What's Ahead for Planned Gift Fundraising in 2020? | Sharpe Group
Posted January 21st, 2020

What’s Ahead for Planned Gift Fundraising in 2020?

by Russell James
It’s the beginning of a new year, and a great time to think about what’s next. What’s ahead for 2020? How can you be ready?

Delayed tax impacts

Yes, I know. The new tax law took effect in 2018. Why are we still talking about it? Because real world impact takes time, especially when things are complicated.

Let’s look at an example: In 2018 not everyone instantly realized effective capital gains tax rates had increased. But, wait…the federal rates didn’t change. The state rates didn’t change. How could they have gone up? Because before 2018, people could deduct state capital gains taxes from their federal taxes. Now, for the most part, they can’t. This is due to fewer itemizers and the new state and local tax (SALT) caps.

Maybe donors didn’t notice this until they actually wrote a bigger check to the IRS in 2019. Or maybe they were counting on the court challenge to SALT caps. (That wasn’t dismissed until last September.) Now they know. Now, when you explain to your donors they can avoid those taxes by donating assets instead of cash, your message is even more compelling.

Pease elimination

For high-income itemizers, elimination of the Pease amendment was another big deal. Their charitable deductions used to get reduced up to 80%. Now they aren’t. Maybe these donors didn’t notice this until they actually paid taxes in 2019. Now, in 2020, they may realize their deductions are more valuable.

Interest rates

When interest rates drop, it makes some planned gifts even more attractive. Donors can take an immediate income tax deduction for donating the inheritance rights for farmland or personal residences through a retained life estate. That deduction increases dramatically when interest rates fall. Similarly, deductions increase for other strategies like grantor (for income taxes) or non-grantor (for estate taxes) charitable lead trusts.

Demographic changes

During the depression, births fell dramatically. The lowest total births in the country occurred in 1933. From that point forward more and more babies were born, eventually leading to the Baby Boom. Why do you care about babies born in 1933? Because those babies are now 87. Charitable bequest dollars tend to come from decedents (especially childless decedents) in their late 80s. Not only are the upcoming groups bigger, they are also more likely to be childless.* This critical population group is just now starting a dramatic growth curve that will last for decades.

What if you don’t want to wait for this upcoming boom? There is still good news. The Baby Boom was already raging in 1949-50, which means these babies (now age 70½) can use Qualified Charitable Distributions for the first time this year! The best time to encourage these gifts is when donors first take required distributions.

All signs point to growth in planned giving and gifts of assets in 2020 and beyond. You can be prepared to reap the benefits by communicating with donors about all the great ways to give more effectively. ■

Professor Russell James, J.D., Ph.D., CFP® of Texas Tech University is responsible for the university’s on-campus band online graduate program in charitable financial planning.

*“The New Statistics of Estate Planning: Lifetime and Post-Mortem Wills, Trusts, and Charitable Planning,” Russell N. James III, The Estate Planning & Community Property Law Journal, 2016.

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