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February 2016 Newsletter

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Planned Giving Mentor

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


Quotes for today.....If we all did the things we are capable of doing, we would literally astound ourselves.-- Thomas Edison

The proper aim of giving is to put the recipients in a state where they no longer need our gifts.--C. S. Lewis

Quickie quiz:...... Answers below. If you make $200,000 or more a year what is you chance of having an IRS audit your tax return? What about charitable deduction audits?

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

Join me..... at the 2016 Crescendo Practical Planned Gift conference on September 26th Chicago and hear a presentation on "Building a Professional Advisory Committee"

Past issues of the Newsletter are available in the Newsletter Archives

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Annuities: How to find the right one for the title of an Investopedia article by Chris Seabury. If you ever wondered about what your probable donors were talking about when they said they had annuities, this article is one you need to keep in your reference library.

I find prospects are often confused about what they own unless you are looking at the original documents and reports. This article can serve as the start of your quiz to determine if your charitable gift proposal is on the right track.


Real Estate Whiteboard presentation.....Click the picture at the left to see an animation video written and created by Dennis Haber and Chase Magnuson on real estate gifts.

The video was recently published to disabuse the planned giving community about the misconceptions surrounding real estate gifting. Real estate is the largest asset class in the country and is largely ignored. Accordingly non-profits are leaving a lot of money on the table and are doing so at their peril. These gifts are so flexible they can be crafted to meet the needs of donors. They also provide a win-win strategy for the non-profit, for the community where the property is located, and for the ultimate purchaser as well. Proven techniques will protect the nonprofit from potential liability. It is certainly worthwhile to revisit the area of real estate gifting.

As Mark Twain said: "It ain't what you don't know that gets you into trouble, it's what you know for sure that just ain't so."

REAL ESTATE - Home prices have appreciated +41.7% over the last 5 years (12/31/10 to 12/31/15) in the Pacific states, double the +22.9% growth experienced nationwide (source: Federal Housing Finance Agency).

Endowments are a booming fund raising growth area.....The Chronicle of Philanthropy is offering free insights into their 2015 annual study of endowments. To download the study click HERE. You may find my April 2005 artcile for Planned Giving Mentor on Endowment Management helpful, click HERE for a copy. _____________________________________________________________________________________________________________

Gift Annuity Rate Update and Laminated Gift Annuity Rate Charts..... At its semiannual meeting on April 5, 2016, the Board of Directors of the American Council on Gift Annuities (ACGA) reaffirmed the existing schedule of suggested maximum rates 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 evaluates annuitant mortality and other assumptions as appropriate.

The ACGA uses the mortality assumptions from the 2012 IAR Mortality Table recently promulgated by the National Association of Insurance Commissioners when calculating a schedule of suggested gift annuity rates. The ACGA will meet again in April, 2016.

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.

Download a PDF chart of single life $10,000 cash gift and two-life $100,000 security gift for ages 60,65,70,75,80 here.


Top 6 complaints about financial advisors! Does it also apply to fundraisers?..... In any week I must read 30+ financial newsletter. One I just finished struck a cord. Jeffrey Rose authored an article titled: Top 6 Complaints about Financial Advisors. So I wondered how do his thoughts apply to planned gift fundraisers or fundraisers in general?

Like any industry there are great fundraiser's and some really horrible ones. Here are the top complaints and my comments about how they might apply to planned giving fundraisers.

1. Too little explanation about products.

PG has may products and/or strategies to complete a gift. Do you view it as a sale where you gloss over the finer points of the product/strategy to pick the prospect's interest? In PG there is a delicate balance between providing too much information to seniors and too little background on the implications of donor's gifts. Knowing that balance only comes with experience and the ability to read individuals and answer questions honestly and simply.

2. He's selling just to earn a commission.

At first this does not seem to apply to PG professionals since working on commission is unethical. However, if you have forced a gift option on an individual so that you might qualify for a merit increase or salary increase that may be a problem that needs to be addressed and corrected: if it is ever discovered.

Perhaps another way to look at it is you did not force a gift option on a prospect but did not explain completely all the implications of the gift option as mentioned above. That would also be a major issue to be corrected.

3. She isn't responding in a timely manner.

I make it a point to respond to inquires within 1 to 3 days of the initial inquiry. Sometime responding takes longer when you try to determine all the facts and circumstances of a gift situation. The old adage "strike while the iron is hot" should prevail for all your proposals.

4. Not putting the clients needs first.

PG professionals should always put the donor needs first and institutional needs second. It is never proper to force a gift situation on a prospect. Proper planning takes time and it is at the donor's schedule not the gift planner or the charity schedule.

5. He or she likes to churn.

Churning means excessive trading by a broker in a client's account largely to generate commissions. Churning is an illegal and unethical practice that violates SEC rules and securities laws. It should not apply to fund raisers.

That said I have had situations where I have reviewed donor's accounts and it resulted in reporting the advisors to higher authorities and resulted in a lengthly settlement where the donor was compensated for their losses.

6. Promising unreasonable returns.

A guaranteed 12% annual return on investments is an absolutely unreasonable standard today, but over the years I have seen upwards of 15%+ promised to individuals.

Setting expectations on the results of a portfolio investment is difficult at best and varies by gift option. You have often heard "Past results are no predictor of future returns."

If a gift annuity is suggested it may be wise to inform the prospect if they are only interested in the highest return then they should consider a commercial annuity.

If a charitable remainder Unitrust is suggested it may be wise to use the average return on the S&P 500 stock index as the assumption for future returns.


IRS Mileage rates.....The 2016 rates have been published and will be 54 cents per mile for business, 19 cents per mile for moving or medical and 14 cents per mile for charitable purpose travel. These are down significantly from the 2015 rates which were were 57.5 cents for business miles, 23 cents for medical or moving purposes, and 14 cents for charitable purpose miles.


Quiz answer.....IRS statistics show that people with incomes of $200,000 or higher had an audit rate of 2.71%, or one out of every 37 returns. Report $1 million or more of income? There's a one-in-13 chance your return will be audited.

The audit rate drops significantly for filers reporting less than $200,000: Only 0.78% (one out of 128) of such returns were audited, and the vast majority of these exams were conducted by mail.

We all know that charitable contributions are a great write-off and help you feel all warm and fuzzy inside. If your charitable deductions are disproportionately large compared with your income, it raises a red flag.

That's because the IRS knows what the average charitable donation is for folks at your income level. Also, if you don't get an appraisal for donations of valuable property, or if you fail to file Form 8283 for non cash donations over $500, you become an even bigger audit target. If you've donated a conservation or facade easement to a charity, chances are good that you'll hear from the IRS.

Be sure to keep all your supporting documents, including receipts for cash and property contributions made during the year.


Do you know these life insurance terms?.....Insurance has a proper place in any financial plan and is gaining an increasing presence in planned gift strategies. It is essential you know what the prospect is offering or what the insurance agent is saying with their terminology.

Here are the terms which will be defined in the following link: Premium, Face Amount, Policy Loar, Cash Value, Accelerated Death Benefit Riders, Child Term Riders, Lapse Rate, Non-Forfeiture, Policy Proceeds, and Settlement Options.


News and Notes....QUEEN OF MEAN - Real estate and hotel tycoon Leona Helmsley left $12 million to her Maltese dog (named “Trouble”) when she died in August 2007. Helmsley cut 2 of her grandsons from her will, leaving them nothing. “Trouble” died in December 2010 (source: New York Times).

A FEW FOLKS - The 20 wealthiest Americans (worth a combined $732 billion) own more wealth than the bottom 50% of the US population. There are 323 million Americans today (source: Institute for Policy Studies).

TAXES - The top 10% of taxpayers in 2013 earned at least $127,695 in adjusted gross income (AGI), reported 45.87% of all AGI nationwide and paid 69.80% of all federal income tax (source: Internal Revenue Service).

SUPERSIZE - The average size of a new single family home built in the USA has increased by 935 square feet in the last 30 years (i.e., from 1985 to 2015) to 2,720 square feet, roughly equivalent to adding a 30’ x 31’ room to a home (source: National Association of Home Builders).

BUT WOULD YOU UNDERSTAND IT? - The federal tax code and accompanying federal tax regulations contain 10 million words, a publication that would take an individual reading 300 words a minute (the average adult reading speed) more than 23 days of non-stop reading to digest (source: Tax Foundation).

SHORT OF CASH - Only 1 in 7 (14%) American workers have accumulated savings and investments (both pre-tax and post-tax combined) of at least $250,000, not counting the value of the worker’s primary residence or the present value of any pension plan he/she has earned (source: Employee Benefit Retirement Institute).

EVERY DAY - An estimated 9,300 Americans will turn 65 years old each day during 2016. This group represents the 6th year of 19 years of “Baby Boomers” turning 65. An estimated 11,400 Americans will turn 65 years old each day in the year 2029 (source: Government Accountability Office).

BEST LAID PLANS - 60% of current retirees retired sooner than they had expected, 7% retired later than expected and 33% retired at the age that they had anticipated (source: Transamerica).

TOO MUCH VODKA - The life expectancy of American males at birth is 76.4 years. The life expectancy of Russian males at birth is 64.0 years (source: Center for Disease Control, American Enterprise Institute). __________________________________________________________________________________________________________________

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.

Kudos to Jason Chandler, President, Gwinnett Medical Center Foundation, secured a $207,675 stock funded single life gift annuity from the surviving spouse (age 94, payout 8%) of a previous two-life anuity agreement. Ultimate proceeds will establish two endowments for the medical center.

Kudos to the Chapters Health System Sharon Jones FAHP, VP Development, secured a $25,000 single life gift annuity from a 68 year old female donor.

Kudos to John Wilbur, Senior Major Gift Officer, also of Chapters Health System, secured a $10,000 single life gift annuity from a 91 old male donor. This was the donor's first single life agreement as his spouse recently passed away but his 12th-$10,000 annuity. Total annuities equal $1,200,000.

Kudos to Silvana Cowden, Assistant to the President, Good Counsel Homes, secured a $50,000 single life gift annuity from a 77 year old female donor, her second $50,000 annuity, total annuities equal $100,000. ______________________________________________________________________

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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