Fall 2020 GPC Newsletter
Fond Farewell to Philanthropies
By Wes Mashburn, JD, CSPG, CTFA
Senior Trust Officer, Deseret Trust Company
As David announced in the last newsletter, I have left Philanthropies to join Deseret Trust Company. This has been a bittersweet transition. I am so excited for the opportunities ahead, yet I also dearly miss my Philanthropies family. My time at Philanthropies, as the words of the prophet Jacob would put it, has passed “like as it were unto [me] a dream” (Jacob 7:26). That’s because it has been a dream. As an attorney, I never planned for this career (I didn’t even know it existed) but the Lord knew, and He led me here. But that is a much longer story for another day.
The “secret sauce” of Philanthropies is its people. I am grateful for so many at Philanthropies, past and present, who have made such an indelible impact on me, both personally and professionally. There is not time to thank everyone, and I think you’d all fall asleep reading this if I tried. But I hope you will indulge me as I share my gratitude for these people who have meant so much to me. I believe you know some of them.
I am so grateful for Tanise Chung-Hoon’s inspired leadership and for her personal mentorship of me. She has left a mark for good on me that will bless generations after me. I am also grateful for my fellow Directors’ Council colleagues for their trust in me, Christlike examples, sense of humor, and consecrated work ethic. They care deeply about those whom they lead. I am grateful to the amazing teams I had the opportunity to lead. These dear colleagues diligently seek to identify every capable person who might have an interest in giving by reaching out to donors in sincere, genuine, loving, and caring ways. They always do their work with their hearts and souls. They are a reflection of their great team leaders. They personify the truth that attitude reflects leadership.
I must make particular mention of the late Jim Olson, who I affectionately referred to as Yoda. He taught me everything I know about gift planning. He was always so patient with and kind to me when I would hassle him with question after question. I must also thank Carl McLelland, who was my trainer when I came on board 19 years ago and is a big reason I ended up at Philanthropies. (Read more)
Gerilyn Merrill Spotlight
Gerilyn Merrill, gift planning specialist, received her Bachelor of Science in geographic information systems from Brigham Young University in 1996 and continued towards the master’s program in that field. After living in Israel, Michigan, and California, she moved back to Utah in 2009 and co-founded Cederian Investments, which merged with Everspire Wealth Advisors in 2016. Since then Gerilyn has served as a member and vice president of her local BNI chapter, as a member of the Primary Children’s Hospital Planned Giving Committee, and in various Utah initiatives dedicated to supporting women business owners. She has also received additional training specifically directed to helping women manage their retirement and business planning. As a mother of eight, she has a gift and passion for serving others and finds singular meaning in this role of supporting the Church’s giving initiatives and helping people understand investing principles, set meaningful goals, and reach their financial objectives.
A highlight of her time with GPC, aside from meeting and networking with outstanding professionals in the field, was hearing Elder Ronald A. Rasband’s talk at a recent conference where he shared in detail the humanitarian work he was involved in for many years. There have been many valuable moments at the past three GPC conferences which have facilitated important discussions with clients.
Six Ideas to Facilitate Charitable Giving with Life Insurance
By Jerry Borrowman, CAP (Chartered Advisor Philanthropy)
1. A Legacy Gift to Charity
Several years ago, I wrote a $20,027 check to the American College in Philadelphia, where I received my master’s degree in financial services (MSFS). The purpose of the gift was to support their endowment fund. My after-tax cost was $13,418. Because Pennsylvania allows a charity to have an insurable interest in a donor, I also authorized the college to use the money to purchase a $100,000 single premium life insurance on my life that is guaranteed through age 121 with no future payments required.
In other words, for just 13 cents on the dollar, I guaranteed the college $100,000 at my death. The average annual internal rate of return on this purchase is greater than 6 percent tax-free at age 86, my normal life expectancy. It is difficult for a charity to find a no-risk investment at 6 percent or higher in today’s low-interest-rate environment, so the college has a superior return with no risk. More than that, the cash value and present value of the future death claim are assets that strengthen the college’s balance sheet for many years to come.
A single-premium policy is attractive to a charity because there is no risk of the policy becoming underfunded—it is fully paid-up by the initial gift. But it is not the only way to use life insurance to create a charitable legacy. Donors can make annual tax-deductible gifts to fund a life policy with the charity as owner and beneficiary.
- Some states assign an insurable interest to a charity, while others, including Utah, do not.
- In states where charities have an insurable interest, the charity can purchase the policy as owner and beneficiary. The donor is the insured. The donor makes cash gifts to the charity, which are used to pay the premium.
- In states where charities do NOT have an insurable interest, the donor would purchase a policy with a personal beneficiary. After paying a number of premiums, the donor can donate the policy to the charity because insurable interest only applies at the time a policy is purchased.
- Charities, including The Church of Jesus Christ of Latter-day Saints, almost always have a “gift acceptance committee” to decide whether to accept different kinds of gifts, including life insurance. Charities are highly likely to accept a single-premium policy that is fully funded. They will consider whether or not to accept an annual premium policy where future funding is uncertain.
There are a lot of choices—too many for this newsletter—but just know that you can do something really magnificent for your favorite charity by creating a legacy with life insurance at an affordable out-of-pocket, tax-deductible contribution.
2. Replacement Asset for Family Beneficiaries Disinherited by a Charitable Remainder Trust
A charitable remainder trust (CRT) allows a donor to sell an appreciated asset that will ultimately transfer to a charity, while retaining a term or lifetime income interest from the sale of the asset.
- The donor donates an appreciated asset to a trust created specifically for the donor and his or her family. This may be a business interest, real estate, appreciated stock, and so on.
- Once owned by the trust, the trustee (who is often the donor) sells the asset with no capital gains tax due because the ultimate recipient of the “remainder” interest is a qualifying charity.
- This leaves more money to produce a lifetime (or period-certain) income to the donor and spouse, or to other named beneficiaries.
- At the end of life or term, the balance is given to the charity named in the trust.
- Additionally, there is a current income tax deduction that can offset earned income for up to six years based on the amount given to the trust.
Problem? Not for the donor who wants to sell an asset and live off the income—because with all the tax savings, the donor and spouse will have a higher lifetime income than if they did not use the trust. But what about the heirs of the donors since the remainder interest goes to a charity instead of the children?
It turns out that the income tax savings created by the gift to the CRT is often large enough to fully fund a life insurance policy that is equal to the amount of money the children would have inherited if all the taxes had been paid at the time of sale. In other words, the donor gets both a tax-deduction and avoidance of capital gains recognition, the charity receives a large endowment at the end of the CRT term, and the beneficiaries receive an income-tax-free (and potentially estate-tax-free) life insurance death benefit as a substitute for inheriting the proceeds of the sale. And the life insurance is funded by tax savings! (Read more)
COVID-19 and Philanthropies
Due to the current COVID-19 (novel coronavirus) situation, Philanthropies has temporarily restricted access to our offices for the public. The Gift Planning Services team will be working from our homes, so please feel free to continue reaching out to us through our normal phone numbers and e-mail addresses. We hope you, your families, and your clients will continue to be safe and healthy. You are in our thoughts and prayers!
For a detailed discussion of the services we provide you and your advisors, please contact us at 1-877-650-5377 or by email.