estate tax

Interesting opportunities as a result of the new tax law

Image result for Interesting opportunities cartoonSlowly, we are starting to realize there are interesting opportunities as a result of the new tax law.  Many will take months or longer to come out.

Here is one – in addition to the most obvious that people with estate planning attorneys are likely going back to them as we speak:

No longer needed life insurance!

Yes, many life insurance policies were created specifically to pay any federal estate tax liability – saving the principal of the estate for the family.

But now the estate tax exemption just jumped to $11.2 million per person from $5.6 million per person.  In other words, anyone who had such a life insurance policy should be talking to their insurance/financial planner.  Why not do something charitable with that policy?

Want to get up to speed on the new tax law and various planned giving options?

CLICK HERE TO SEE MORE ON OUR NEXT PLANNED GIVING BOOT CAMP

CLICK HERE TO SEE OUR SUMMER LINE UP WEBINAR TRAINING SESSIONS

Time to get your planned giving act together!

Related imageBaby boomers getting older….

The wealth transfer is coming….

Blah, blah, blah.  The same old, same old and no real difference in the numbers for planned giving.  Right?

I know what I am about to say is self-serving (this is a blog and I’m constantly promoting myself and my services) but if you have a minute, read what I am about to write carefully.

The estate tax exemption just doubled (i.e. people can leave more to family estate tax free).  Bad for planned giving?

Wrong. Amazing for planned giving!!!

Why?

People with means are going to their estate planning attorneys.  Considering options. Redoing their estate plans.

How often does this happen with your typical planned giving prospect?  You usually have no idea unless someone tells you.

So, I am telling you this (from my estate planning practice – more than half of my business):  your wealthier donors are meeting with their estate planning attorneys NOW.

That means NOW is the time to make sure they are considering YOUR institution for some sort of planned gift!

In other words, you need to wake up your sleeping planning giving program. You need to train your staff (click here to see more on my upcoming training!). You need to put some budget towards planned giving.

Meaning: it’s time to get your planned giving act in order! The boomers will start moving on. There are a lot more of them than their predecessors and they actually have a lot of money.  Planned Giving will grow dramatically in the next few years.  You and your organization need to get ready!

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)!

It’s started…..

Tax reform – yikes! Always supposed to simplify but always ends up being more complicated!

If you are a nonprofit/fundraiser, you should be concerned. Presidential proposals in the past have been very frightening to nonprofits who rely mainly on tax deductible gifts. So, what are we facing?

  1. Firstly, we are a long way from anything actually happening but we do have some details on the Administration’s’ proposed plans.
  2. Good news – It’s official – the income tax deduction isn’t being tampered with.
  3. Not sure news – the standard deduction would jump a lot (ie… 2016 for married joint return is $12,600 – would jump to $24,000). In other words, many more people will no longer “itemize” on their tax returns – maybe this deincentivizes those from giving because their gifts no longer get them a cash rebate?  More on this below.
  4. Also not sure news – no more death tax.  Ha ha. Last time a president fulfilled his promise to eliminate the estate tax (2001), he actually increased it in many places and it almost swung back to huge rates in 2011. In any case, the roller coaster years of ending estate tax to the snap back year to a decent fix actually didn’t impact planned giving numbers! I don’t think there will be an impact on bequest dollars to charities but I do think I may be very busy dealing with whatever cockamanie scheme they come up with (ie…return of carry-over basis 🙂

Back to #3 – I already saw a Forbes article claiming that the increase in the standard deduction “could decimate charitable giving.” Click here for that article but please read my response!

I totally disagree with that article’s point.

Here is another quote from the article:

The House tax reform blueprint said that a $24,000 standard deduction for joint filers would reduce the percentage of American taxpayers who itemize and take the charitable deduction from 25% (one out of four taxpayers) to 5% (one out of 20).”

Sounds catastrophic except for the fact that most charities receive 80% or more of their fundraising dollars from the top 20% echelon of their donors – and those 20% will likely continue to itemize.  Trust me, your major gift donors have more than $24,000 in itemized deductions! I have way more than that!!! (and I’m not anywhere near being a major gift donor – nowhere near it in fact;(

Anyway, take a look at these charts from my training programs:

One Day Boot Camp - AM Session 1 Introduction and OverviewOne Day Boot Camp - AM Session 1 Introduction and Overview 2

Americans give consistently – regardless.  2% of disposable personal – 2% of the economy.  The dips happen when people are poorer – not upset about taxes.  SO, the administration argument that people doing better in general is better for nonprofit fundraising is TRUE!!!!  Put more money in their pockets and they will give more.  This next slide on total US giving – inflation adjusted since 1975 – makes that point especially in light of the above slides. Giving over those years just went up and up but the percentages of disposable wealth and GDP stayed flat!!

One Day Boot Camp - AM Session 1 Introduction and Overview 3

Ok, so how could charities get hurt by the increase of the standard deduction? Well, older people might be impacted who don’t have all of the deductions that younger folks have.  They may start getting less benefit from their charitable giving – that is true.

Ah, older meaning age 70.5 and up – just happens that at that age, you are eligible to make direct IRA rollover gifts – no taxes.  This is already a great deal for seniors who don’t itemize and if this change happens, you need to step up the IRA rollover marketing!

Maybe we can convince the government to allow direct rollover IRA giving from age 59.5!! That would be really cool.

We’ve just begun with the big tax changes. Stay tuned!