Philanthropic Planning Conference: Three Take-Aways for Donors

The Western Regional Planned Giving Conference, now in its 23rd year, took place May 28-30 in Costa Mesa, California.

Hosted by the Partnership for Philanthropic Planning of Greater Los Angeles, the conference is geared toward non-profit fundraising professionals involved in charitable gift and estate planning and the professional advisors who work with philanthropic clients.

For donors and charitable individuals, here are three key take-aways from the conference as you consider your philanthropic goals (warning: advanced strategies ahead!):

  1. For international giving, remember “Discretion and Control”

Attorney Jane Peebles of Karlin and Peebles, an expert in international philanthropy, cautions donors who make gifts to foreign charities to watch for pitfalls.

First, as a general rule, contributions made directly to a foreign charity do not qualify for a tax deduction.  One way around that is to make gifts to a U.S.-based “Friends Of…” organization set up to support the foreign non-profit.

But the U.S. charity can’t merely serve as a “conduit” for gifts abroad.  The IRS has issued guidelines that U.S. charities must follow when making grants to foreign organizations: the U.S.-based organization must retain “discretion and control” over the funds sent abroad to ensure that they are used solely for charitable purposes.

Needless to say, this is an area of tremendous complexity, and consultation with a knowledgeable advisor is a must.

  1. Business owners: philanthropy can be part of succession planning

Attorney Matt Brown of Brown and Streza presented a series of case studies in which business owners successfully employed charitable strategies to help meet personal and financial goals related to the succession of the business.

The type of business entity – sole proprietorship, S-corporation, or C-corporation – will dictate which strategy will work best. Generally, charitable remainder trusts, lead trusts, and gift annuities can be used.  Pitfalls to avoid are the pre-arranged sale, unrelated business income, and self-dealing.

Most of all, it helps for the business owner to have charitable intent to begin with.

  1. Charitable Remainder Trusts come in various flavors

Reynolds Cafferata, partner at Rodriguez, Horii, Choi & Cafferata, demonstrated how charitable remainder trusts (CRTs) can be designed with certain advanced features to turn them from the “plain vanilla” into the “almond-rocky road-chocolate-with-sprinkles” variety.

Specifically, CRTs can be designed with a “spigot” feature whereby a donor can control the distribution of income in years when income is not needed – like turning a spigot on and off.  The so-called “Spigot CRT” uses an entity – LLC, partnership, or variable annuity – inside the CRT to control the income.  Again, use of expert counsel is necessary to avoid a myriad of pitfalls, but when done correctly the “Spigot CRT” can be effective in meeting a donor’s goals.

While some may advocate that we stop going to conferences to learn, that just doesn’t apply to the Western Regional Planned Giving Conference.  These three take-aways are a prime example that in the world of charitable planning, there is always something new to learn, for donors and their advisors alike.

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