Gift Planning, the Church, and the Fiscal Cliff

Recently I had the opportunity to connect with Rob Kuck of Philanthrocorp. We discussed some of the changes that are coming in tax law if the looming “fiscal cliff” isn’t resolved by December 31.

Several options are being discussed, including one that would limit and/or entirely eliminate tax deductions for charitable contributions. Additionally, estate tax changes are on the horizon. Here are notes from our conversation.

What possible implications in the charitable tax area that might result from the looming fiscal cliff we are hearing about in the news?

Due to the political climate in Washington, many pundits agree that it’s entirely possible that no resolution will be reached before the December 31 fiscal cliff deadline.

At the moment, if all of the fiscal cliff (Budget Control Act of 2011) adjustments go into effect, we know for sure that the estate tax rate, (the amount of an estate that is free from taxation), will revert to $1M per spouse from the current $5.12M, and that the generation-skipping tax exclusion (how much you can leave the grandkids before taxes are assessed) drops to $1.3M from $5M. Also, the rate that the remainder of an estate over the exemption amount is taxed will climb to 55% from the current 35%.  These changes will impact a whole bunch of people who have no estate tax to worry about under today’s rates.

Who is a candidate for the gift planning conversation? What is the target audience within the church?

We like to say long-term, committed members represent the best opportunities for gift planning conversations within the church. The best predictor that a member will leave a gift to the church isn’t measured by net worth, how much they’ve been giving, or how old they are, but by how connected they are—starting with those who have demonstrated this connection for the longest period.  It’s important to note that an estate gift is one that almost everyone can give…even if they don’t have much to give during life.

Some churches see estate planning as something for only people who are 50 and older. Do you agree? Are there conversations we should be having with new families, people in the 20-30 age bracket?

Estate planning is something everyone should consider…but it’s critical where there are dependents involved.  Young families may not have much in the way of material wealth but should always address guardianship, personal representative and health care issues. You’d be amazed at how many 50+ year olds we work with that haven’t updated their planning since their kids were small and their assets were simple. Each stage of life brings different considerations, and it’s important to keep your plan up to date to best reflect how you want to see your stewardship responsibilities transferred.   Whatever our age, the government has a plan for us if we don’t execute our own. Most folks want to avoid the State plan.

How are my heirs affected if I choose to include my church in my will or estate plan? Why is this an important conversation for the church to consider?

We look at estate planning as the greatest stewardship opportunity most of us will ever have—and stewardship extends to people we care about as well as the material wealth God has given us the responsibility to manage.  Fortunately, in the United States we have one of the most favorable tax codes in the world for giving to charities such as the church.  With proper planning we don’t need to disinherit the children to be generous to the church.  In fact, with good planning there are instances where we can give our children a larger inheritance while at the same time benefitting the church.

Thanks for the information, Rob. Pastor, if you’re not implementing a defined-legacy giving strategy in your church, you are missing a tremendous opportunity to fund mission and ministry well into the future. Let me know how I can assist you in the legacy giving area.