Planned Gifts as Part of your Client’s
Financial, Estate, and Giving Plans
As an attorney, your practice is related to the law, but when you
work with a client, you are likely to get involved in aspects of their
financial, estate, and giving plans. While having a client simply
“write a check” to their favorite charity is a viable way to give, there
are many other techniques that can better serve your clients and
allow them to take full advantage of their particular financial and
personal situation. This article will give you a basic outline of the
characteristics of several planned gifts, client circumstances in which
they might be appropriate, and how you can get more information,
including gift illustrations, customized to your client situation.
When discussing planned gifts, one should remember 85 percent
of planned gifts are simple bequests written into a will. When
helping a client with a simple bequest, it will serve you, your client,
and the charitable beneficiary well if you contact the charity to obtain
accurate name, tax ID# and, if the client plans to place guidelines or
restrictions on the gift, whether those restrictions will “work” for the
charitable beneficiary. The North Dakota Community Foundation
and many other charities will provide draft language that provides
the necessary information and can help craft a bequest provision
that accomplishes your client’s charitable goals and which is able
to be effectively and efficiently administered for the benefit of the
charitable beneficiary.
Probably, the next most popular planned gift is a Charitable Gift
Annuity (CGA). The CGA is a contract between your client and the
charity in which the donor transfers something of value to the charity
and is paid a fixed annuity payment for their lifetime. Once the
CGA “matures,” the remainder (if any) is for the use of the charitable
organization to accomplish its mission. If you have a client who is
sitting with dollars in a bank account earning one percent or two
percent, and who doesn’t have need of the principal for immediate
or emergency needs, a CGA can provide an immediate tax benefit
to them, a substantial increase in their income, and the ability to
support the charity with a nice gift.
When advising a client regarding a CGA, be sure the charity has
substantial assets, as those assets are all that is backing up the annuity
payments promised to your client. Nearly all legitimate charitable
organizations use the rate chart published by the National Council
on Gift Annuities, so donors establish CGAs at charities which
they are interested in supporting, not just “shop for rates” as they
might with certificates of deposit. The donor receives a charitable
tax deduction for the calculated remainder value to charity (roughly
50 percent of the amount placed in the annuity) and, if the donor
is a North Dakota taxpayer, they will also receive the 40 percent
North Dakota income tax credit for establishing a deferred gift to a
qualified North Dakota charity.
Sample Annual Gift Annuity Payout
For a $10,000 Gift*
Age Annual Income Tax
Annuity Deduction** 60 $470 $1,486 $170 $300 $1,093
70 $560 $1,721 $167 $393 $1,093
65
75
80
$510
$620
$730
$1,595
$1,873
$1,973
Income Tax-Free Maximum ND
Taxed
Income
Income Tax
Credit
$169
$157
$179
$341
$453
$551
$1,093
$1,093
$1,093
*rates subject to change, for illustration only
** income tax deduction in year of gift only
Let’s look at the less common, but still useful
charitable trust, both remainder and lead. With
a charitable remainder trust (CRT), of which there
are two main types, annuity trust and unitrusts, a
client/donor transfers something of value to the
trust. This could be cash, securities, real estate, farm
commodities (special rules apply), etc. When the
transfer is made, the donor will receive a charitable
income tax deduction for the present value of the
remainder which will eventually pass to charity. The
donor needs to designate a charitable remainder,
which in some forms of trust can be changed at a
later date by the donor/trustee. A trustee is chosen -
this can be a corporate trustee, the donor can act as
trustee, or an independent third party. This is a big
responsibility, as the trustee must invest the assets in
the trust, make the annual payments to the income
Kevin J. Dvorak, CFP ® , is the president and CEO of the North Dakota Community Foundation (NDCF).
Established in 1976, NDCF manages over $83 million in over 700 charitable funds, including local community
foundations, scholarships for North Dakota students, organizational endowment funds, and donor-advised funds.
If you have any questions about the information contained in this article or would like more information about
charitable giving in North Dakota, Dvorak can be reached at 701-222-8349 or [email protected].
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THE GAVEL