New Blog, New Giving Opportunities for 2020
Crescendo has launched a new blog! The Crescendo Blog will feature a number of writers on topics that include planned gifts and major gifts marketing, technology, donor motivation, stewardship and giving trends. Crescendo would like to hear from you! If you have thoughts or comments, please share them on this blog or your social media.
SECURE Act Creates New Opportunities
While much has already been written on the SECURE Act, the new opportunities for capturing gifts in 2020 and beyond are worth emphasizing. One of the biggest changes coming from the SECURE Act is the increase in the IRA required minimum distribution age and contribution age to 72. What does this mean for giving? It creates the potential for larger IRA balances and bigger future gifts to charity.
IRA Rollover Gifts Abounding
For donors who wish to make a gift today to support your current work, capital project or campaign, IRA charitable rollover gifts just became more attractive. Many IRA owners will not want to take extra IRA income and pay more in taxes each year. Send a simple letter to your donors age 70 ½ and older highlighting the benefits of IRA rollover giving. Don’t be surprised if you see more donors making gifts at the top level permitted --$100,000 annually. Loyal donors may make gifts after 70 ½, even though the RMD Age is 72. Also, there may be limitations if your donors are making late IRA contributions. Check out Crescendo’s recent GiftLaw article on Post-Age 70 ½ IRA Contributions and QCD.
Expect Bigger IRA Bequests
Because IRA balances will be larger, expect to see bigger IRA bequests to charity. Remember that IRAs and other retirement plan assets are IRD (income in respect of the decedent) assets and make better gifts to charity than a loved one (other than a surviving spouse who benefits from the marital deduction). This is because IRAs are an untaxed ordinary income asset. When given to a non-spouse beneficiary (like a child), this inheritance will be taxed to the child at his or her rate. If the donor has a taxable estate (less than 1% of the population), the IRA could also be depleted by estate tax. When given to a charitable organization like yours, the full value of the IRA can go to support your cause. Encourage your supporters to give their children low-tax assets that step-up in basis (such as securities that can be received and potentially sold with little or no tax due) and leave their IRA to your charity.
Testamentary Charitable Remainder Unitrusts will Happen!
There is enormous potential for testamentary charitable remainder unitrusts (TCRUTs) because of the thousands of conduit trusts that will need to be replaced now that the SECURE Act is law. What does this mean? The SECURE Act requires the distribution of beneficiary-inherited IRAs within 10-years of an IRA owner’s death, effectively eliminating most benefits of stretch-IRAs and conduit trusts. These plans were created with the intent to stretch-out IRA payments for the lifetimes of beneficiaries. Under the SECURE Act rules, your supporters will need to make plan changes. Otherwise, their beneficiaries will receive larger amounts paid from IRAs over a shorter time period (10 years) and owe higher taxes on their inheritance.
You should be talking with your donors about TCRUTs now as they visit with their advisors to update their plans in light of the SECURE Act. When a TCRUT is funded with an IRA, it can make payments to children for life or up to 20 years. It is true that TCRUTs require some planning. However, Crescendo has simplified this process for you. Check out Crescendo’s article on the mechanics of doing a TCRUT, SECURE Act Promotes IRAs to Testamentary Unitrust Plans. While the TCRUT gift to your organization is a future gift, if you can create a pipeline of these gifts maturing at different points in time (similar to a bequest pipeline), this kind of giving will create longevity for your organization to continue its work into the future.
Will There be IRA Testamentary Charitable Gift Annuities?
Yes. However, keep in mind that the average age for a charitable gift annuity is age 79. In order for a testamentary charitable gift annuity funded with an IRA to make payments to a child for life, the gift annuity must meet the 10% minimum deduction test requirement under IRS rules. This means that for the gift to qualify, the deduction must equal at least 10% of the initial funding amount ($10,000 for a $100,000 gift). If the parent passes early or the children are young, a testamentary gift annuity may not qualify. For this reason, you will want to discuss all options with your donors. In many cases, a testamentary charitable remainder unitrust stretching out payments for the maximum allowable 20-year term may be the best option for children who will potentially receive their inheritance at younger ages.
What do you think? Crescendo has just released a new SECURE Act marketing package focused on the TCRUT with additional marketing pieces for future release. If you are thinking about your marketing in light of the SECURE Act, contact Crescendo at 1-800-858-9154 and ask to speak with a marketing specialist.
By Kristen Jaarda, JD, LLM, CAP®
Executive Vice President, Crescendo Interactive, Inc.
Crescendo Interactive says: February 13, 2020 7:39 PM PT
Thank you for the comment, Mark! We hope you enjoy the new blog.
February 13, 2020 9:03 AM PT
Nice to see the blog back