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Nov 2014 Newsletter

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Planned Giving Mentor

Professional Partnerships: Hospice Philanthropy Group L.L.C.


Quotes for today: Vision without action is just a dream, action without vision just passes the time, and vision with action can change the world.....(Nelson Mandela)

Quickie quiz:.....What was the total return on the S&P 500 stock index for the year 2013? 11%-13%-18%-22%-Answer below.

Senior Spirit.....Click the Senior Spirit link (below left) for a copy of the latest articles from Certified Senior Advisors

Past issues of the Newsletter are available in the Newsletter Archives To subscribe to this newsletter E-mail and put Subscribe in the subject line


Folks - it is the New Year and I am always optimistic about the future and helping people plan their gifts to support worthy causes. This is the time to set your goals for 2015 and maybe beyond. Let them be challenging but achievable.



Ethical issues and trends in gift planning for seniors -- Part 3 Donor suitability- for parts 1 & 2 see Oct. and November newsletters in the Newsletter Archives

Experienced planned gift officers (PGOs) become familiar over time with the concept of “gift suitability.” Suitability translates into a ethical, personal, and financial decision about the appropriateness of the gift for the donor.

To fully understand suitability the PGO must answer the question, “Does the amount and form of the gift match the donor’s personal goals and values?” Answering this question may depend on how the interest in a life income/estate gift was started. Was the development program of the charity or a professional advisor responsible for stimulating interest in an life income/estate arrangement?

In addition to the donor’s personal goals and values the amount of the gift must match the donor’s financial and tax planning needs. Often the PGO is not privy to the full financial situation of the donor as their decision evolves into making the gift. Perhaps the CPA advisor is the one closest to the financial concerns as individuals go through the accumulation, retirement and distribution stages of their financial life. The CPA advisor is often the closes person to understanding the donor’s overall financial and life situation.

The self directed donor may search out information on gift options from commercial and charitable web sites. Therefore, it is important that charity web sites provide accurate and up-to- date information on the full range of gift options and arrangements. Advanced commercial web sites allow donors to independently determine gift results by selecting a gift strategy, input select variables such as age, gift amount, beneficiaries while providing immediate tax and financial results.

All too often the PGO is presenting a gift strategy or option without full knowledge of the donor’s financial and personal lifestyle. Therefore, it is important to delicately probe into the donor’s finances by asking open ended questions. If you get significant push back then find out the donor’s financial advisors and ask permission to talk to them about what you are suggesting.

Suitability Example: A 91 year old (CGA age) donor with a strong local giving history meets wit the the development director of a mid-western hospital. He presents a copy of a single life charitable remainder standard payment 6% unitrust he has established with and for another charity. His request, in order to avoid attorney fees would the hospital retype this trust agreement to include their hospital as beneficiary. “I want to fund it this year with $1,000,000 in cash or mutual funds.”

This situation opens a pandora box of additional concerns and questions. What is wrong with this situation? How do we get additional information? Who and how are his advisors involved? How should the development officer proceed? How is the other charity managing the CRT agreement? What is the donor’s asset and tax situation? Has he used up his previous deduction from the CRT or is there a carry forward?


All great questions but let’s step back and assess the situation. We know the donor is married (third spouse), how will the spouse react? Does he want to include her or has he made other arrangements for her? What is the donor’s annual taxable income? What is the tax situation of the proposed gift assets? What will be the directions to the attorney if the hospital goes forward with drafting a CRT? Will the attorney be working for the donor or the hospital? Who will be paying the fees involved? Who and how are any advisors involved? Is a CRT a suitable gift option for a 91 year old? Are the mutual funds the most appropriate asset for the gift? What will be the impact of this gift on the need for future long term care costs?

Fast forward with a philanthropic gift consultant meeting with the donor, prior request to have CPA advisor involved was tabled for now. During donor visit he indicates he will likely sell his mutual funds and contribute cash to set up the proposed CRT. The various mutual funds have some long term gain but he thinks others have little or no gain. Taxable gain will be offset by the benefit of the charitable gift deduction.

The consultant predetermined a more suitable program for the donor would be a gift annuity paying 6% or $60,000. The tax free payment is $50,760 for the next 3.8 years. This is equivalent to a full taxable amount at a 28% marginal tax rate of $70,500, more if the donor’s marginal bracket is higher. The fixed income balances the variable income from the existing CRT to form a well balanced financial gift program.

Donor understands the advantage of the fixed guaranteed lifetime payments and large tax-free payments. The simplicity in establishing the gift annuity agreement and tax reporting of the income is also an advantage.

Donor agrees to move forward with the CGA but wishes to consult both his CPA and investment advisor. Both agree the CGA is a good plan and the gift moves forward.

Best Practice Result: know your limitations in terms of technical expertise and form a team when appropriate to establish credibility and suitability of gift recommendations.
Next issue: False Motivators (adapted from presentation by Brian Black, J.D., “Gift Planning for Seniors” to Susquehanna Planned Giving Council, Harrisburg Pennsylvania)


Qualifying Prospects.....Recently the Smart Planned Giving Marketers Group on had a discussion on qualifying prospects for planned giving. All respondents assumed the donor has an interest in your mission. I am adapting a summary below.

Overall you are examining your donors looking for 1. frequency of giving, 2. longevity of giving, 3. age, and 4. gender. Don’t make the mistake of forcing consecutive giving criteria as many seniors bunch their deductions into alternate years to take advantage of itemization.

Recent research has uncovered if a donor is going through a major life changing experience it drives both inclusion and exclusion of charity in their estate plans. Are your donors facing retirement, a major financial event, or a major health issue? Do you have some manner of knowing what life experiences are effecting your closest donors?

Be sure you know why you are qualifying prospects? Are you looking for bequest expectancies to add to your Legacy Society, or are you looking for probable gift annuity prospects? Perhaps the task is to build your legacy recognition society by uncovering only the names of committed legacies, or are you looking for commitments or expression of interest to be followed up in some manner?

Knowing what you are looking for will drive your selection criteria as you pull names from your donor base.

Perhaps you have a big donor list where a survey will work to determine which are good legacy prospects Talking to donors about their wishes, needs, age and stories about their lives gives dramatic insight into which ones would benefit from a legacy commitment, but it may not always be possible.

Overall you are looking for expressions of loyalty and financial commitment combined with some knowledge of the donors’ sex and age bracket.

Divide you list into 1. Prospects who are mostly long-term financial supporters. 2. Suspects who qualify by age, gender or are referred by someone to approach. 3.Qualified lead who are mostly individuals who have raised their hand and said I am interested by responding by mail or email to promotional activities.

Someone who has raised their hand and said they are interested are called an Active Leads and should be contact right away. Individuals who are interested but it is just not right now for a proposal are called Deferred Leads. Prospect may fall into a third group called Tentative leads who are prospects who are interested but now is not the time for a further discussion.

There is no surefire way to know which approach will work for your charity. Try a combination of approaches to see if you can find the shortest way to identify your best prospects.


Technical Tips.....WELL INTO HIS/HER EIGHTIES - In the year 2000, an average 65-year old American male had a life expectancy of 19.6 years. Today, an average 65-year old American male has a life expectancy of 21.6 years, an increase of 2.0 years or 24 months. In the year 2000, an average 65-year old American female had a life expectancy of 21.4 years. Today, an average 65-year old American female has a life expectancy of 23.8 years, an increase of 2.4 years or 29 months (source: Society of Actuaries).

COMMENT: The longer life span doesn't bode will for the corporate pension plans or charitable gift annuities. The recent ACGA gift annuity study indicated 57% of all annuity agreements were established by females with an average age of 79 years. To eliminate potential longevity and investment risk programs should investigate the benefits of gift annuity reinsurance for each new agreement. Connell and Associates through its national board of advisors offers gift annuity reinsurance in most states. Let us quote the options for your next gift annuity agreement.


Quickie Quiz Answer.....FOR THE YEAR – The S&P 500 was positive on a total return basis during 8 of 12 months in calendar year 2014, gaining +13.7% for the year. The stock index achieved 53 all-time record closing highs in 2014 in addition to the 45 record closes it set in 2013. The S&P 500 consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index with each stock's weight in the index proportionate to its market value (source: BTN Research). ___________________________________________________________________________________________

Gift Annuity Rate Update and Laminated Gift Annuity Rate Charts..... At its semi-annual meeting on November 3, 2014, the Board of Directors of the American Council on Gift Annuities (ACGA) voted to reaffirm the existing maximum rate schedule for charitable gift annuities which was originally published on January 1, 2012.

As part of its ongoing review process, the Rates Committee of the ACGA monitors on a weekly basis certain interest rates that underlie the investment return assumptions used to create the rate schedules. The committee also evaluate annuitant mortality and other assumptions as appropriate.

The ACGA uses the results of a study of gift annuitant mortality study it commissioned in 2010 when calculating a schedule of suggested gift annuity rates. They do this because historically charitable gift annuitants have been shown to have longer life expectancies than both the general public and the population of individuals who purchase commercial annuities.

The ACGA will meet again in April, 2015.

Rate Chart....... If you would like a laminated rate chart for the most recent rates simply request one using the following E-mail request and put Laminated Chart in the subject line.


Prospect Information....New retirees: derive 43% of their income from Social Security whereas 19% still comes from traditional pensions. More than 60% don't expect to use their retirement plan savings until they are required to at age 70 1/2.

Comment: If a donor has what they believe to be an over funded retirement plan, IRA, Keogh, 403b or 401k, ask them to take their next donation from these assets to make a gift. For those who itemize, if it is an outright gift it is 100% deductible whereas if it is for a life income gift it is only about 30% deductible.


IRS Tax Info.....The standard mileage rates for 2015 are: Business $57.6, Medical/Moving $23.0, Charitable $14.0.


News and Notes....MAJORITY PAY NOTHING - 66% of the 67.6 million tax returns filed in 2012 that reported less than $30,000 of adjusted gross income did not pay any federal income tax (source: Internal Revenue Service).

BACK IN TIME - Home prices across the United States (based upon new and existing home sales) at the end of September 2014 are at the same level that they first reached at the end September 2005 or 9 years ago (source: Office of Federal Housing Enterprise Oversight).

ESTATE AND GIFT TAXES - The federal estate tax exemption will increase from $5.34 million (per decedent) in 2014 to $5.43 million as of 1/01/15. For 2015, individuals can make an unlimited number of tax-free gifts of up to $14,000 per recipient, unchanged from 2014’s level (source: Internal Revenue Service).

TOO FEW CHILDREN - The birthrate in the United States has been cut in half since 1957. 1,000 American women (between the ages of 15-44) had 122.7 births per year in 1957. That rate was just 62.5 births per 1,000 women in 2013 (source: Census Bureau).

FOR THE YEAR – The S&P 500 was positive on a total return basis during 8 of 12 months in calendar year 2014, gaining +13.7% for the year. The stock index achieved 53 all-time record closing highs in 2014 in addition to the 45 record closes it set in 2013. The S&P 500 consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index with each stock's weight in the index proportionate to its market value (source: BTN Research).

- Since dropping to a bear market low on 3/09/09 (i.e., approximately 70 months ago), the S&P 500 stock index gained +244.2% (total return) through the close of trading on 12/31/14 or an average gain of +1.8% per month (source: BTN Research).

ANYONE WITH A BIRTHDAY TODAY? - If 50 people are in a room, there is a 97% chance that 2 people in the room have the same birthday (source: BTN Research).


Kudos Corner - Celebrating gifts of all types and sizes

In this section I periodically highlight some recent gift expectancies and gift program elements I think will be helpful and informative, not all gifts are included.

Chapters Health System, John Wilbur, Senior Major Gift Officer and Sharon Jones, VP for Development secured the following gift annuity agreements $30,000 for an 88 year old donor, and $10,000 for each of the following donors ages 81, 83 and 81. All donors were repeat gift annuitants.

Santa Fe Opera, Brian Dailey, Director of Planned Giving, received several estate gifts and notifications including $100,000 from their former business manager. The Opera also received 4 IRA rollover gifts at the end of 2015.

Gwinnett Medical Center Foundation, Jason Chandler, President secured another deferred gift annuity from a couple aged 78 and 67 and received an IRA rollover transfer of $5,000.

Gilda's Club Grand Rapids, MI, Daryl Vogel, VP Development secured a $10,0000 single life gift annuity from donor aged 82 and received a $5,000 bequest payment

Munson Healthcare Regional Foundation & Paul Oliver Foundation, Beth Karczewski, Sr. Leadership Giving Specialist and Desiree Worthington, President, Traverse City, MI received confirmation of the Foundation being named beneficiary of a $100,000 commercial annuity agreement.

The Foundation of Monongalia General Hospital, Inc, Bill Hennessey, Executive Director has been promoting the major tax issues involved with Corporate Inversions. This is where a US corporation changes its tax status to a foreign country in order to reduce it 35% corporate tax liability on earnings. Holders of company shares are liable for the capital gains on their holding even if they continue to hold the shares of the new company.

Initial efforts have resulted in a CRT funded by a 88 year old donor with $70,000 in appreciated Mylan stock with a cost basis of $3,300.

In addition a Foundation donor with a multi year pledge paid the pledge early with 5,000 shares ($280,000), avoiding all taxes on the gifted shares. Additionally a new donation by a Foundation board member gifted 3,000 shares, with 1,000 shares to fund a scholarship and 2,000 shares for a cancer care challenge donation. The latter gift will generate $110,000 in matching fund for cancer care.

Donors take time. In 2011 I visited a charity in the western U.S. about a strategy to acquire some additional land for medical purposes. Visiting with the donor and the CEO it became apparent there were major timing issue effecting the possible donation. RESULT: I am pleased to report as the result of several factors falling into place the charity has acquired a major piece of land using a bargain sale arrangement. The fair market value exceeded $5,500,000 million and the charity purchased it for $2,000,000 leaving a major charitable gift deduction exceeding $3,500,000 to be split among multiple owners. Patience is a virtue in fund raising and a lesson to all.


James E. Connell and Associates is a national consulting service devoted to increasing resources for charities using the power of charitable estate and gift planning techniques.

Pinehurst office: PO Box 3335, Pinehurst, NC 28374
Phone: 910-295-6800

Northeast office: 20982 Bayside Avenue, Rock Hall, MD 21661

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