On Philanthropy / Ted Sudol

Wealth Replacement Strategy

2010-03-22T23:11:00.000-07:00

Whether you'd consider yourself someone with a high net worth or a high earner who's not necessarily rich, there could come a time when you'd like to make a special philanthropic gift - but, you hesitate because you also may not want to tap assets you'd like to pass on eventually to your children or grandchildren....

Is there a solution?

You betcha!

With a 'wealth replacement strategy' you could make the philanthropic gift you wish to make -and then use the tax savings derived from the gift to fund the cost of premiums on a life insurance policy acquired by an irrevocable life insurance trust that you would set up concurrently with the gift. This trust would have your intended heirs (children, grandchildren) as the named beneficiaries. At your death, the death benefit from the life insurance would likely be equivalent to the value of the original assets you gave as a philanthropic gift. And, the cost of the insurance premiums likely would be covered by the value of the federal income tax charitable contribution deduction.

This strategy ends up allowing you to benefit BOTH your alma mater (or other favorite charity) AND your family. It's a terrific win-win opportunity. And, it may be just right for you!

Wondering...

2010-03-03T06:56:00.000-08:00

So, when donors makes gifts to charitable causes in the Caribbean or in Central America - or, to the University of San Paulo in Brazil, for example, are these folks making philantropic gifts? Just wondering...

Preserving Our Natural Resources - A Unique Opportunity for Philanthropy

2010-02-26T14:19:00.000-08:00

Been working on a project recently involving 'stewardship of the natural world' and, can't help but see the unique opportunities available in environmental issues for those who are philanthropically inclined to make a real difference that can last for generations.

We - especially we in America - have long held the belief that our natural resources are limitless - and, our consumption over the years has reflected this mindset. Even as other in the world have begun using restraint, we've been reticent to do. And, our resources in America show the scars of our living large. The truth is that the notion of an "American Way of Life" immutable to the reality that we all share one planet and its resources is quite at odds with the 'Hot Flat & Crowded World' portrayed by Thomas Friedman.

In a letter he wrote in 1787 to his friend, Thomas Jefferson, James Madison pointed out, "Nature has favored our country." and, who wouldn't agree with his assessment. Perhaps, it's time for to honor Mr. Madison's legacy by challenging ourselves to return the favor. Imagine all the people in all our communities across the country embracing the idea of changing behaviors and adopting new - good - habits that can help preserve the resources with which Nature has favored us.

And, as for the role of philanthropy? Well, there are opportunities at your alma mater - with charitable organizations in your community - and through local and state government initiatives for private philanthropic funds to seed new initiatives, support large scale recycling efforts, figure out ways to cut consumption of electricity, reduce water waste, and move about without always using cars and other personal vehicles. It's not just Carlos Santana that believes "This can't go on... We got to change our ways." Indeed, there are ways all of us can take on this work - as donors and as volunteers. It's time. You know, Victor Hugo hit the mark when he said (in French), 'Nothing's more powerful than an idea whose time has come!' And, the time certainly has come to act -to give money, give time, give new habits a try.

'Scholarship & Philanthropy'

2009-12-09T03:53:00.000-08:00

In a recent speech, entitled "On Scholarship and Philanthropy," Georgetown English Professor John Glavin calls out the relationship between scholarship and philanthropy. He cites three particular points of intersection: disinterest, risk, and hope. Prof. Glavin notes, "They are the key markers for scholars and philanthropists alike..."

On DISINTEREST, he explains how both scholars and philanthropists "act out of distinterest...Disinterest not as a lack of interest but as an un-self-regarding commitment to change as the only ground of growth." He points out that the process of learning and true discovery "demands disinterest from both the scholars who think the new, and the philanthropists who support them."

As for RISK, he observes that a philanthropist's love of risk is evident in the willingness to invest often substantial assets on a venture that offers the promise of greatness, but may just as likely not succeed. "The risk every genuine scholar takes when she or he steps into an archive or a lab, venturing all on an educated hunch and a dream that might at any moment dissolve into mere chimera." Indeed, the mark of a great outcome - for both the philanthropist who funds the initiative and the scholar who takes it on - often is measured by the degree of risk associated with the initiative.

Lastly, he addresses the significance of HOPE - and reminds us that the folks who toil as scholars and those who lead lives dedicated to philanthropy are "persons of hope." While so often we hear from so many to live in the moment, the present, the here n' now, Prof. Glavin offers encouragement that those with their focus on the future are the folks who will shape the next great moments. He cites an 1889 address at Georgetown by Martin Morris, who pointed out 120 years ago, "That which springs up in the night can also vanish like an exhalation before the morning sun. Enduring works take long beginnings."

So, if you're a scholar - it's a good time of year to thank a philanthropist who has helped you in the past - or is helping you right now - to teach, foster learning, and discover paths to a better future. If you're a philanthropist - or want to become one - it's a good time of year to make a gift that can make a difference right now and for the future - at your alma mater or wherever you have the strongest desire to leave your mark.

Happy Holiday!

Leadership is like a megaphone...

2009-09-05T00:17:00.000-07:00

The connection between philanthropy and leadership may either seem obvious or non-existent, depending on one's perspective. As economist Arthur Brooks (now, president of the American Enterprise Institute) has noted, the most generous philanthropists are everyday folks, not necessarily those who attract headlines and public attention; as a percent of income/assets, those with modest means typically see the need - and opportunity - to make a difference and use what funds they have available in acting philanthropically for the good of their community and society. Not to say the folks with great means don't represent the lion's share of total dollars given in any year by individuals - for that is certainly the case - but, it is to say that there's room at the top for those with the fiscal capacity to make a difference in society to do more. I suppose, there is always room for any of us to do something more than we currently are doing.

Which brings me to leadership and philanthropy - and, the question of the connection between the two.

I've begun this week participating in a unique leadership development program at James Madison University, known as Impact3 - one of 13 from across campus this year to be invited to take this academic year-long journey. There have been 63 individuals over the past six years who have gone before us. It's quite a program. An exploration that is thorough and thoughtful in its strategically structured approach to exploring what leadership means, looks like, and can accomplish - for the participants themselves, on the campus of James Madison University, and in our community/society, generally. That's the '3' of Impact3.

I'm going to chronicle here - to a certain extent - this experience this year because i believe that if one is going to consider all things philanthropic, then leadership likely belongs on the list of things to consider.

For Forrest Gump, he had to wrestle with the idea that 'life is like a box of chocolates.' For me, my task was to consider how 'leadership is like a megaphone.' It was a creative exercise on opening day. A day of introductions for the 13 participants, especially introductions to each other, the program's founding purpose, and its objectives for us this year. Broad strokes with a wide brush for starters; it's a big canvas, to be sure, and there will be time indeed for the fine brushes and the many details. It will be interesting to see what we add to this work - collectively and individually - over the year's time.

And, for me - I believe this experience will provide an interesting vantage to see and explore - and, to witness - the connection between leadership and philanthropy.

If you can care and can do something, now is a good time to act.

2009-07-28T18:48:00.000-07:00

All the news coming out of Washington, DC these days not only fills the newspapers and the news channels on TV and radio - but in all the news clutter, a message that is getting lost is how much the colleges & universities, charities, churches, and other causes in our lives need the support of folks who care. Economist Arthur Brooks has asked - and answered - the question, "Who Really Cares?" - and, the overwhelming conclusion he discovered in the course of his painstaking research is that the folks who care the most are the folks we all know - and, us. Sure, there are the big-time philanthropists who can make mega-gifts of $50 or $100 million (or more), but there's not a lot of Vanderbilts, Carnegies, Buffetts, and Gates around. In truth, the lion's share of charitable giving comes from folks of modest means - billions of dollars in charitable gifts come from millions of donors every year. And, all the causes we care about are able to help make our lives and society better thanks to this support.

So, right now it's easy to be concerned about a lot of things - many of which are quite beyond our capacity to affect the ultimate outcomes - but, well within our control is the chance - right now - to do something that makes a difference. Whether it's a gift to your alma mater to help with scholarship needs (and, you can be sure that such needs are great at every college & university in the country!), or a pledge at work for United Way, or adding a special gift in the plate at church for a mission trip or the pastor's discretionary fund - whatever it may be, it will be greatly appreciated.

I suppose it comes down to this: If you care, this is a terrific time to act on your caring nature. Not only will the beneficiary of your generosity be appreciative, but you'll be glad you did it, too.

Hmmmm.... Michael Jackson's WIll

2009-07-01T14:01:00.000-07:00

Well, it seems the world is curious about all things Michael Jackson, and where else better than a blog on all things having to do with financial & estate planning to offer you, dear readers, a link to MJ's LAST WILL & TESTAMENT.

So, here it is -

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Not a good time for a charitable gift? Okay, how about a loan?

2009-05-11T20:43:00.000-07:00

Hmmm, a loan... 'You want me to make a loan to my alma mater (or other favorite charity)?'

YES!

Okay, so it goes by another name - but that's the idea.

Here's how it works:

You want to do something for your alma mater, say - and, something that can really make a difference. BUT, you have a family to worry about - children or grandchildren.... their college educations, their first homes, their first business venture's capital. You have some money available right now, sure - BUT, they will need it in 15 or 20 years. If you give it away now, you'll have nothing for them later.

Ah, that's the dilemma.

Here's the solution:

Two simple steps - First, you put the assets you know you want your children (or grandchildren) to have in 15 or 20 years (or however many years you wish) into a trust - so that the assets are safe and secure - and, will be there for them when they need it. And, at the same time, you name your alma mater (or other favorite charity) to receive an annual gift from the earnings derived each year from the assets in this trust - a special gift each and every year until the trust is scheduled to terminate so that the assets go to your children (or grandchildren).

These annual distributions from the trust to your alma mater can make a big impact.

Plus, of the assets in the trust appreciate at a rate higher than the annual payout for the charitable gifts, then your children (or grandchildren) will end up with MORE at the end of the trust than you put into the trust initially - and, whatever the amount - they will receive it free of taxation, if you design the plan well.

AND, you'll enjoy a few serious tax-wise benefits from this plan.

Hard to create? No, actually it can be quite a simple thing to do.

Do you have to be a Vanderbilt or a Carnegie for this to make a difference? Not at all!

It just may be the thing that can add great value - in your life, for your family - and, for your alma mater (or other favorite charity).

PS TO ENTREPRENEURS - The kind of arrangement described above can be a creative strategy for conveying a privately held business to the family's next generation. This trust - which is called a Charitable Lead Trust - and a Family Limited Partnership - can offer - when structured strategically - an effective way to achieve valuable family and philanthropic objectives. Something worth considering.

Living Endowments - A Dandy Little Two-Step That Makes a Big Impact

2009-04-17T10:41:00.001-07:00

The financial markets seem to be moving in a good direction recently - maybe a good sign that the economists who anticipated something of a recovery beginning in the second quarter of 2009 were on the right track.

But, portfolios are still down significantly compared with a year ago - your portfolios and those of the colleges, charities, and churches you care about. While the need for philanthropic action is great, financial resources remain quite limited for many folks.

Is there something creative you can do right now to make a difference?

In fact, there is something very creative you can do now - that will have a big impact both now and later.

Say you have the desire to create an endowment - a legacy gift - that will last forever, perhaps to provide scholarships at your alma mater. Creating an endowment may be beyond your reach right now. In fact, it may not be something you can do until much later - perhaps not until your executor is administering the Will you leave to direct the distribution of your estate.

The truth is that a bequest is the only chance most folks have to make a large gift.

But, with a relatively small annual gift, you can give your alma mater (or other favorite charity) the equivalent of what it would receive as income from a scholarship endowment. That is, you can bring to life your ultimate bequest right now - and, you can do so with an annual gift you likely can afford to make.

Then, at the time of your death - when the bequest you put into your Will now finally is made available - the gifts you've been making each year will be covered by the income derived from the endowment funded by your bequest.

This little two-step is a creative way to start having an impact now AND ensuring that you will be making a difference for generations to come.

How much will it take to make this happen?

Let's say you want to create a scholarship of $2,000 every year for students at your alma mater. That would require an endowment of $50,000.

So, you could provide for a bequest of $50,000 in your Will to create an endowment. If you already have a Will, a simple Codicil can be used to add this gift to the terms of your Will. Then, you can plan to make annual gifts of $2,000 to support the awarding of the scholarship each year.

The added advantage of this plan: you'll likely get to meet the students who benefit from your generosity. If you just made the bequest and did nothing more than that, you'd never meet the students whose lives you touch.

There are great needs for people to do what they can to help. If you can make even small annual gifts and arrange for a large gift in your estate, you would be a philanthropic hero.

Got a question, just use a comment to let me know.

An Ideal Gift Plan for Uncertain Economic Times - A Charitable Gift Annuity -

2009-01-30T22:10:00.000-08:00

Like the thermometer outside, the financial markets seem to be dropping lower than anyone might have predicted just a few months ago, causing lots of concern about the best ways to preserve assets and income sources.

This brings me to the topic of an ideal gift plan for uncertain economic times. I often talk and write about the benefits of Charitable Gift Annuities as a terrific way to supplement your income and help make a difference at your alma mater or other favorite charity. A Charitable Gift Annuity offers, essentially, guaranteed income at a fixed rate of return that will never change in your lifetime – a welcome thing right now more than ever.

Rates of return for Charitable Gift Annuities are changing this spring - dropping. As much as 1.0 percent. Current economic conditions are affecting the capacity of colleges & universities - and, othe charities - to continue offering the same rates that have been in effect for the past few years.

BUT, even at the slightly lower rates, a Charitable Gift Annuity still offers donors an ideal life income gift plan that just may be too good to pass up.

Folks in their 70s and 80s - and older - find Charitable Gift Annuities to be special ways to add a steady income stream for life - that leads later to a legacy gift for their alma mater (or other favorite charity). Young folks (under 50) can create a Charitable Gift Annuity for the benefit of parents and grandparents - and lock in a fixed rate income source for the rest of their lives.

Rates in the 6.5 - 9.5 percent range are available, and the precise level is determined by the age of the donor - or the beneficiary, as the case may be.

Perhaps the most special thing about a Charitable Gift Annuity is how it benefits both you and your alma mater (or other favorite charity). In creating a Charitable Gift Annuity you can choose to create a scholarship, fund student-faculty research projects, or help student-athletes. Actually, your gift can help you champion just about any particular purpose you may wish to support. Best of all, this gift is a chance to transform your under-performing investments (e.g., stocks, mutual funds, real estate) into a higher yield source of income for the rest of your life, with the added bonus of receiving a federal income tax deduction based on the value of the assets you use. In addition, part of the annual income you receive will be tax-free for a few years, based on your age.

There's more information available on the details of creating a Charitable Gift Annuity - but the key thing is that there's not a lot of paperwork and the gift can be set up relatively quickly. If you'd like more information on Charitable Gift Annuities, just let me know. If you have a question, ask here and i'll answer in a post right away.

Depreciated Securities - An unusual gift idea that may be just right this year

2008-10-16T13:40:00.000-07:00

Before talking about gifts of depreciated securities it’s important to understand why gifts of appreciated securities are so popular. So, we begin with that.

Gifts of highly appreciated assets held long enough to qualify for long-term capital gains treatment if sold by the donor top the list of philanthropic win-win situations. Here's why: The donor receives a charitable tax deduction at the fair market value of the securities and completely avoids paying capital gains tax on the appreciation that accumulated over the years – and, the charitable beneficiary - your alma mater, for example - receives a gift likely much larger than would have been the case if the donor had made the gift using other assets.

If you have highly appreciated securities that you’ve held for more than one year, then these assets may be a terrific way to make a special charitable gift this year. If you’re interested in learning more about the considerable tax advantages and how this gift must be made, COMMENT here and we'll go into more detail in reply.

But, that said – the focus here is on the opposite situation, a topic much less often discussed. Why? Simply, there usually are better ways to make a charitable gift than to use depreciated securities. But, this is not a usual year – and, this just may be the right year to consider a gift idea that could be an ideal fit for today’s economic conditions.

If you own securities that have lost value, turning these securities into a charitable gift may be best thing you can do with them. Unlike appreciated securities – which you would give directly to the charitable organization to achieve maximum tax advantages, a gift of depreciated securities requires you to first sell the stock and then make the gift using the proceeds from the sale. This two-step sequence preserves your opportunity to take the capital loss tax deduction on the sale of the depreciated securities and creates your opportunity for a charitable gift tax deduction.

This year especially, it just may be that stocks you own which are substantially below your original cost could offer a creative way to fund the charitable gift you wish to make. Such a gift can be both generous and tax-wise.

LAW SIGNED BY PRESIDENT BUSH ALLOWS TAX-FREE CHARITABLE GIFT TRANSFERS FROM IRAs IN 2008.

2008-10-05T10:22:00.000-07:00

President Bush has signed into law legislation that allows individuals 70½ and older who have Individual Retirement Accounts (IRAs) to make direct and tax-free transfers from their IRAs to their alma mater (and other public charities). This opportunity was possible for the past two years, but it expired last December. Now, donors will be able to do so again this year. The key thing is that the charitable gift transfer must be completed by December 31, 2008.

We know from last year’s experience that many Americans who are 70½ and older will see this new law as a creative way to support their alma mater (and other public charities). The IRA-funded gifts can be for any amount up to $100,000. This means a donor may give not only the amount that must be withdrawn this year to meet mandatory distribution requirements but also can draw down part of the IRA's principal – which has the added advantage of reducing the tax bill due on next year's withdrawal.

These IRA gifts are relatively easy to do, but they take a little time to process. Those interested in taking advantage of this special opportunity are encouraged to act soon, to be sure they meet the December 31 deadline. My office is available to answer any questions donors may have about what they need to do to make a ‘qualified charitable distribution,’ as these IRA gifts are called by the U.S. IRS.”

For more information on making a 'qualified charitable distribution' this fall from an Individual Retirement Account (IRA), I can be reached at either 540.568.3196 or (toll-free) 800.296.6162. By e-mail, please use sudoltj@jmu.edu.

And, to read more about making gifts from your IRA (and other such ideas), you are invited to visit the web at www.jmu.edu/development/plannedgiving.

Gifts of Life Insurance - The often forgotten asset.

2008-09-21T23:47:00.000-07:00

As you think about financial resources you may have available to make a philanthropic gift, one set of assets that may not come to mind quickly — if at all — is the life insurance policies you may have collected over the years. Yet, a life insurance policy can be an ideal asset to fund the special gift you've wanted to make for a while now.

In fact, whether you have several life-insurance policies or just one, once you determine that the need you once had for life insurance has passed, a philanthropic gift can be the best way to put such an asset to good use.

If you have a paid-up whole or universal life policy, you can make a gift of the policy to your alma mater or other charitable organization — and, both the accumulated cash value and the ultimate death benefit can be earmarked by you to fund a generous gift.

And, it's easy to do. Your insurance representative can provide you with the forms you'll need to name your alma mater or other charity as the beneficiary and owner of the policy. Once the paperwork is completed, you would have made a thoughtful gift using an asset that you no longer need.

Even policies for which you are still making annual premium payments can be used - and, when you name your alma mater or other charity as the beneficiary and owner of such a life insurance policy, you're able to make an annual charitable gift for the amount of the premium payment — and then, your alma mater (or other charity) will use each annual gift to keep the premiums paid. Turning a premium payment into a charitable gift is an extra advantage of such a gift of life insurance.

Any questions about ways to devise creative charitable gift plans using existing or new life insurance policies, post your question and we'll talk about it here.

Why Give? Volunteers Know Why!

2008-09-12T03:32:00.001-07:00

We all are asked to make financial contributions to charitable organizations from time to time - sometimes, it seems, day after day. It most cases, we're asked to give to organizations and causes we know little about. Alas, sometimes that's even true when the cause is our own alma mater. It's hard enough to keep track of things on our daily To Do lists, let alone stay current with the ever-changing campus of the college or university we attended more years ago than we want to count. In our hearts, we know we'd like to do something for our alma mater - make a gift that is meaningful - but, it's been so many years. . .

What's the answer?

Get involved! Next time you're invited to serve on a committee or council, plan an event or a program, sponsor an intern, or participate in an alumni community service project, say "Yes!"

And, you'll be glad you did.

So will your alma mater - because one thing that is as true today as it ever has been is that those who give the gift of their time and talents - as volunteers - are also more likely to give the gift of their treasures - their financial resources. It doesn't matter so much whether you serve on the Board of Directors or the annual Beach Party planning committee - what matters is that you have made the commitment of your time to something that is important to you.

In taking this step, you have helped yourself answer the question "Why give?" Now, you'll know!
So, call someone today that you know at your alma mater and offer to volunteer. You may be surprised at the opportunities awaiting you!

Donor Intent & The Role of Gift Agreements

2008-08-27T06:35:00.001-07:00

When you make a charitable gift to support a worthy organization's work - whether it be for a scholarship at your alma mater, a particular program, or a special purpose - it's very important that a match exists between the donor's understanding about the gift and the organization's understanding - so that there is no doubt about how the gifted funds are to be used.

Hmmm, sounds basic, right? Well, sometimes it is. Sometimes, this is accomplished quite easily and with minimal discussion or paperwork. But, often it's a good idea to talk things over and write things down so that everyone involved is sure of the donor's intent - and, equally sure that the charitable organization can carry out the donor's intentions.

This is especially true when the amout involved is substantial. Ah, and what is 'substantial'? Well, like beauty and works of art, the defining point for 'substantial' may best be measured by the eye of the beholders. Whether a gift is for $1,000, $10,000, $100,000 or a million dollars, the degree of detail that goes into the discussion likely depends as much on the donor's views as on the charitable organization's size and scope.

One way or another, if you're making a gift to your alma mater or other charitable cause and you want to know that the gift will be used as you intend, the best way to be sure is to talk about it before you make your gift - and, then look for this plan to be placed in a writing.

This is the role and value of Gift Agreements. Such a document is the ideal place to describe in clear and complete terms the donor's intentions and confirm the organization's commitment to fulfill the donor's expectations. A Gift Agreement can be as simple or complex as a particular gift plan merits. The key is that it provides you, the donor, with the assurance that your alma mater (or other charitable cause) will use your gift in the manner you expect it to be used. Especially when your gift is intended to last for generations to come - in perpetuity - as part of an endowment, a Gift Agreement provides you and your family a confidence that your gift will be making a difference for years to come.

Have a question, want more information - your inquiries are invited.

Bequests are #1 gift by those with estate plans.

2008-07-17T06:04:00.000-07:00

Recent research shows that 89 percent of gifts in estate plans are bequests. Whether you have a Will or a Trust for your estate plans, a charitable bequest is the #1 way to make a testamentary gift for your college, church, or favorite charities. If you have already included a charitable bequest in your estate plans, you have ensured your legacy gift will make a difference in perpetuity. If you have not yet done so, it's relatively easy - and you don't need to create a new Will or Trust - a Codicil (for your Will) or an Amendment (for your Trust) is sufficient.

It's important to check with your college, church, or favorite charity about the exact language you should use for your charitable bequest - to be sure what you want to do will be done - but, the key thing is to ask your lawyer to prepare the provision for your charitable bequest so that you can sign the documents promptly and then rest easy, knowing your desire to make this testamentary gift will be fulfilled.

And, in most cases, your charitable beneficiary will recognize your generosity in a special way. For example, at James Madison University, everyone who remembers the university in their financial & estate plans is recognized as a member of The Madison Founders Society. Nearly 500 individuals have been a part of this society since it was created in 1982 - and, a special benenfit of membership is the annual Membership Appreciation Brunch in the fall - commemorating the arrival of the first student at Madison nearly a century ago - in 1909. This year, the Madison Founders Society Brunch will be on Saturday, September 20th.

Create a legacy for generations to come, make a charitable bequest in your Will or Trust.