No doubt about it, Planned Giving is a fascinating area to work in. it’s right at the confluence of fundraising and estate planning, incorporating knowledge about investments and sensitivity to the life cycle stages that are part of the human experience. We’re helping organizations to raise money for causes we believe in, and we’re helping individuals to make the most efficient allocations of their income and wealth. One of the central and more difficult aspects of planned giving, however, is the dependence upon a variety of tax laws that affect every type of planned gift. Today’s gift planning professionals need to know more about the American tax system than ever before.
We’re at that point in the year when the kids are finally out of school, the fiscal year has ended for many, and we’re all more than halfway through the calendar year. The weather is finally nice, we’re taking our summer vacations, and in general, we’re starting to enjoy a slightly less hectic pace of living. But truth be told, summers aren’t as quiet as they used to be. Families don’t just pack up and head “down the shore” or “down the Cape” for the entire months of July and August. Colleges and even many primary and secondary schools now begin the “fall” sessions in the middle of August – or even earlier. And no one ever really disconnects and gets away from it all anymore, because we have our cell phones and our tablets and all of our 21st century accoutrements with us at all times.
Question: When Is a Charitable IRA Rollover not a rollover? Answer: Never! Or - Always! Say what? Read on! The so-called “Charitable IRA Rollover” goes back to 2006, where it started out as a temporary provision in the Pension Protection Act of 2006. The provision expired at the end of 2007, but it was then reinstated retroactively for 2008. Over the next several years, the provision would be allowed to expire multiple times and was then reinstated, sometimes retroactively. This caused a great degree of uncertainty and rendered strategic planning around the provision quite difficult. The 2015 Tax Act (Protecting Americans from Tax Hikes or “PATH”) finally made the provision permanent.
We hope that you’ll pardon the title of this article, which is a modification of the infamous James Carville campaign mantra in 1992 – “it’s the economy, stupid!” As was the case with the original phrase, this expression is meant to be tongue-in-cheek and self-directed. The tax legislation passed by Congress and signed by the President last December seems to have rendered the itemizing of personal deductions much less beneficial for large numbers of Americans. There has been considerable discussion among fundraising professionals that the result will be a dramatic decrease in charitable contributions. Whether or not you agree with that assertion, this article is about something else - the realization that the possible benefits of reducing taxes on realized capital gains by contributing appreciated securities for split-interest gift arrangements remain as powerful as ever.
When we at PG Calc run long-term projections for charitable remainder trusts using our Planned Giving Manager (PGM) and PGM Anywhere software, we make certain assumptions about the investment performance of the trust assets. There is a fairly basic dynamic implicit in our modeling, which is that the remainder of the gift plan will be the result of the original funding amount, the amount paid out to one or more beneficiaries, and the amount earned by the trust assets. The default assumptions in PGM and PGM Anywhere are that of an 8% total investment rate of return, broken down into 5% principal appreciation and 3% income.