Posted July 1st, 2001

What Gift Planners and Donors Are Saying About New Tax Law

With the Economic Growth and Tax Relief Reconciliation Act of 2001 now in effect, many are wondering just what impact this new tax law will have on charitable giving in America. Give & Take decided to ask a panel of experienced gift planners and board members/donors to share their thoughts on the tax law changes.

About the panel:

  • George Good, former CEO of George-Good Corporation for 42 years, serves on the board of several charities including the Good Samaritan Hospital of Los Angeles and the Pacific Asian Museum of Pasadena. He recently retired from the national board of the American Cancer Society.
  • Amelia Montjoy is director of gift planning at World Wildlife Fund in Washington, D.C.
  •  Frank Wendt, retired chair-man of the investment firm John Nuveen & Company, is a longtime donor to a number of nonprofits who has served on many nonprofit boards and chaired campaigns for several educational institutions.
  • Carl Bendorf is assistant vice president of gift planning for the University of Iowa Foundation in Iowa City, Iowa.
  • Sterling Kerr, Ph.D., is director of gift planning at the AARP Andrus Foundation in Washington, D.C.
  • Doris Pierce-Hardy is manager of gift planning for Habitat for Humanity International in Americus, Georgia.
  • Mary-Gail Smith is national director of planned giving for The Leukemia and Lymphoma Society in White Plains, New York.

Give & Take: How do you think this new law will affect charities?

Good: I think it will have very little negative impact on charities. I think the charitable intent of the individual is the most important factor. This does not really change a great deal except that with the elimination of tax on a lot of estates that don’t total over $1 million per person or $2 million per family, there will be more for the heirs and there should thus be little or no reduction in the charitable dimension of these person’s plans.

Give & Take: What have you been hearing from donors about the new tax law?

Montjoy: Our donors have not called with questions about the new tax law. My hunch is that there is still a great deal of confusion regarding the law and that people do not understand it well enough at this point to ask questions. This will change now that in-depth analysis of the law is reported in the media. Most donors have been taking a “wait and see” attitude toward charitable remainder trusts and certain other planned giving vehicles over the past several months. While many realize their estate will now be exempt from estate taxes, I don’t think most understand that the estate tax could return.

Give & Take: As a philanthropist, could you share how this law will impact your own personal plans?

Wendt: Tax laws have a minor impact upon my estate plans and current distributions of assets. I do not want my relatives to be subject to whatever the taxes are, but I also want to take care of charities in which I have an interest. But it was the charities that had to give up the tax portion that might be required from my estate. In my case, anything that reduces the estate taxes will increase the amount that goes to charity rather than the other way around!

Give & Take: What affect do you think this new law will have on capital campaigns?

Bendorf: It’s a little early to tell. Whatever impact there is actually started well before the actual approval of the current law changes. For example, we could sense uncertainty beginning last fall when estate tax reform was passed and subsequently vetoed by then President Clinton. It’s kind of like the stock markets, where prospective good or bad news seems to get factored into planning long before it becomes reality. In the long run, we are extremely optimistic about an increasing spirit of philanthropy. In the short term, any major change in the tax laws seems to cause hesitation in committing to a major gift. Also, it’s difficult to separate the impact of tax law changes from the recent volatility in the financial markets.

Our strategy all along has been to focus on mission and the impact of charitable gifts on our constituencies. By not over-emphasizing tax benefits in the past, we don’t feel we now need to overly worry about the changing nature of those same tax benefits. Tax benefits have never been the leading edge of our marketing up to this point – by the same token, they won’t be in the future either.

Of much greater importance is to keep our institution relevant to the values and dreams of alumni and friends and, perhaps most important, finding ways to communicate effectively about our relevance. Without this, the tax law impact won’t mean much either way. Since the tax laws (whatever they may be) apply the same to all 501(c)(3) organizations, our biggest challenge and opportunity will always be in differentiating our mission from other worthy causes.

Give & Take: What impact do you think the new tax law will have on different gift planning arrangements, such as gift annuities?

Kerr: The bequest and gift annuity categories will become increasingly important to our Foundation. Our donor base, made up primarily of women over the age of 75, finds the highly competitive lifetime incomes associated with gift annuities very attractive. Small to modest size bequests ($10,000 to $20,000) are often given by relatively low income retirees with non-taxable estates who make up a reasonably large part of our constituency. We anticipate an increasing number of these types of bequests as a result of increased marketing activity regardless of recent changes in the tax laws.

Give & Take: How do you see this law affecting people of different wealth levels?

Pierce-Hardy: I believe that this new tax law will neither increase nor decrease an individual’s desire to give to charity. Those that want to support their charities will continue to do so regardless of their wealth. Our donors are motivated by their values and the majority of donations we receive are conscious-driven, not tax-driven. They just want to help someone less fortunate than themselves.

Give & Take: Does your management and non-development staff seem confused by this law? If so, what do you plan to do about it?

Smith: Our management has been interested in knowing how the changes will impact our organization financially. It is very important that I help local staff and volunteers located throughout the country answer questions from our donors, board members, and other constituents. Our planned giving initiative was launched about a year and a half ago, and it is critically important that we don’t get derailed as a result of misconceptions about the impact of tax law changes. Providing hard data on who has given planned gifts to the Society in the past will help dispel some current fears. By far, most of the planned gifts received by the Society have been through wills from persons of moderate means on whose plans the recent changes in the law will have little or no impact.

The publisher of Give & Take is not engaged in rendering legal or tax advisory service. For advice and assistance in specific cases, the services of your own counsel should be obtained. Articles in Give & Take may generally be reprinted for distribution to board members and staff of nonprofit institutions and other non-donor groups. Proper credit must be given. Call for details.

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