estate challenges

Update on New Tax Plan and Nonprofits

Image result for not so badOk, the details are coming out and as I thought, nonprofits might actually benefit from the tax plan!

  • We still have an estate tax!  Ok, it impacts much less people (exemption doubled to $11.2 million per person) but it didn’t impact many of our donors in recent years anyway.  Just having it on the books is a good thing for the planned giving world – just giving them something to worry about is enough to spur talking to estate planning counsel.
  • Here is my favorite quote from Crescendo Interactive on the new tax bill: “Now that Congress has passed tax reform, one thing is clear – tax reform is good news for gift planners! Planned giving donors are still expected to itemize their deductions. In fact, with the loss of other non-charitable deductions, donors may be increasingly attracted to making a planned gift as a way to increase their overall deductions and reduce their taxes.  I bolded the important ideas – planned giving (and certainly major gift donors!) donors will likely continue to itemize.  I commend for Crescendo for getting this point – see next bullet point for one that I was shocked at how skewed others were looking at this….
  • Here is a quote from another provider who I will not mention as I felt their comments were just wrong:  “Although the legislation maintains the current-law income tax charitable deduction, it will significantly reduce the number of taxpayers who itemize and effectively eliminate the income tax charitable deduction for a vast majority of Americans.”  Please read that last, bolded sentence again – the claim that the new tax law effectively eliminates the deduction for the “vast majority of American” is absurd!!!!  The “vast majority” of those who no longer will itemize are not your typical major or planned giving donors!  (Ok, some older donors on fixed imcome will no longer itemize but that is ok – see next point!)
  • I think the big advantage for planned giving promotion coming out of this bill will be the IRA rollover.  For those donors age 70.5 and up (clearly candidates for no longer itemizing), this will be a great option to heavily promote.  Not itemizing?  Considering a direct IRA rollover gift! It’s that simple.
  • Apparently, the 50% of AGI ceiling for charitable giving deductions per year is going up to 60%.  This may be very helpful for larger gifts!  More to come on this when I finally get to those details.

So, there you have it, for now. Charitable giving will be more valuable to those who are the biggest givers in 2018 and beyond.  And, for the folks who may no longer need to itemize (a good thing for them as it means they save some taxes), the IRS rollover is a great option if they are 70.5+.

One last point! This blog (as well as most in this field) is apolitical – I’ve attacked both sides of the isle on foolish tax laws/proposals.  I was shocked to see a major provider of planned giving services out there buying into a clearly political statement.  The idea that this legislation is bad for charities is utterly ridiculous and to make it seem as though they just eliminated the income tax deduction is plainly foolish.  Don’t get caught up in the politics – just look at what is changing and see where it can help (or hurt).

And, by the way, change is good for planned giving. It gets people thinking and addressing their plan!  That is half the battle (considering less than half of Americans have any estate plans at all)!

Crime Does Pay (especially when it comes to frivolous estate challenges)

Several years ago, a client came to me to help work out language to establish a restricted endowment for someone donating land to establish a camp – all nice stuff.  About year or two later, the client called and said that the donor has passed away.  The endowment agreement never was signed but the donor had done his estate plans without involvement of the charity.  The result: he left everything he had to this charitable organization, including the valuable land and more, around $15 million in total.  No strings, either!  Not that it mattered since the nonprofit knew the donor well enough to create a board restricted fund to meet the donor’s wishes posthumously.  All nice stuff until a long lost relative got notice that great uncle Charlie passed – and all of his money is going to charity, do you object?

So, the client asked me what they should do in the face of the challenge to the estate.  Apparently the donor’s attorney had done everything right, even a video of the client attesting to no undo influence and mental capacity.  Upon hearing these facts, my advice was to hire the largest, nastiest law firm in that state and instruct them to squash the other side.  Having had the misfortune of being in a small law practice and having run up against big law firms, I knew exactly the pain a large firm would put the challenging attorneys through.  Make is so not worth their time and money that they will walk away.  In any case, the charity’s bequest was completely solid – it was just a matter of time (they just didn’t want to wait years for the funds).

The client consulted with a top law firm in the state and lo and behold, they settled with the family – a few hundred thousand to send the great nephew off in style.

I found out that what would normally be considered a frivolous law suit (estate challenges only can be instituted by someone who would have received estate funds had the person died without a will – i.e. a next-in-line descendant), was actually a smart move.

For regulars to this blog, you should know my personal involvement and feelings regarding the Huguette Clark estate (search my blog for numerous posts on the topic).  So, when Bill Dedman’s email with a link to his latest piece on the Clark estate came through this morning, it wasn’t surprising.  The title says it all:  “Kin of heiress Huguette Clark in talks to receive share of $300 million estate.” Click the title if you want to see the article!

All not surprising – the whole story was a ruse from the start to squeeze some bucks out of the estate.  All of the accusations, negative stories about the estate attorney and accountant, the law suit against the hospital, all of it was for one purpose and one purpose only: how much money can we (the relatives who had nothing whatsoever to do with Ms. Clark) get out of the old lady – who to their chagrin lived to the ripe old age of 104 and only signed a will very late in the game.  Ironically and perhaps with divine justice, Ms. Clark outlived so many of the family who were to me scheming and planning and waiting to get her money (having squandered their wealth over the years).  It could have been billions of dollars, too, had her assets been managed professionally.

Here is a snip-it from the linked article that says it all:  “Fourteen of the 19 said in legal papers that they never met their reclusive aunt. The last time any of them recalled speaking with her in person was in 1957, although some said hello when their parents were on the phone with Huguette on holidays.”  I think they were stretching the truth even there.  Ms. Clark was a recluse and these “relatives” were descendants of her half-siblings (all of whom were adults when she was born) who probably didn’t appreciate their father’s new late in life family.

So what do walk away with from these stories?  The unfortunate reality is that estate challenges – from next-of-kin only – don’t follow the normal “frivolous law suit” standard that other legal cases do.  There is almost no way around it.  Planned giving fundraisers – do your best to make sure family knows what your donors are doing, keep good files and don’t be surprised when the family fights the will.  Usually it is the long lost nieces and nephews and other more distant relatives who fight the most.  No guilt about their parents, just greed and easy money.