently Manage Asset (tax filings, insurance changes, lease/rental changes, record deeds, pay bills, oversee maintenance, etc.) Manage Disposition – Hold, Sell to Private Party, Redeem/Surrender to Entity, Broker in Public Market, Auction Manage Risk – Asset Due Diligence, Indemnification Letter, Legal Counsel, Outsource Functions or Entire Gift to Another Firm or Charity