Planned
Giving
Overview
and
Magnitude
Russell James, J.D., Ph.D., CFP®
Director of Graduate Studies in Charitable Planning
Texas Tech University
Planned giving: Any charitable giving other than
a simple, immediate gift of money to charity.
Often involves tax and legal planning.
• Gifts where the transfer to charity
is deferred.
• Gifts where the donor receives
income or other financial
benefits.
• Gifts of appreciated assets.
The U.S. planned giving industry
The Partnership for Philanthropic Planning
(National Committee on Planned Giving) is the
largest professional association.
12,000 members including planned giving
fundraisers, lawyers, accountants, and
financial planners.
The Canadian planned giving industry
The Canadian Association of Gift Planners is the
largest Canadian professional association.
1,300 members including planned giving
fundraisers, lawyers, accountants, and
financial planners.
Example planned giving activity in the U.S.
77,457 private foundations holding $518 billion
123,659 charitable trusts holding $115 billion
122,500 donor advised funds holding $28 billion
120,000 charitable bequests annually $23 billion
Private foundation and charitable trust data from “Split interest trusts, filing year 2007”, Lisa Schreiber, IRS Statistics of
Income; Donor advised fund data from National Philanthropic Trust; Charitable bequest data from Giving USA 2009.
Planned giving: The characters
The employee
The company
The charity
The government
Employees pay income taxes
Wages
$ $ $ $ $ $
$ $ $ $ $ $
$ $ $ $ $ $
Taxes
$ $ $ $ $ $
Gifts to charity receive a tax deduction
Wages Gift
$ $ $ $ $ $
$ $ $ $ $ $ $ $ $
$ $ $ $ $ $
Taxes
$ $ $ $ $ $
Tax Deduction
The charity
Wages Gift
$ $ $ $ $ $
$ $ $ $ $ $ $ $ $
$ $ $ $ $ $
Taxes Who
$ $ $ $ $ $ can be a
charity?
Tax Deduction
The charity
Public charity: 501(c)3 Gift
• Operated for charitable
$ $ $
purpose
• No private benefit
• Start with IRS Form Who
1023 and $750 fee* can be a
• Continue with IRS Form charity?
990 annually (no fee)*
*not required for churches
Simple creation = More charities
501(c)3 public charities in the U.S. in 2008
974,337
(Excludes all churches choosing not to file tax forms)
974,337 public charities in the U.S.
More Charities = More Donation Requests and
More Donor Choice
More Choice & More Requests = More Giving
More Choice &
More Requests
More Donations
Companies pay taxes and distribute
some earnings
Reinvested earnings
Earnings to
$ shareholders
Earnings
Taxes
Charities pay no taxes and distribute
no earnings
Reinvested earnings
Earnings to
$ shareholders
Earnings
Taxes
If a charity sells appreciated property,
it pays no taxes on the sale
Reinvested earnings
Earnings to
$ shareholders
Earnings
Taxes
Normal Capital Gains
Buys for $1,000
Sells for $11,000
Capital Gain
$7,070 Profit
of $10,000
$2,930 Tax
Note: All taxation examples are given based upon a
California resident paying the highest marginal tax rates.
Other states and incomes will generate less tax.
Giving Property Avoids Capital Gains Tax
Buys for Gives when worth
$1,000 $11,000
• Charity sells stock
Donor receives • Charity pays no
income tax
deduction of capital gains tax
$11,000
reducing taxes
paid by as much
as $5,516.
Large tax benefit from giving
appreciated property
1. Donor gives property
2. Charity sells property
3. Charity pays no capital gains tax
4. Donor pays no capital gains tax
5. Donor receives tax deduction for full value of
property
Some planned giving devices combine
this tax benefit with other benefits
• Charitable Remainder Trust
• Charitable Leads Trust
• Pooled Income Funds
During Donor Life End of Life
or Set Years or Set Years
Charitable
Remainder Trust
Gift
Payments from
income or assets
During Donor Life End of Life
Pooled Income Fund
Gifts
Payments from
shared pool of
income and assets
During Donor Life End of Life
or Set Years or Set Years
Charitable
Lead Trust Donor’s family
Gift
Payments from
income or assets
Charitable trust types by number
1%
5%
Charitable
Remainder Trusts
Charitable Leads
Trusts
Pooled Income
Funds
94%
Source: Split interest trusts, filing year 2007,
Lisa Schreiber, IRS Statistics of Income
Charitable trust types by asset value
1%
16%
Charitable
Remainder Trusts
Charitable Leads
Trusts
Pooled Income
Funds
83%
Source: Split interest trusts, filing year 2007,
Lisa Schreiber, IRS Statistics of Income
Charitable Remainder Trusts
(US in 2007)
Total number: 115,754
Total assets: $97,307,466,000
Annual charitable distributions: $1,547,930,000
Annual share of assets to charity: 1.59%
Source: Split interest trusts, filing year 2007,
Lisa Schreiber, IRS Statistics of Income
Pooled Income Funds
(US in 2007)
Total number: 1,528
Total assets: $1,607,555,000
Annual charitable distributions: $81,229,000
Annual share of assets to charity: 5.05%
Source: Split interest trusts, filing year 2007,
Lisa Schreiber, IRS Statistics of Income
Charitable Leads Trusts
(US in 2007)
Total number: 6,377
Total assets: $18,690,926,000
Annual charitable distributions: $956,154,000
Annual share of assets to charity: 5.12%
Source: Split interest trusts, filing year 2007,
Lisa Schreiber, IRS Statistics of Income
Now Later
(Immediate tax deduction) (Distribute 5% or more assets per year)
Non-operating
Private
Foundation
Gift
Tax Deduction
A private foundation may be managed by
donor and donor’s friends or family
Gift
Tax Deduction
Non-operating Private Foundations
(US in 2007)
Total number: 77,457
Total assets: $518,384,930,000
Annual charitable distributions: $41,267,947,000
Annual share of assets to charity: 7.96%
http://www.irs.gov/pub/irs-soi/07pf01ta.xls
Comparative share of total assets held
3% private
foundations
15% (non-operating)
charitable
remainder
trusts
charitable leads
82% trusts
Comparative share of charitable
distributions made
4% 2%
private
foundations
(non-operating)
charitable
remainder
trusts
charitable leads
trusts
94%
A private foundation is created by the
donor and follows his rules
Gift
Tax Deduction
A donor advised fund is held by a charity to
give to other charities with donor’s advice
Gift
Tax Deduction
Private Foundation
(non-operating) Donor advised fund
• Contributions receive • Contributions receive
immediate tax deduction immediate tax deduction
• Money held by foundation • Money held by a charity
• Money later given to other • Money later given to other
charities based on board charities on advice of
decision and donor’s donor
original rules
• Some expense to create • Very little expense to
and maintain create and maintain (.5%
annually)
• Average size $6,692,551 • Average size $200,000
New Era in DAFs
• 1991 first mutual fund DAF (Fidelity)
• Investment advisors earn commissions for
managing client’s assets in the DAF, thus have
financial incentive for charitable planning
• Minimum initial contribution $5,000
• Largest mutual fund DAFs
1. Fidelity
2. Schwab
3. Vanguard
Donor Advised Funds: Fidelity
Donor Accounts
55,000
50,000
45,000
40,000
35,000
30,000
25,000
2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Chronicle of Philanthropy
Donor Advised Funds: Schwab
Donor Accounts
12,000
11,000
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Chronicle of Philanthropy
Donor Advised Funds: Vanguard
Donor Accounts
7,000
6,500
6,000
5,500
5,000
4,500
4,000
3,500
3,000
2,500
2,000
2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Chronicle of Philanthropy
Donor Advised Funds: Fidelity
Assets
$5,000,000,000
$4,500,000,000
$4,000,000,000
$3,500,000,000
$3,000,000,000
$2,500,000,000
$2,000,000,000
2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Chronicle of Philanthropy
Donor Advised Funds: Schwab
Assets
$2,500,000,000
$2,000,000,000
$1,500,000,000
$1,000,000,000
$500,000,000
$0
2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Chronicle of Philanthropy
Donor Advised Funds: Vanguard
Assets
$2,000,000,000
$1,800,000,000
$1,600,000,000
$1,400,000,000
$1,200,000,000
$1,000,000,000
$800,000,000
$600,000,000
$400,000,000
$200,000,000
$0
2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Chronicle of Philanthropy
Donor Advised Funds Charitable
Distributions
Charitable distribution averages for mutual fund DAFs
(2001-2009)
• Fidelity: 25.3%
• Schwab: 19.0%
• Vanguard: 21.9%
Compare distribution averages (2007)
• Charitable Remainder Trusts 1.6%
• Charitable Leads Trusts 5.1%
• Private Foundations 8.0%
Donor Advised Funds
(US in 2007)
Total number: 122,500
a
Total assets: $27,700,000,000
b
Annual charitable distributions: $5,877,940,000
b
Annual share of assets to charity: 21.22%
a Source:National Philanthropic Trust; bWeighted estimate from three largest DAFs and 19.36% reported for community
foundation DAFs by Council on Foundations survey including $8.7 billion in assets
Comparative share of total assets held
4% 3%
private foundations
(non-operating)
15% charitable remainder
trusts
donor advised funds
charitable leads trusts
78%
Comparative share of charitable
distributions made
2%
private foundations
3% 12%
(non-operating)
charitable remainder
trusts
donor advised funds
charitable leads trusts
83%
Planned
Giving
Overview
and
Magnitude
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