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September Newsletter 2011

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Planned Giving Mentor

Of Counsel: Winton C. Smith, Jr., JD

Quotes for today: Let us not be satisfied with just giving money. Money is not enough, money can be got, but they need your hearts to love them. So, spread your love everywhere you go. Mother Teresa


Social Security the Basics on Video.....Do you get questions about Social Security during your prospect visit? If so you will enjoy a short video produced by Wells Fargo Advisors explaining the basic everyone should know.


Crescendo on your smartphone.....Crescendo announced the availability of CresMobil a planned giving application for smartphone available at your App Store for $2.99.


One Third of Retirees Receive Annuity Income.....According to a recent LIMRA study, 35 percent of all retirees receives income from an annuity in retirement.

The majority of current retirees relies primarily on pensions and social security to meet their daily expenses, with annuities making up only four percent of their income. But in the coming years, we expect to see fewer Americans retiring with pensions and more relying on their personal savings to fund their retirement. Annuities will provide a reliable way to convert savings into a guaranteed income stream.

LIMRA found the likelihood of taking income from an annuity increases with age. Only 19 percent of retirees under age 65 receive income from an annuity, but the number jumps to 49 percent when looking at retirees age 75-79.

Interestingly, household income has little effect on whether retirees receive income from an annuity. About a third of retired households with incomes under $75,000 rely on income from an annuity; the retired households with incomes of more than $75,000 increased about five percentage points.

Household assets are another story. Retirees with household assets under $100,000 are about half as likely to receive income from an annuity (22%) as those with assets of $250,000 to $499,000 (45%). About 4 in 10 retired households with assets above $500,000 receive income from an annuity.


How many millionaires would be effected by the new Obama proposed tax rate?.....In 2010 there were 144 million tax returns filed but only 450,000 had AIG of $1,000,000 or over. The new rate would effect only 0.3% of taxpayers (source: New York Times, 9/8/2011)


Back to Basics-Donor Appraisals.....Since 2006 there have been new standards for appraiser certification and reporting requirements for IRS Form 8283. Both the charity and the appraiser must sign the 8283 form.

Appraisals must be done by a qualified appraiser who has earned an appraisal designation from a recognized professional organization or has otherwise met minimum education and experience requirements. Most appraisers are members of the American Society of Appraisers (ASA), the Appraisers Association of America, or they are members of the Appraisal Institute (MAI).

For any gift of non-cash property over $5,000, other than cash or publicly-traded securities where a charitable deduction is claimed an appraisal is required.

The appraisal may be made not earlier than 60 days prior to the gift transfer and not later than the date the tax return is filed. The qualified appraisal requirement applies to individuals, partnerships and corporations. The appraisal must be signed and dated by the appraiser, and attached to the tax return. It may not involve a prohibited appraisal fee.

Who cannot be a “qualified appraiser?” The donor, the donee (charity), a party to the donor’s acquisition of the property, anyone employed by or related to any of the above, and someone used regularly by any of the above unless the majority of the work is performed for others.

The following information must be included in an appraisal: description of the property, including its physical condition; date or expected date of gift; terms of gift, including any limitations; identity and qualifications of appraiser; statement that the appraisal was prepared for income tax purposes; preparation date; appraised fair market value; valuation method; specific basis for valuation; and appraiser’s declaration.

There are penalties for gross misstatements of values. For donors the penalty is 20% of the underpayment for a substantial valuation misstatement and 40% for a gross misstatement. For appraisers aiding and abetting understatement of a donor’s tax liability the penalty is the greater of $1,000 or 10% of the amount of tax attributable to a substantial or gross valuation misstatement up to a maximum of 125% of the gross income received by the appraiser.

In addition, charities are required to give the donor a statement about any benefits received from the gift or a statement that no good and benefits were received and file IRS Form 8282 when the property is sold within three years.


News and Notes....FOLKS COMING AND GOING - There were 4.01 million births in the USA in 2010 or 10,978 per day. There were 2.45 million deaths in the USA in 2010 or 6,718 per day (source: National Center for Health Statistics).

WE PAY - The average US taxpayer pays an effective tax rate (i.e., federal income tax paid as a percentage of adjusted gross income earned) of 12.2% (source: Tax Foundation).

LUMP-SUM NEEDED - A present value (PV) amount of $195,929 is required to fund a $1,000 per month ($12,000 per year) payment for 20 years with a 3% annual increase for maintenance of purchasing power assuming a +5% annual rate of return is maintained into the future. The PV amount is $269,006 if the required payment period is 30 years The calculations ignore the impact of taxes and are for illustrative purposes only and are not intended to reflect any specific investment alternative (source: BTN Research). Comment: Therefore the power of a charitable gift annuity to generate a greater payment than could be generated from the existing rate of return on invested assets.

BRIDGE WOULD BE CHEAPER - A 60-year old individual who has just retired would need a present value lump-sum of $138,000 to pay for his/her 3 rounds a week golfing habit assuming a 22.4-year life expectancy, an average round of golf cost of $36, a 4% annual rate of inflation on the cost of golf, a static +3% rate of return on the savings and no lost golf balls (source: Center for Disease Control, BTN Research).

NO PENALTY - Individuals younger than age 59 ½ may be able to withdraw dollars from a pre-tax retirement plan (e.g., 401(k) plan or IRA) and not pay a 10% early withdrawal penalty if they qualify under any of 15 different exceptions that are available. Please consult a qualified tax advisor for details and recommendations (source: Internal Revenue Service).

WHO GOT WHAT - The top 5% of households accounted for 21.3% of all pre-tax income in the United States in 2010. The top 20% of households accounted for 50.2% of all pre-tax income in the United States last year (source: Census Bureau).

WHY GROWTH IS NEEDED - An individual living on a fixed income over the 20 years from the end of 1990 to the end of 2010 would have suffered a 39% loss of purchasing power over the 2 decades using the CPI as a gauge of his/her inflation (source: Department of Labor).


Seminar for Professional Advisors....If you work with professional advisors I am currently offering a new seminar called: Case Study Approach to Integrating Charitable Gift Annuities into Wealth Preservation, Wealth Enhancement and Portfolio Diversification. It includes 16 case studies and related material to encourage professional advisors to discuss charitable solutions to their clients.

This seminar will help professional advisors unlock the hidden potential in donor assets and increase your gift annuity program.

The cost is $2,500 plus travel expenses for the two hour presentation which has been previously approved for CEU credits in some states. To discuss available dates send me an email requesting further information.


Kudos Corner

This is a new section where I will be periodically highlighting some gift expectancies and gift program elements I think will be helpful and informative, not all gifts are included.




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, 15 Pinewild Drive, Pinehurst, NC 28374
Phone: 910-295-6800

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

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