Recently I interviewed Hank Zachry to get his perspective on how the Trump tax plan will impact Major donor giving and Planned Giving. Hank is CEO of Caswell, Zachry, Grizzard http://czg.net/ , which is an agency that specializes in planned giving marketing and communication. He breaks down the impact in three key areas of the bill: a reduction in corporate tax rates, itemized deductions and the estate tax.
Corporate tax rates: According to Hank, the biggest opportunity for both planned and major gifts will come as a result of a reduction in business taxes on large corporations. This will result in business growth and inflated stock values. Potential donors holding appreciated stock can use that asset to fund a major gift, create a charitable trust, or place assets in a donor advised fund for later distribution to charity at the direction of the account holder.
Itemized Deductions: Elimination of itemized deductions except for those allowed for charitable contributions, retirement savings, mortgage interest and property taxes will likely create more interest in high-level charitable giving as wealthier taxpayers and their advisors look for easily accessible tools to reduce their federal income tax liability.
Estate Tax: The doubling of the lifetime exemption for federal estate tax will essentially eliminate estate taxes as a concern for all but the very wealthiest Americans. On the surface, this isn’t great for planned giving, but the truth is that only 1% of estates probated since 2012 have been subject to federal estate tax, and the federal estate tax hasn’t been a real issue for most Americans since the 1990s when the lifetime exemption was six figures. (Astute charities cultivating donors who live in states which impose an estate tax at the state level will do well to market potential savings there, since the Trump proposal would leave those taxes intact.)
Planned giving practitioners will be well-advised to continue to focus on tax-disadvantaged assets such as IRAs as prime assets for charitable giving, whether by bequest at death or after age 70 ½ through application of the now-permanent IRA Charitable Rollover Provision.
It will be interesting to see exactly what gets passed into law and how charitable organizations respond to both the potential opportunities and the likely obstacles that will be created as a result.