E-Newsletter

Click here to read the entire Q1 commentary provided by State Street Global Advisors, a Gold Sponsor of PGCGP.

Written by: Anat Becker, JD

Dear Colleagues,

Welcome to another issue of the Planned Giving Council of Greater Philadelphia e-newsletter. We have several excellent articles covering legislative, technical and ethical topics that are especially pertinent to our field at the moment. David Toll, Esq., covers the SECURE Act’s implications for our donors. You will find great pieces by Bob Fogal, Aruna Pappu, and Mark Smith that are timely and helpful.

When I initially wrote this letter, I was eager to share with you a full slate of spring programming, including our education program, originally scheduled for March 27^th, and the Planned Giving Course, originally scheduled for April 2^nd and 3^rd.   

Due to concerns surrounding the Coronavirus (COVID-19), our education programs will take place in the late fall on Thursday, December 3^rd. We hope that the education programs currently planned for June 4^th will take place as scheduled. Of course, we will keep you posted.

Similarly, the Planned Giving Course has been rescheduled to September 24^th and 25^th and I am pleased to share the following updates to the Planned Giving Course:

*The Course will take place on two consecutive days in the fall.

*We have updated the course. In addition to offering current technical and legal information, we will discuss practical ways for planned giving officers to approach prospective donors. Participants will complete the Course with concrete solicitation techniques.

*We will host a reception following the first day's sessions for the instructors and participants, providing additional opportunities to network and socialize.

*The Course offers continuing education credit for CFRE, CLE and PACE.

To register for the Course, please click here.

With best wishes for a healthy spring!

Written by: Mark Smith, Relationship Manager, TIAA Kaspick

Click here to read about uncovering assets other than cash that can become viable gifts for your organization. Article used with permission.

Written by: Aruna K. Pappu, LLM-Tax, JD, MSTax

To those of us in the Planned Giving (PG) Community, the multiple benefits resulting from the donation of appreciated assets to a charity is far from a novel concept. As a matter of fact, most of us would consider this strategy a classic “oldie but goodie.” EVERYONE knows this is a downright “no brainer”, right?

Well, as was made quite clear to me recently, apparently not. Let me explain: I was recently involved with two donor scenarios. Both donors had independently approached my institution seeking to donate multi-million-dollar long-term concentrated positions of appreciated stock. The important distinction, however, was the timing of these respective calls. Specifically, Donor #1 contacted us BEFORE the anticipated sale of his appreciated stock; while Donor #2 called us three weeks AFTER he had completed his stock sale. (You know where this is going…)

With respect to Donor #1, we were able to advise that the more beneficial approach for all concerned would be for him NOT to sell his appreciated stock, but rather to donate these assets directly to our organization. We explained to Donor #1 that by making such a “Gift-In-Kind” of his appreciated assets, the tax benefit he received would be two-fold: (1) during the year of donation he would get the full FMV income tax deduction (up to a maximum of 30% of his AGI);  AND  (2) he would avoid paying any capital gains tax on the built-in stock appreciation value (i.e., the FMV less his cost basis). We also made clear to Donor #1 that we, as the recipient charity, would not be subject to any income or capital gains tax on the amount he gifted to us. Thus, by making a charitable gift of the appreciated stock to our organization, Donor #1 would be able to make a very generous charitable donation while generating significant tax benefits for himself. As you can imagine, Donor #1 was thrilled with this news and our organization was able to secure a very substantial charitable gift. A classic “Win-Win” all around.

In contrast, since Donor #2 had already sold his appreciated stock by the time he contacted our office, we were unable to offer him the sort of timely and beneficial advice we offered to Donor #1 above. Sadly, we had to inform Donor #2 that he would be subject to income taxes on the sale of his $11 million in stock as well as capital gains taxes on the built-in appreciation value. He was unaware of these tax implications -- his contemplated Big Gift to our organization unintentionally turned into the “Big Gift That Got Away.” A Big Ouch for all concerned. We tactfully admonished him for not contacting us before he embarked on this stock sale.

So my friends, the moral of this story is simple:  We must impress on all donors and prospects how imperative it is to involve your planned giving team in the charitable giving discussions as early as possible. Timing, as they say, is EVERYTHING!

Written by: Bob Fogal, PhD, ACFRE, CAP

In a previous column on personality styles, I wrote (and it’s still a good introduction to the theme!):

A challenge that all fundraising professionals face is how to engage donors and volunteers—and colleagues—whose personalities differ from our own.

Observing that “people differ” is a mundane statement. Such statements commonly show up, though, in discussions about others whom we consider a source of difficulty for us—those we might call “problem people.” When we elevate such observations to include social or demographic groups, all kinds of biases and prejudices can surface that are not positive attributes in our profession.

Self-awareness is essential for the self-management required to manage ourselves professionally.  As we each become clearer about what “makes me tick,” we can identify much more easily how others differ from us in personality and style. I have found that a theory called personality type, as defined and developed by Carl Jung a century ago, is still a good tool for enhancing our interpersonal communication and reducing unconscious characteristics of our personalities.

One key component of psychological type is how we perceive the world and take in information. (This is what the previous column addressed.)

Another key component involves our priorities in making decisions and how we interact with the outer world—in other words, how we use what we have learned. Jung called these mental functions “thinking” and “feeling.” The terms aren’t the best, since we all think and we all have feelings. But in 100 years no one has come up with any better terminology, so we’ll stick with it for now.

Those who prefer to use the thinking function enjoy abstract analysis and objective truth. A favorite analytical tool is exploring data-driven pros and cons. They believe the best decisions remove personal concerns from the process—and getting on with the work. Well-organized information and projects appeal. And it’s not unusual that they have a high level of confidence in their logic.

In contrast, people who prefer using the feeling function will usually consider how ideas, information and opinions impact people. They make decisions based on how they understand the needs and emotions of the persons involved. Personal values have priority—both their own and others’. If it’s necessary to slow down a task to establish or maintain interpersonal harmony, they will.

Interacting with someone whose decision-making function differs from our own is challenging. Most of us need a lot of practice to do so. We’re unlikely to encounter overt challenges from donors or prospects when their preference differs from ours—especially from the feeling preference folks! (The thinking preference people will just consider your conversation a waste of time, keeping them from other tasks.) Their default position will simply be lack of interest because we aren’t communicating in their dialect.

A staff colleague, however, might be different, since we are more likely to deal with positions and decisions that others may want to defend. Extreme defensiveness usually correlates with rigid decision-making, which makes success less likely for everyone.

So, the data- and task-driven, analytical gift officers need to learn how to relate to people’s personal values and needs. And the interpersonally- and values-oriented gift officers will benefit from learning how to connect with analytically- and task-oriented individuals.

The observations in these columns barely scratch the surface in applying psychological type to philanthropic management. Let me know (bobfogal31@gmail.com) if you have questions or comments.

Written by: David J Toll, JD, MBA

Today, the traditional pension funds our parents had have become a thing of the past and most people will rely on Individual Retirement Accounts (IRAs) or 401(k) plans to take them through their “golden years.” With a goal of enhancing retirement security for a growing population that’s living longer than ever before, last month Congress passed the first major piece of retirement legislation in more than a decade. The Setting Every Community Up for Retirement Enhancement (SECURE) Act took about three years to come to fruition and, despite being stalled along the way, has enjoyed consistent bipartisan support.

The SECURE Act, which took effect on January 1, 2020, does several things that will affect donors’ ability to save money for retirement and influence how they use the funds over time. Two of these changes may also have a significant impact on their charitable giving:

• The required minimum distribution (“RMD”) age for retirement accounts increased from 70 1/2 to 72 years old, but the age an IRA owner can make a qualified charitable distribution (QCD) remains at 70½.
• The SECURE Act modifies the stretch IRA provisions. Until now, a beneficiary could stretch distributions over their lifetime (or the remaining life expectancy of the deceased IRA creator). The new 10-year limit increases the income tax impact to the beneficiaries, which ultimately supports the argument that it is better to name a charity as the beneficiary.

Change in age for mandatory Required Minimum Distributions (RMDs)

The SECURE Act increases the age at which retirees must begin taking RMDs from 70½ to 72, allowing investors to save longer before having to take withdrawals. (This change applies to individuals born after June 30, 1949; individuals born on or before June 30, 1949 are still required to begin taking RMDs at age 70-1/2.) This change now allows retirement funds to grow for an extra year and a half before participants must begin receiving distributions.

No change in age for Qualified Charitable Distributions (QCDs)

Even though the age requirement for taking mandatory RMDs has increased, donors can still make QCDs of up to $100,000 per year directly from their IRA(s) beginning at age 70 ½ without having to include the RMD in your taxable income for the year as long as they are no longer contributing to their IRAs. If a donor is still contributing to the IRA, it’s important to know that the amounts they contribute after reaching age 70½ will reduce, dollar-for-dollar, the amount of a QCD that can be excluded from their taxable income. Although the SECURE ACT does have rules to coordinate the new IRA rules with QCDs, this may cause some confusion among donors; it is anticipated that the IRS will offer guidance soon.

For example: if the donor of a $50,000 QCD has contributed $20,000 to her IRA since turning 70½, only $30,000 of the QCD will be excludable from her taxable income. (The donor will be able to itemize the other $20,000 as a charitable deduction, which may offset the additional taxable income.) If the donor makes no further IRA contributions and makes another $50,000 QCD in a subsequent year, all $50,000 of that distribution will be excludable from her taxable income.

Inherited IRA distributions must now be taken within 10 years

Previously, if an individual inherited an IRA, they could "stretch" their IRA distributions over a long period of time, deferring income tax and permitting the account balance to compound income tax free. More specifically, following the death of the IRA owner, the retirement benefits passing to a designated beneficiary were paid out over the lifetime of the beneficiary, resulting in a significant tax benefit for beneficiaries who were much younger than the IRA owner, such as a grandchild. The RMDs were calculated based on life expectancy of the grandchild (or other young heir) so after the death of the plan owner, the plan assets would be paid out over that beneficiary’s life expectancy. That deferral (and the accompanying income tax benefit) made many IRA owners comfortable bequeathing a large IRA balance outright.

The SECURE Act has changed that. Now, for IRAs inherited from original owners who have passed away on or after January 1, 2020, the new law requires many beneficiaries to withdraw all of the assets within 10 years after the death of the account holder. No withdrawals have to be made during the 10-year period, but at the end of 10-years from the date of the plan holder’s death, the entire balance in the plan must be withdrawn.

Exceptions to the 10-year rule include: assets left to a surviving spouse, a disabled or chronically ill beneficiary, or beneficiaries who are less than 10 years younger than the original IRA owner. In these cases, the beneficiary is allowed to take distributions under the old rules. Minor children are also considered an exception to the 10-year rule; however, when the minor reaches age 18, the 10-year rule will clock will begin ticking and the plan assets will have to be paid out by year 10, when they reach age 28.

What if an IRA was inherited before 2020? Since, the SECURE Act only applies to retirement plan assets that are inherited after January 1, 2020, the complex distribution rules that existed under prior law will continue to apply to many heirs.

A new opportunity for strategic charitable giving

For charitably minded people who don’t necessarily want their non-spousal beneficiaries to receive their entire IRA proceeds within 10 years, a testamentary life income gift, such as a charitable remainder trust (CRT), may offer a creative solution:

• The IRA owner can designate a CRT as the beneficiary of the account and the IRA proceeds will then be used to fund a life income vehicle that will provide income for loved ones, either for their lifetime(s) or for a set term of years, and typically generally with a minimum 5% payout (each payment would carry out a portion of the income). At the end of the term, the remaining assets will go to one or more charitable organizations chosen by the original IRA accountholder. This strategy combines tax-free growth, maximum income, protection of the trust principal and future support of a favorite charitable cause. For individuals who want to protect and help loved ones, the IRA-to-testamentary-CRT solution offers enormous benefits and might accomplish something similar to the intended deferral before the SECURE Act.
• Under the rules for CRTs, a minimum of 10% of the assets must go to charity at the end of the CRT’s term. To further provide for heirs and replace those assets, the IRA owner might also purchase a life insurance policy in an amount equal to what is estimated to go to charity and, to avoid any potential estate taxes, establish an insurance trust to hold the proceeds. This strategy is similar to a planning concept sometimes known as “a wealth replacement trust” but applied here in a post-SECURE Act context.

Next Step:

These changes are just a few of those resulting from enactment of the SECURE Act. Take this opportunity to educate your donors about the benefits of using a testamentary CRT or other life income gift to replicate the stretch IRA for their families. As with any piece of new legislation, it is important to encourage your donors to work with their tax professionals and advisors to define and prioritize their personal objectives an explore the best solutions and strategies for them.

Written by: Anat Becker, JD

Dear Friends,

Earlier this month I had the pleasure of attending our educational program at the historic Racquet Club in Philadelphia.  Sometimes I take it for granted that our Council members get to meet in iconic Philadelphia locations.  One of our speakers, Patrick Schmitt, traveled from NYC for the day, and was clearly impressed with the elegant club and the ambiance that we all appreciate while we learn, network, and enjoy the sumptuous luncheon. Patrick, co-founder of FreeWill, an innovative new social venture, spoke about the latest research into digital fund raising, specifically for planned gifts.  Some of the information confirmed our experience: childless donors make for good planned gift prospects.  But some of the other findings of FreeWill could help us all amplify the impact of digital fundraising.  I was pleased to hear that donors were much more likely to share the size of their deferred gift if they learned that the information could help their relationship officer.  Also, while we know that donors increasingly name a percentage amount (rather than a specific figure) in their estate or retirement plans, the benefit of percentage gifts to organizations was dramatic.  Percentage designations surpassed dollar designations by 120%!

To hear about Patrick’s insights on maximizing qualified charitable distributions to your organization, please come to Planned Giving Day on October 30 for another excellent presentation, among numerous others.  The offerings this year continue to be relevant, helpful and practical for our daily work. 

Another terrific presentation was made by Lynn Malzone Ierardi, JD, who is the current Chair of the National Association of Charitable Gift Planners.  Lynn talked about her recent book, Storytelling, The Secret Sauce of Fundraising Success.  Listening to, and telling, stories can increase both giving and our own professional growth.

Looking forward to seeing you on October 30 at the Union League.

Written by: Bob Fogal, PhD, ACFRE, CAP

A challenge that all fundraising professionals face is how to engage donors and volunteers—and colleagues—whose personalities differ from our own.

Observing that “people differ” is a mundane statement. Such statements commonly show up, though, in discussions about others whom we consider a source of difficulty for us—those we might call “problem people.” When we elevate such observations to include social or demographic  groups, all kinds of biases and prejudices can surface that are not positive attributes in our profession.

Self awareness is essential for the self-management required to manage ourselves professionally.  As we each become clearer about what “makes me tick,” we can identify much more easily how others differ from us in personality and style. I have found that a theory called personality type, as defined and developed by Carl Jung a century ago, is still a good tool for enhancing our interpersonal communication and reducing unconscious characteristics of our personalities.

One key component of psychological type is how we perceive the world and take in information. We (and our volunteers, donors and colleagues) take in an almost infinite amount of information each day. Jung called the mental functions that we use to so this “sensing” and “intuiting.”

Individuals who learn primarily with sensing prefer to focus on individual facts and details. They prefer information and tasks that are organized and presented in an orderly manner. And they are likely to become impatient with complicated and future-oriented explanations and tasks that take a long time.

When we explore a deferred gift with a sensing prospect, therefore, we need to talk very specifically about what their gift will accomplish, sharing information in a well-organized way. The relative simplicity of charitable gift annuities appeals to sensing preference people.

Persons who absorb information with intuition focus on what facts mean and how they fit together. The want information to be introduced with the “big picture” before getting to the details—if you get to the details at all. They really like moving from one big idea to another, and may become impatient if they have to pay close attention to too many details along the way.

Gift officers who prefer sensing will relate easily to others who also learn through sensing. They will have to stretch their capacity, though, to talk “big picture” with intuitive learners. We accomplish this by practicing how to talk in more future-oriented and expansive ways. 

Conversely, intuitive gift officers will talk big picture easily with intuitive prospects, but will have to slow down their brains to pay attention to details and communicate them to others.

In both cases, gift officers will benefit from preparing and rehearsing how to express ourselves when talking with someone who has a preference different from our own. This will test how well what we’re saying and how we’re saying it connects with someone whose preferences contrast with ours.

In a future column, I will discuss further how our preferences impact our interpersonal communication and the decision-making process.

Written by: Viken Mikaelian, CEO, PlannedGiving.com

Now more than ever, it is critical for smaller nonprofits to establish a planned giving program. If you’re not going after planned gifts, the nonprofit next door is. And since planned gifts are gifts from the heart, they inspire more cash gifts, too — which means you’re really losing out.

Consider this: Savvy donors consider a planned giving program evidence that a nonprofit has a sensible plan for the future. What’s more, the “big” nonprofits realize this, and they’re using it (as they should!) to their advantage. If you don’t get on the boat now, you run the risk of being left behind — like a mom-and-pop corner store after Walmart moves in to the neighborhood.

If you’re consistently saying “I don’t have the time” you’re just making excuses. A simple planned giving program is easy to set up, easy to market, and easy to maintain.

Here are 9 other evidence-based reasons to establish a planned giving program:

• The largest intergenerational money transfer in history is happening now. This asset transfer is the perfect time for a planned giving program — just think of the tax deductions would-be donors are desperately trying to find!

• The average planned gift is 200 to 300 times larger than a donor’s largest annual gift.

• The average planned gift is between $35,000 and $70,000 (Still want to focus on getting a $20 annual gift?).

• Even during economic downturns, planned gifts have consistently risen.

• Just 5% of this nation’s wealth is in cash. The rest is in easy to give assets like stocks, etc.

• An established planned giving program costs about .3 to .15 cents for every $1 raised.

• Those who work in the planned giving field earn 150% to 200% more than those in the annual giving field.

• Anyone can make a planned gift — it’s not just for the wealthy. In fact, bequests are the main gift of the middle class.

• You don’t need to be a tax law expert — you just need people skills.

Bequests — The Gifts that Keep on Giving

Now let’s back up: A simple planned giving program is easy to set up, easy to market, and easy to maintain. If you do nothing else, set up a bequest program. The majority of all planned gifts are in the form of a bequest. It’s the easiest planned gift to make — it’s either written into a will, or added through a codicil. In 2017, as reported by Charity Navigator, giving by bequest increased by 2.3% to $35.70 billion.

• Setting up a bequest program is easy. 

• Marketing your bequest program is easy, too: Include it on your website, mention it in donor communications (you can even include a link in your email signature), and send out postcards a few times a year. Have a vendor create a simple bequest brochure.

• Maintaining your program is even easier: Keep your materials up to date, and send out regular postcards/donor communications — oh, and watch your endowment grow!

 Do it today. Your board will be happy, and you might even get a raise!

Success@PlannedGiving.Com

Written by: Matt Keller, Director of Marketing, RenPSG

The Chronicle of Philanthropy released the results of a recent study they conducted in partnership with Harris Poll and the Association of Fundraising Professionals that said 51% of fundraisers in the United States plan to change jobs by 2021. That’s a concerning statistic for many nonprofit organizations. Fundraising professionals cite not enough staff, not enough resources, lack of organizational structure, low income potential, and unrealistic goals as reasons for the shift in career path.

That stat, if it becomes a reality, could send shockwaves through the nonprofit world. How are charitable organizations going to maintain their fundraising efforts while losing half of their fundraising power? What will they do with when the institutional knowledge walks out their doors? It could take years to develop the relationships needed to solicit a major gift. And the connection that major gift donors make with fundraisers after the gift is made is one that could pay dividends in the future. The smart play is to launch a retention strategy now to prevent a catastrophic event two years down the road.

Anyone who has worked in or with the nonprofit industry knows that few other sectors are stretched as thin. Each department is asked to do more with less in an effort to bring down overhead and direct more of the funds raised to the mission of the charity. Along with 93% of the respondents to the survey citing their belief in the mission of the organization as a reason to stay, 78% of those polled said they wished they had more time to spend with donors. But fundraisers are pulled in many directions and spreading a smaller gift officer team across a larger portfolio of potential donors means less time with each. That’s a perfect recipe for burnout.

Nonprofit employers often offer additional time off, better medical leave and a flexible work environment to make up for lower compensation. But what if there was a way to raise compensation, reduce the amount of overhead the company spends on back office tasks all while retaining the valuable relationships that gift officers have worked so hard to grow? This is where a company like RenPSG can help.

Outsourcing your back-office administration is a great solution for many nonprofits, but finding a single place to outsource everything can be tricky. Since 1987, RenPSG has been the trusted partner for charitable gift solutions and has a staff with the skills and experience to manage it all. RenPSG’s gift administration services include, tax preparation and reporting, annual reports, accounting and sub-accounting services, grant and contribution processing and more. Letting RenPSG’s professionals manage the back office will allow nonprofits to reallocate resources (human, capital, and expense) to focus on what they do best – fundraising!

Contact RenPSG today and retain your fundraisers tomorrow. Give us a call at 800.843.0050 or send us an email at consulting@reninc.comand let’s work together to find a strategy for your nonprofit organization.