Posted November 1st, 2011

How Gift Planning Helps Meet Personal and Charitable Goals?

Good gift planning considers all of a donor’s concerns. In this article, Barlow Mann explores the factors that may influence whether and how people at different phases of life choose to give.

As pointed out in the article on Page 1, donors will often indicate a desire to give that is being thwarted by one or more personal concerns. This information can come in person or as hastily scribbled notes enclosed with charitable gifts. These notes can often reveal more about the donors than simply their desire to give. The handwriting, for example, may display penmanship skills found mainly in older individuals who came of age before computers.

Many seniors think of charitable giving as an isolated activity instead of part of a comprehensive estate and financial plan. They may be unaware that by combining their personal and philanthropic objectives, both goals may be achieved.

Age may be crucial

Most people tend to put off planning their estates. However, as people age they are more likely to be receptive to information on gift and estate planning.

This is good news as those over the age of 50 possess most of the wealth and accumulated assets in the United States. These individuals have an estimated annual income of more than $800 billion and control:

  • 70 percent of the total net worth of U.S. households.
  •  77 percent of all financial assets.
  • 80 percent of all deposits in U.S. savings and loan associations.

In the landmark book “Age Wave,” Ken Dychtwald, Ph.D., points out that the 50+ age population breaks conveniently into three distinct categories: 50 to 64: middle adulthood; 65 to 79: late adulthood; and 80 and older: old age.

The concerns of the three groups can vary widely based on their current stage in life and the historical events and cultural trends each experienced along the way.

Differing concerns

For example, the oldest group was born before 1931. They experienced the Great Depression and World War II as children or young adults. The thriftiness learned of necessity in youth has remained a defining characteristic of this generation, often called the Greatest Generation.

Now 65 to 79 years old, some of the middle group experienced the Great Depression as children, but more were affected by World War II. These persons are now either approaching retirement or have recently retired after working during a time of unparalleled growth and prosperity. They are primarily members of the Silent Generation.

For the most part, 50- to 64-year-olds are still working and are likely to be enjoying the fruits of their labors. The youngest members of this group just received an invitation to join AARP, so they may feel prompted to consider their long-range plans. This group is composed entirely of the boomer generation.

As we look at these three groups and recognize the different concerns they may have, we see that the youngest category is most interested in accumulating assets, whereas the middle age group may need to conserve assets and meet retirement needs. Those 80 and older are struggling to maintain their health and independence while considering the eventual transfer of their assets.

Giving and solving problems

As you might imagine, the planning needs of each group are quite different.

Ages 50 to 64: People in this group may be prospects for a large outright gift to be paid during their high-income years or perhaps a planned giving arrangement designed to provide for them during their coming retirement. They may also be interested in making gifts in ways that generate charitable benefits now while providing for heirs later.

Ages 65 to 79: The middle group that has already retired may be more interested in marshaling existing assets to meet current and future needs. Except for the very wealthy, they may be less likely to make larger outright gifts of income or appreciated assets.

These retirees may be prospects for life income gifts that would allow them to enjoy the benefits of a current income tax deduction, an enhanced income stream, avoidance of capital gains tax and management of assets. Other gifts from life insurance policies or retirement plans may represent viable alternatives (particularly this year for those over 70½ with traditional or Roth IRAs).

As both of the younger groups begin to experience the death of parents and spouses, the survivors become more and more receptive to the need for estate and financial planning.

Age 80 and above: Members of the 80+ age group are concerned about their physical and mental health as well as their financial health. These concerns may cause some current donors to lapse even though they have already arranged or are capable of arranging substantial charitable gifts in their wills or other estate plans.

Some of these individuals will be pleased to discover gift planning vehicles that offer excellent solutions. For example, a gift annuity might maintain the cash flow to which a person has become accustomed, or a testamentary gift annuity may provide payments for life for a trusted family friend or employee.

It is from this oldest group that the vast majority of maturing bequests and other planned gifts normally are received each year.

It may be possible to meet each individual’s objectives by including charitable gifts in the overall estate plan. In many instances, people will be pleased with the results of integrated planning versus the “hit or miss” treatment of handling each need separately.

Learn about more gift planning strategies in one of Sharpe’s popular seminars. See sharpenet.com/seminars for upcoming dates.

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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