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UT Austin Gift Planner – Nov. 26, 2007

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Welcome to The University of Texas at Austin Gift Planner, an online resource for professional advisors in the estate and financial planning industries. The Gift Planner provides practical information on gift planning issues, reports new developments in charitable giving techniques, connects you with leading professionals, and informs you about key events and resources at UT Austin.

November 26, 2007 (Vol. 1, No. 2)

Capital-gains tax changes

In 2008, 2009, and 2010, the tax rate on long-term capital gains from sales of stocks, mutual funds, and other securities is scheduled to drop to zero — yes, zero — for people in the two lowest ordinary income brackets. Would you like to know how this could benefit some of your clients who own appreciated assets and wish to support UT?

If your clients are in the 10 percent and 15 percent federal income-tax brackets — with a 2008 income of no more than $33,000 for single taxpayers or $66,000 for married couples filing jointly — then creating a charitable gift annuity funded with appreciated securities in 2008 could allow them to:

  • Make a gift to UT Austin while increasing their lifetime income
  • Render most of the annuity payment tax-exempt for years to come
  • Avoid capital-gains taxes

Example: Tom and Mary are a retired couple in their late 70s with a taxable income of $60,000. Years ago they paid $12,000 for stock that is now worth $20,000, and their adviser has been urging them to sell. Currently they pay only 5 percent on their capital gains, but “free” sounds even better.

They decide to transfer the stock to The University of Texas Foundation for a charitable gift annuity that will eventually support the program of their choice at UT Austin. They will also receive an annual lifetime income of about 6.6 percent on the $20,000, or about $1,320 a year. As long as they’re in the 10 percent or 15 percent tax bracket, they won’t pay any capital-gains tax, and more than 50 percent of their $1,320 annuity will be tax-free through mid-2021. After that, they’ll be taxed on the entire $1,320.

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End-of-year giving

As the end of the year approaches, many of your clients are taking time to review, reflect, and plan. As you assist them with their estate and charitable-giving planning, we hope you will look to UT Austin’s Gift Planning team to answer your questions and provide philanthropic resources for end-of-year giving.

There are a variety of end-of-year gift-giving options at UT Austin, many of which offer significant tax savings.

Gifts of cash

The most common gift to the University is cash. Giving by check or credit card is easy and always welcome because these gifts can be used immediately for pressing needs.

You can give by credit card on our secure online giving form or by calling toll-free 866-875-9651.

To give by check, print a gift form and mail it with your gift. The envelope must be postmarked by Dec. 31 to qualify for a tax deduction this year.

Mail your gift to:

The University of Texas at Austin
Office of Development
P.O. Box 7458
Austin, Texas 78713-7458

Gifts of stock

For a gift involving a physical stock certificate, the certificate should be sent using registered, insured mail. A properly endorsed stock power should be sent separately, also by registered mail. Both should be postmarked by Dec. 31. Stock certificates and stock powers may be mailed to:

The University of Texas System
Attn: Office of Development and Gift Planning Services
210 W. 6th Street, Room 1.200
Austin, Texas 78701

Phone: 512-499-4300

Stock certificates along with the stock power may also be hand-delivered by noon CST on Dec. 31 to:

The University of Texas at Austin
Office of the Vice President for Development
2901 North IH-35, Suite 4.100
Austin, Texas 78713-7458

Overnight deliveries of stock certificates and stock powers must be received by noon CST on Dec. 31 at the above address.

For electronic transfers of stock, please contact Charlotte Hambrick at UT System at 512-499-4346 to obtain DTC wire transfer instructions.

Mutual fund gifts

Mutual fund transfers can be complicated and may take time to complete. Mutual fund transfers should be initiated by Dec. 3 to ensure a timely transfer by year’s end. Please contact Charlotte Hambrick at UT System at 512-499-4346 to coordinate a mutual fund transfer.

Other planned gifts

Your clients may give to UT Austin in other ways, such as charitable gift annuities and charitable remainder trusts. Please contact the Office of Gift Planning at 512-475-9671 by Dec. 1 to explore these and other giving opportunities at UT Austin.

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Meet a colleague

Michele MobleyThis feature uses a Q&A format to introduce you to one of your fellow professional advisors. Meet Michele Mobley, partner in the Austin law firm DuBois, Bryant & Campbell.

How did you get involved in estate planning?

I went to law school at Duke, and estate planning was my favorite class there. The first firm I worked for didn’t have an opening in estate planning, but we moved to Rochester, N.Y., a couple of years later, and the firm I joined there had an opening in estate planning. I’ve been doing it ever since — about 15 years.

How would you describe your experience in the field?

It’s a practice area I like a lot. You have a feeling that you’re helping people. Most of them are here because they want to be, not because of some kind of contested issue. They truly are self-motivated.

What do you like about estate planning?

One of the most interesting aspects of the job is working through the details with folks and figuring what paperwork we can do to see that their goals are carried out

When you say “charitable giving” to a lot of people, the only thing they think of is writing a check or, in this day and age, logging onto a web site to make a contribution using a credit card. Those are both wonderful ways to make gifts, but there’s a whole other realm, other ways to structure a gift.

Also, there’s an analytical side to it. I was a physics major as an undergrad, so I like the whole tax side to estate planning. It’s like solving a puzzle — putting together clients’ goals, their circumstances, and their assets — and then there’s the tax law that overlays all of it.

How do you let your clients know there are other ways of being charitable?

It goes back to a few things. No. 1, what are their circumstances? If they are a family that has a low base of security, there are certain techniques that we want to encourage them to use, such as a gift of stock rather than selling the stock in order to give cash. And if they also have a goal of benefiting their family or themselves, there are any number of things they can consider: a split-interest trust, a charitable remainder trust, a charitable lead trust. There are plenty of different techniques out there depending on what is happening with them.

How do you introduce the topic of charitable giving with your clients?

It varies. For some folks, charitable giving is the reason they call. With other people it works in reverse, where their primary focus is providing for their families. Once we get that ironed out, charitable giving follows.

Sometimes the young families — young when it comes to wealth — have a targeted amount that they want to give to their children. They don’t want to leave their children so much that they can sit around and do nothing. One way to approach charitable planning for these folks is to ask, ‘OK. How much do you want your kids to have? To what extent should we cap that in some way?’ and then figure out a charity or a larger family group to whom they want to leave the rest of their assets.

What are the advantages of charitable giving?

As a tax lawyer, the immediate thing that comes to mind are the tax benefits. But I don’t think that taxes are a driving factor for many people. A bigger motivator is a sense of giving back to an institution or organization that helped them in the past. So is feeling that they are benefiting a cause that is important to them, that has impacted their life or the life of a loved one.

When you’re talking to clients about charitable giving, do they already have a charity in mind? Do you play a part in educating them?

Some folks know right away that they want to benefit their school or their church or some particular charity. Others are different. For example, I had a client come in and say he wanted to benefit veterans organizations but didn’t know which ones. We helped him do some background research on which organizations might be right for his goals.

As we’re nearing the end of 2007, what are some options for charitable giving?

A lot depends on how much time is available. If it’s Dec. 30, you have limited options: You write a check, you make a credit-card contribution, or you contribute to a donor-advised fund, which essentially allows you to get your income-tax charitable contribution without making any decision about which charity you ultimately want to benefit. Donor-advised funds are very popular.

If there’s more time available and you’re 70 1/2 or older, it’s worth considering a gift of up to $100,000 from your IRA. It’s uniquely available right now. It takes some time to implement, though. It’s not going to happen in 48 hours at the end of the year.

Even more complicated but also a unique opportunity is the conservation easement for folks who own ranchland or essentially undeveloped property. A conservation easement has some advantages, particularly before 2007 expires.

Of course, folks should meet with their accountant and find out if they need an income-tax charitable contribution and then decide what gift amount makes sense to them.

What do you think clients who are interested in end-of-the-year giving want from their professional advisors, both accountants and attorneys?

If they’re giving for a tax reason they want to know how much to give. They want to know what to give. And they’re interested in how to give. If you have an idea about how much and what you want to give, there may be different ways of accomplishing that gift.

What do you think they want from the charities they are supporting?

Some of them want recognition. Certainly not everybody wants recognition, though. I think they’re interested in knowing that their gift is going to be used for the charitable purpose they have in mind without being watered down or diverted to other projects. And of course they all need a receipt indicating that they made the gift so that they can report it on their income taxes.

What resources do you use to help you help your clients?

The National Committee on Planned Giving has a good web site. I subscribe to Steve Leimberg’s web site for financial-services professionals. There’s a program called Number Cruncher that I use to give people an idea of what will happen if they implement certain plans. Then occasionally I call folks like you all to run other planned-giving examples.

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Charitable rollovers

Do you have clients who would like to give to charity directly from their IRAs without having to report the amount as income? Now is the time to act — the law that allows people 70½ and older to give to charity from their IRAs expires Dec. 31.

Gifts may count toward a donor’s required minimum distribution and may be up to $100,000 per person. Contact the Office of Gift Planning by Dec. 1 to take advantage of the charitable-rollover law before it expires. The office can be reached at 512-475-9671 from within the Austin area or toll-free at 866-488-3927.

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