The San Francisco Foundation
Personal tools
Home  >  About  >  Publications  >  ENews  >  Professional Advisor News - May 2009
Document Actions

Professional Advisor News - May 2009

In this issue...

 

Estate Gifts are Critical to The San Francisco Foundation’s Grantmaking

Estate gifts to The San Francisco Foundation from generous donors have been the catalyst for positive change and critical to strengthening Bay Area nonprofits and the community in which we live. Last year alone, The San Francisco Foundation distributed nearly $21 million from earnings on estate gifts left to The San Francisco Foundation since 1948.

A steady stream of gifts from wills and trusts have built the Foundation’s endowment, and with careful stewardship, we have grown our endowment over the past 61 years. Donors who are interested in making an estate gift to The San Francisco Foundation can make either an unrestricted or restricted gift. The majority of estate gifts to the Foundation are unrestricted, providing the Foundation with broad latitude to distribute funds through its grant program and allowing us to meet unforeseen needs in the community in perpetuity.

We also administer dozens of restricted funds, with broad charitable objectives that range from monetary awards to writers, to aid for disabled children, to fighting poverty, to helping the blind. Two restricted funds are particularly noteworthy for the leadership they cultivate in our community. The Koshland Young Leaders Award Fund was established by Daniel Koshland, Jr., to give scholarships to disadvantaged but academically excelling students in the San Francisco Unified School District. The Robert C. Kirkwood Memorial Fund is used to support the Community Leadership Award in his honor, recognizing individuals with a history of outstanding community service, commitment, and inspired leadership. We hope you will join us when we celebrate these leaders at the annual Community Leadership Awards celebration, this year on September 22nd.

We invite all donors interested in making an estate gift to the Foundation to join our Legacy Society. As members, they receive invitations to Foundation events, including site visits, forums, and awards celebrations. Legacy Society members are also honored annually at the Foundation’s Legacy Society lunch and kept abreast of Foundation activities and updates through our publications. All Legacy and current donors have the opportunity to meet with our program officers to discuss charitable objectives and how best to use an estate gift to achieve philanthropic goals.

The Foundation has significant experience helping individuals structure estate gifts, including bequests, charitable trusts, and bargain sales. If you have a client who is considering an estate gift, please contact Susan Shain, Director of Gift Planning and Philanthropic Services, at 415.733.8507 or sas@sff.org. 

[back to top]

Charitable Planning in a Down Market

We invite a conversation with you to discuss charitable planning in these times. We look forward to discussing opportunities specific to this economy. Charitable gifts of all sizes can make an impact in this time of great need, bringing positive change to our communities. Below are three charitable options to consider with your clients.

Bequests
According to a recent study by Bank of America, 55% of all high net worth donors have a trust or will with a charitable provision and 35% are considering including a bequest in their estate plan in the next three years. Bequests are the single most popular charitable tool used by high net worth clients.

The downturn has led some nonprofits to cease operations, more to alter their programs, and many to consider making significant changes in the years ahead. In times like these, it would seem wise for clients with bequest provisions to review them and make sure that they are still appropriate. 

Clients who make bequests to a fund at The San Francisco Foundation can designate that their gifts go to a specific organization, or for the Foundation to select organizations that are working on a specific issue, such as afterschool enrichment programs for at-risk youth in San Francisco.   

Charitable Lead Trusts (CLTs)
Due to historically low interest rates, CLTs, like Grantor Retained Annuity Trusts and loans to family members, are particularly appealing from a transfer tax standpoint, especially when funded with assets that have the potential to generate earnings and appreciation at a rate greater than the IRS mid-term rate, currently 2.2%.

CLTs can be designed to make income payments to a donor advised fund (DAF). This approach combines the CLT’s tax efficiency with the DAF’s grantmaking flexibility. The San Francisco Foundation administers a number of DAFs that receive annual income distributions from CLTs.

Transitioning Charitable Remainder Trusts (CRTs) and Private Foundations
As Erik Dryburgh pointed out in his recent seminar on underwater CRTs, a new study suggests that roughly half of the 30,000 Charitable Remainder Annuity Trusts will likely run out of assets prior to their expected termination date. In addition, as the Wall Street Journal discussed in a recent article, investment losses are causing an increasing percentage of private foundations to terminate into donor advised funds.

The San Francisco Foundation has experience assisting with the transition of both CRTs and private foundations. If you have clients who have trusts or foundations and are looking for an exit strategy, we would be happy to discuss our expertise and the support and options we provide for you and your clients.

For more information about any of the charitable options, please contact Chris Nicholson at 415.733.8521 or cmn@sff.org. 

[back to top]

Tax Issues Raised by Early Termination of CRTs

By Amy Tsang, Tax Manager, PricewaterhouseCoopers

Amy Tsang.jpg

The current economic climate may be driving people to consider early termination of their charitable remainder trusts (CRTs). In some cases, the value of the CRT has dropped enough that the continuation of payments to the income beneficiary has become difficult. In other cases, the amount of distribution to the income beneficiary may be too high that the trust exhausts itself, and there is nothing left for the remainder beneficiaries.

If your client is considering the early termination of a CRT, two key issues should be considered before taking action.

  • Long-term capital gains tax. Typically, when a CRT terminates on schedule, the income beneficiary is subject only to an annual income tax either on a certain percentage of the fair market value of the assets or on a fixed amount. However, when a CRT is terminated early, the transaction is deemed a sale of the income beneficiary's interest to the remainder beneficiary, and the cost basis of the income beneficiary's asset is disregarded. Because the holding period of the income beneficiary will exceed one year, the entire amount received by the income beneficiary will be considered long-term capital gain.
  • Self-dealing. Terminating a CRT with a public charity remainder beneficiary is not self-dealing if the amounts that are distributed to the income and remainder beneficiaries are calculated correctly. However, if the remainder beneficiary is a private foundation, early termination could be considered an act of self-dealing and would thus trigger the imposition of the termination tax.

If your clients find themselves with underperforming CRTs and are considering early termination, reach out and help them understand these issues.

[back to top]

The San Francisco Foundation Impact Fund

As our Bay Area community confronts the effects of an unstable global economy, The San Francisco Foundation is focused on addressing the fallout close to home. Every family is tightening its budget, and many must go without as unemployment and foreclosures rise, overall anxiety increases, and we see a surge in the need for food stamps, health services, and shelters.

We launched The San Francisco Foundation Impact Fund, a mutual fund of effective philanthropy so your dollars make a difference. Now more than ever, knowledge and strategy are the keys to ensuring your philanthropic investment creates an impact.

We invite your clients to invest with us in The San Francisco Foundation Impact Fund, featuring five funds:

  • End Poverty
  • Children and Youth
  • Healthy Communities
  • Environment
  • Arts and Culture

Each of the funds will make grants twice annually to effective Bay Area nonprofit organizations selected by The San Francisco Foundation expert program officers. Donors who contribute to the Impact Fund will receive an annual update on how their donations are benefiting the local community.

For more information about The San Francisco Foundation Impact Fund, please visit our Impact Fund section or contact Lisa Rose, Donor Relations Officer, at lmr@sff.org or 415.733.8534.

 [back to top]

Upcoming Event: Economic Outlook - Where are we now? Where are we headed?

The economy and financial markets have changed dramatically in the past year. Join The San Francisco Foundation and the Institute for Private Investors for a panel discussion as we examine where the California, United States, and global economies are headed, when we can expect recovery, and what opportunities and challenges lay on the road ahead.

With moderator Bimal Patel, and panelists J. Bradford DeLong, Stephen Levy, and Thomas F. Steyer.

Thursday, June 4th
Registration: 11:30 a.m. – 12 noon
Program: 12 noon – 1:30 p.m.
Lunch provided

Location:
The City Club of San Francisco
155 Sansome Street, 11th Floor
San Francisco

For complete event information and to RSVP, please visit our Calendar section.

Continuing education credit for attorneys and CPAs. Credit pending for CFPs and CTFAs.

[back to top]