Wealth Transfer

The Dreaded Trump Tax Plan IS Coming

Image result for trump tax plan

I know everyone is scared. So many messages coming at us – how could we not be afraid for ourselves and/or the nonprofit sector with the dreaded Trump tax plan?

Well, I am here to tell you in a few words – don’t stress the unknown.  And guess what – the final tax bill that is bound to happen soon is STILL unknown.

If you are seeing nonprofit sector commentators making recommendations like donors should be fronting their gifts in 2017 to donor advised funds in anticipation of losing out on tax deductions in 2018 and beyond – my advice is to completely ignore it.

In fact, the way I am seeing things, the charitable income tax deduction may be one of the few deductions left intact and may be even more important in 2018 and beyond.

And, all of this talk about the negative impact on nonprofits of raising the standard deduction (because it may take some people out of being itemizers) is ludicrous! Those people who are barely itemizers are NOT your major gift donors.  They are the type of donors who will still send you a $50 or $100 a year annual check, regardless of the deduction.

So, don’t lose sleep over a tax law overhaul that is far from done and may end up benefiting the nonprofit sector.

See, that wasn’t so bad!

Watch Free Webinar on the Great Wealth Transfer

 

Check out this free webinar on the Great Wealth Transfer!  (NOTE: the first minute or two didn’t get recorded but it picks up on the first slide)

If you have any interest in receiving a copy of the actual powerpoint (with slide data accessible) please email me at jonathan@plannedgivingadvisors.com.

Also, don’t forget to check out our summer planned giving training programs!

The Planned Giving Boot Camp (starts July 12th)

Beyond the Planned Giving Boot Camp (part II of the Boot Camp) (starts July 20th)

Thank you as always for checking out our programs!

 

 

 

 

 

The Great Wealth Transfer Finally Here?

For years, I’ve been working on a powerpoint slide showing the tidal wave of the Great Wealth transfer (in projected numbers, of course) finally arriving.

I am not quite there yet on that particular slide but I have started to cull together very interesting data that shows the waves are beginning to swell!

Got your attention?  This Thursday I am giving a FREE webinar for Donor Search on this topic – CLICK HERE TO REGISTER!

Here is the rest of info on the free session:

Thu, Jun 30, 2016 1:00 PM – 2:00 PM EDT

20 years after the infamous Boston College predictions were made, are we finally seeing signs of the Great Wealth Transfer? Jonathan Gudema, planned giving blogger and obsessive, will present key statistics from the most recent sources including higher education VSE/CAE surveys, Giving USA, the IRS and more – all indicating that Planned Giving is on the rise.

An attorney and fundraiser, Jonathan has over 19 years of experience working with and advising non-profit organizations on planned gift arrangements and tax-advantaged charitable estate planning options.

 

Why Lead Trusts are so rare

As I follow-up to my previous post, which proved from IRS statistics that very few charitable lead trusts are established annually, I want to briefly address the likely reasons for the small number of this wonderful giving option (thank you to those who commented for your input!).  If you aren’t sure what Lead Trusts are, search this blog for various posts on them – this post is directed at those who already understand them fairly well.

Here are my top ten reasons why we see very very few lead trusts:

  1. The required payout rates to avoid all or most gift/estate tax are too high!  Even under today’s mega-low AFR environment, your lead trust still needs to pay the charity at least 6% annually for a 20 year trust, 8% for a 15 year trust.  Think about it – if your investment plan for the trust assets can’t guarantee well more than those rates, forget about a lead trust.
  2. The required terms to avoid all or most gift/estate tax are too long!  Really the same  point as the first point.  Most people considering lead trust don’t want to use any of their lifetime gift/estate tax exemption.  That being the case, your lead trusts need to be 15-20 years or more!  Someone in the Hess family did a 35-year lead trust!  Click here for article on that one.
  3. The investment returns to make lead trusts work are not realistic in most cases!  This is also connected to the first two points.  If you are ok with a 20-year term paying the charity a 6% annuity, you better feel confident that your trust can earn 8% or 9% or better.  If not, this may not be worth doing – it could actually reduce the heirs’ inheritance!
  4. Finding the right funding asset/investment is close to impossible!  Building on the previous point, you need to find an asset that will produce the cash flow to cover the 6%+ payout rate as well as grow.  To me, commercial real estate sounds like a great option.  Problem with commercial real estate is that most properties/interests in properties are leveraged in ways that prevent donors from using them for lead trusts (I had that happen to one of my perfect lead trust donors).
  5. Professional advisors are not knowledgeable about them.  I am not talking about one’s ability to talk like you know what you are doing – I am talking about really knowing them!  If you are an advisor, did you know that Lead Trusts are NOT done to avoid capital gains?  Did you know they are NOT done for income tax deductions?  If those two questions have you wondering, you DON”T understand lead trusts very well.
  6. Charity advisors aren’t knowledgeable about them.  This doesn’t bother me that much because charities should NEVER act as trustee for a lead trust.  In fact, while advice from a charity can help, a lead trust is a key piece of one’s estate plan which requires full participation of the estate attorney and very little practical help from the charity.  Still, charity advisors could teach the estate planning and professional advisor worlds about lead trusts and maybe encourage more to happen.
  7. It may not even be the best planning option for ultra-wealthy philanthropists with heirs.  I have one estate planning client who fits the bill for a lead trust – very charitable, concerned about estate tax, looking to pass assets to his heirs with a decent time delay and has assets that may soar in value.  But, at the end of the day, GRATs worked better for him because he needed more flexibility to swap assets in and out of the GRATs and worst case for him, the assets all passed back to him and he starts new GRATs.  He is setting aside assets for big giving and not bothering with lead trusts.
  8. Complex, complex, complex!  Did you know that a charitable lead trust is not a “tax-exempt” trust?  It is actually considered a complex trust for accounting purposes.  And complex it is.  And, the less people understand these things, the less likely they will happen.  Just my theory but it seems to work that way.
  9. Did I mention finding the right donors is also like finding a needle in a haystack?  Yes, you need to find a donor where all of the bells and whistles hit on target.  Facing significant estate taxes (with an estate well in excess of the federal $5.23 million per person exemption)? Otherwise, there is no reason to even consider them.  They need to be seriously charitable.  Like I said above, there are other similar, non-charitable options that work.  And, then you need the right asset/investment and a payout/term that makes sense to your donor. Would be nice, too, if your donor understood what a lead trust really is.
  10. Too many easier giving/planning options that make more sense to your donors.  When a donor or client gives me that blank stare (as lead trust discussions often cause), I know I’m not in good territory.  How about a CRAT?  How about a GRAT? Yea, that sounds good.  I get the message and quietly slink my lead trust pages away.  Donors and clients tend to stick with what they know and have done before.

Trust me, I would love to be working on lead trusts.  I’m not a naysayer by nature. All I am saying is learn what they are really about and see if you can ever sell one.  I wish you luck and offer to discuss any real lead trust scenario with you for free!  Send me an email if you think you have a live one (jonathan@plannedgivingadvisors.com) and I’ll give my advice, for whatever it’s worth.