Planned Giving Commentary

Tax Bill Imminent – Time to Take Action?

Image result for musical chairs winners losersThere still needs to be some negotiations between the House and Senate to come up with a final bill but they are pretty close. My accountant even told me to make sure I pay up my back state taxes owed since 2017 is probably the last year I can deduct them.

Ok – for Nonprofits – what is the bottom line?  Anything terrible? Any advice for our donors?  Good, bad or ugly for planned giving?


Here is my take on a few provisions that might be relevant to nonprofits:

  1. The “standard deduction” is definitely going up – probably doubling. As a head of household, I will get around a $24,000 standard deduction.  Seeing that I will still get the mortgage interest deduction as well as up to a $10,000 deduction on my real estate tax, I probably will still be an itemizer.  In other words, donors who have significant expenses like mine will likely not be impacted. My verdict: no impact on nonprofit fundraising.
  2. 529 plan expansion –  Under the House bill, parents may set up 529 plans for unborn children. Additionally, up to $10,000 per year of plan funds could be used for private elementary and secondary school expenses. Under the Senate bill, 529 savings plans could be used for public, private and religious elementary and secondary schools, as well as home school students. My verdict: might be very good for private schools – families with extra funds will be encouraged to park large sums in 529 plans to be used throughout private elementary and college years as a tax-free (on growth) fund.  No impact on fundraising that I can see unless people tell you that they are funding 529 plans instead of giving you charitable gifts.
  3. Estate tax repeal – Under the House plan, the federal estate tax would be phased out and completely disappear after 2024. Under the Senate plan, the federal estate tax would remain, but the exemption for federal estate and gift tax would double.  In other words, we will have an estate tax, just applying to even less people. My verdict: not great for planned gifts like Lead Trusts which are driven by estate tax avoidance but no impact on planned giving as a whole or other vehicles.
  4. Excise tax on big University Endowment Investment Income – Under House proposal, private universities with assets of more than $100,000 per student will pay a 1.4% excise tax on their net investment income. Small colleges will be exempt from the tax.  Not sure how the Senate addressed this issue but I suspect it won’t end up in the final bill.  For some reason it was not brought up in the Forbes article, it only impacts the biggest private schools (around 100 of them). My verdict: not sure.

I have been through too many “feared” tax law adjustments to be overly concerned about the impact on nonprofit fundraising. Since they are not tampering with the charitable income tax deduction, my hope is that those who benefit from the changes will be give more to nonprofits.

Still, there’s a lot of musical chairs scrambling going on here (fooling around with tax code under the current condition that is must be revenue neutral means there has to be winners and losers) so we won’t know the impact of the law for years to come.


The Big Short(age of Donors)

It’s coming. The Big Short-age of Donors.Image result for the big short

Follow this blog, take my courses, hear my pitches. You will get the message.  This county is rapidly aging and so is your nonprofit donor base.

The Baby Boomers – the largest and wealthiest generation in U.S. history which has fueled insane growth in the nonprofit sector of over the last 20+ years – is moving into Planned Giving territory (that is the nice way to put getting old and/or dying).

This is truly bad news for most nonprofits (regardless of the fact that the overwhelming approach to dealing with one of the most obvious courses of action – Planned Giving – is to essentially to ignore it).

I finally watched the Big Short and I really related to the characters in the movie, in a stressful kind of way.  They all knew they were right (about the housing bubble). They all knew they made the right investment. Yet, they were almost all sunk financially because the system refused to admit there was a problem and it was taking too long for their profits to materialize.

So, here I am. Completely invested in planned giving for over 20 years. It is the right move – the nonprofit sector WILL experience a demographic nightmare that WILL be very painful – Planned Giving is an obvious need throughout the nonprofit world.  And, all I have seen is a once awesome job path completely disappear. Charities reducing investment in this area to barely anything.  Consultants not booming either. Is anyone besides the bigger, more successful programs investing properly in Planned Giving or even doing anything?

In other words, nonprofit decision makers – most likely CEOs and heads of development who are under pressure to keep their jobs today by raising today dollars – have decided that the short-term goal takes complete precedence over investing in long term planned gifts (which, when received are typically multiples of your largest donors’ lifetime giving – regardless of whether it’s known leadership donor or a $50 annual fund donor).

Here is another way to look at it.  In the subconscious or even right there in the conscious brain it is clear that it’s time for planned giving.  But, what good will huge future windfalls (via planned gifts) do you (the person under pressure now)?  Go for the $5,000 major gift now and don’t think about the $200,000 bequest (the average size for university bequest donors in FY16) or other planned gift options. Who cares if the right business decision is to actually talk to your donors about legacy giving? Your job is to keep your job today, and not make it easier for your replacement who’ll take credit for that planned gift the second you are gone!

I know this sounds like sour grapes but there is truly something akin to the Big Short going  on here.  Nonprofits – you are in trouble.  Your biggest and best donor classes are entering their 70s.  It doesn’t get better from here.  Younger potential donors might not have the same commitment or financial potential.  You might not even attract younger donors.  The least your organization can do is intelligently make the case to your aging donors that it is also time to think about a legacy gift. That’s all.

But it does take training, staffing, and actual budgets to get it done.  So, ask yourself this question: Am I going to do what is right for this organization in the long term or what’s right for me personally in the short term?


Time to worry about tax law changes yet?

blog pickProbably not.  It doesn’t seem that the President and Congress are about to do anything together.

Ok, but what if all of the Republicans actually get in line (or a few Democrats defect…like that’s going to happen!!)?

Any problems with the most recent tax proposal for non-profits?

Here is a quick overview of potential issues that might impact nonprofits:

  • Standard deduction would be increased to $12,000 for individual filers and $24,000 for married couples – I can tell you right now that this does not hurt charities whatsoever – maybe even helps.  All it means is that middle and lower middle class America have less incentive to itemize but that sector is not likely to reduce charitable giving over a few tax benefits or not.
  • Personal exemptions and many itemized deductions would be eliminated – the income tax deduction won’t be touched directly so you actually might find upper middle class and higher Americans looking for more deductions (i.e. charitable deduction or maybe new fangled schemes for deductions).  Probably a plus for nonprofits.
  • Estate tax, which now only applies to estates of more than $5.5 million per decedent (or $11 million per couple) would be entirely repealed – oh boy, it’s not happening.  I’ll believe it when I see it.  George Bush Jr. had the power and did “repeal” the estate tax but was it really a repeal?  Go ahead and mess around with the estate tax again – all good news for consultants and attorneys. Probably not an impact on nonprofits but we will have to wait and see what they really are doing.

There is other stuff in it – the rest of which doesn’t yet rise to be addressed in this blog – here is a link if you want to read more:

If you have ever seen my presentations, you would know that I subscribe to the 2% rule.  Americans in general give away 2% of their disposable income/wealth each year, roughly equal to 2% of the economy/GDP (see Giving USA for more on those numbers).  Since these percentages are very consistent, year in, year out, regardless of tax law changes, you have to believe that if anything  happens, it is not likely to impact charitable giving (unless it increases or decreases Americans’ disposable wealth or the overall economy). Even the so-called estate tax repeal doesn’t frighten me, and will probably be replaced with something confusing that I’ll be speaking and writing about it for years.


Eye opening facts for your nonprofit board


In Image result for eye opener cartoona presentation to a nonprofit board a few weeks ago, I went through my typical “case for planned giving” presentation which includes slides that address the on-coming Baby Boomer Boom for Planned Giving and the potential for the field in the next 10 years.

But,  you know what got this board’s attention?

They saw that charities, across the board in the U.S., average approximately 7.7% of nonprofit revenue from planned giving (since 1969).

And, when looking at planned giving revenue versus individual giving (a better apples to apples comparison), planned giving averages over 10% nationally of these two revenue streams AND in higher education the percentage is as high as 15%-20% of individual and planned giving revenue combined. These were the facts this board picked up and started to engage.

In other words, don’t forget that your board may have business owners and others keen on bottom line revenue.  Bottom line: planned giving should at least be reaching national statistics and even higher if you have a developed program.  Time to invest.