Improve Your Planned Giving Program (Part 2)
Observations from the field

Recognize the Impact of State Taxes
Make your gift projections as accurate as possible

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“[E]xplaining Planned Giving means more than explaining the details of trust and tax law (thank goodness).”

Part One of this article (read it here) generated a fair amount of e-mail, all favorable and recognizing how the pitfalls I identified can hold back a Planned Giving program. In this second of two parts, I will share three observations that keep Planned Giving programs from achieving their potential or prevent new programs from emerging. I advise you to avoid these traps.

No one with Planned Giving responsibility
A successful program needs an advocate. Someone has to speak up for Planned Giving during budget, event and mail calendar planning; when board agendas are set and when major gift solicitations are devised.

Without an advocate, your Planned Giving program is administratively marginalized, never receiving the resources it needs and the time and attention that must be devoted to it for it to bring in gifts.

Board expectations not managed
From the outset of a program you should set your board’s expectations around planned gifts so that its members understand what they can reasonably expect your Planned Giving program to accomplish. This isn’t so much around goals as a general understanding of what Planned Giving can do for your institution.

I recommend illustrations that show how planned gifts can increase net assets, as through any of the irrevocable gift vehicles, which your finance committee will find appealing, as well as conversations to advise your board not to expect planned gifts to fund next year’s salary budget or even the five-year capital plan.

These are balanced presentations so that in year three of your program trustees are not grumbling that cash has not been realized despite current dollars having been expended.

You want your trustees to recognize the value of your growing number of bequest expectancies (wills your organization is in where the donor is still living), the importance of an annual recognition event for planned gift donors and why seminars have long term cultivation benefits.

Your board needs to have a long term view of fundraising to appreciate the value of Planned Giving. The person responsible for the program must set your board’s expectations and understanding from the outset. Doing so will avoid misunderstandings and potential conflict in the future.

Relying on donors’ advisors
Have you ever heard this: “our major donors are very sophisticated and their financial and legal advisors will explain Planned Giving to them, we don’t need to do it?”

It inherently recognizes the value of Planned Giving for the organization, but it puts marketing responsibility and message control in the hands of third parties. Plus, it assumes that only major donors are good planned gift prospects. Let’s break this down.

Even the most skilled CPAs and estate planning attorneys who understand all the nuances of their practice would not be able to compare and contrast all the vehicles of Planned Giving. They don’t work with all of them on a regular basis. The ins-and-outs of Charitable Remainder Trusts may be well within their ken, but most likely not the deductions earned by giving different life insurance policies or how the CRT differs in taxation from the Charitable Gift Annuity.

And all practitioners are not among the “most skilled.”

Recognize too, explaining Planned Giving means more than explaining the details of trust and tax law (thank goodness). It means relating the vehicles to what they can achieve for your organization. For instance, explaining to the donor that her insurance premiums are better paid through your office so they can count as gifts to your Annual Fund, or explaining what programs can be funded with a CRT versus a Charitable Lead Trust.

Your donors’ accountants and attorneys are not qualified to relate their technical knowledge to your charitable mission. Only you can do that.

Finally, the vast majority of planned gifts come from people of modest means, who are not major donors and who are probably not serviced by the most skilled advisors. In 2000, almost 60% of all bequest expectancies came from donors whose income was under $75,000. That same year, over 80% of all Charitable Remainder Trusts were created by donors whose income was under $150,000. Most planned gifts do not come from the very wealthy.

If you recognize the value of Planned Giving for your organization, I urge you not to leave its marketing to your donors’ advisors.

(For an article that explains why professional advisors do not make the best Planned Giving advisory committee members click here.)

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“Your donors, and their advisors, will recognize your thoroughness and have greater respect for your work.”

State income tax rates approach one-third of the top federal rate in some states. When you prepare projections of life income gifts for your donors, you should disclose the impact of state taxes so your donors get an accurate picture of their gift plan.

The gift planning software packages I’m familiar with ask for the donor’s and beneficiary’s marginal income tax rate, or something similar, depending upon the type of gift you are modeling. I think the temptation is to enter “35%” because that is the top marginal federal income tax rate. But in New York, for instance, the state rate adds an additional 7.7%. In California, the top marginal rate is 9.4%. Arizona and New Mexico are 5.04 and 5.7 percent, respectively. These are 2005 tax rates.

For greatest accuracy, determine the threshold at which the highest marginal rate applies. California’s highest rate kicks in at just $56,456 but in New York the top rate does not apply until income exceeds $500,000. Arizona is $300,000 and New Mexico is $96,000.

I have provided links to these four states’ revenue departments below because these are popular retirement states that have a state income tax. Florida does not collect income tax.

Hopefully you attach to your gift models a disclaimer to the effect that you are not providing tax counsel to the donor and that they should have any plan reviewed by their own tax or legal advisor.

My further recommendation is that you always obtain information directly from the state website (or publications) and do not rely on the many third party sites that collect tax information for all the states and present it in one place. I routinely find discrepancies between, for instance, salary comparison and retirement planning websites and the state taxation authorities. Like a lot of subject areas, there is a fair amount of wrong tax information on the internet.

Please recognize the importance of state taxes as you prepare gift projections. Your donors, and their advisors, will recognize your thoroughness and have greater respect for your work.

Here are links for the states I used as examples:

AZ: www.revenue.state.az.us
CA: www.ftb.ca.gov (for the Franchise Tax Board)
NM: www.state.nm.us/tax
NY: www.tax.state.ny.us/pit/income_tax_2005/taxrates.htm

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I was quoted extensively by the Long Island Business News on effective strategies for Planned Giving and I had a column in Metro NY’s Common Cents feature.

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• Jewish Organizational Exposition and Fundraising Conference
  The new date for this event at the Meadowlands Exposition Center is Monday, May 8 and I will be speaking at 10 o’clock. Event information is here.


• Visit our website
  At the Martignetti Planned Giving Advisors website you will find a full list of clients, consultants’ bios, archived articles from The Martignetti Report and recent company news

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I am always interested in your opinion of The Martignetti Report. You can send me a message from here with your comments. Or, you can always reach me through the company website

Best regards,

Tony Martignetti, Esq.
Managing Director
Martignetti Planned Giving Advisors

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