Integrating Charitable Giving Into Legacy Planning

1. FIDELITY CHARITABLE SERVICES ® Integrating Charitable Giving Into Legacy Planning

2. Today’s Objectives • Provide an update on charitable giving trends • Review income tax planning strategies • Review estate planning strategies • Discuss the benefits of donor-advised funds • Learn about Fidelity Charitable Services® Advisor Resources

3. Update on Charitable Giving Trends

4. Growth in Charitable Giving ($ Billions) $350 $306.4 $295 $300 $238 $250 $200 $139 $150 $105 $100 $83 $55 $50 $32 $23 $0 1971 1976 1981 1986 1991 1996 2001 2006 2007 Source: Giving USA 2007 Growth in Charitable Giving

5. Charitable Assets in Structured Giving Vehicles Only 15% of HNW households use structured giving vehicles.1 But, 52% of HNW individuals show an interest in discussing charitable planning with an advisor.2 3 1HNW defined as households with $2MM+ in investable assets (all assets except primary residence, closely held business partnerships, restricted stock, vested/unvested options, insurance and annuities, defined contribution assets) 22004 Fidelity Study on Wealth and Advice. 3 Includes community foundation donor-advised fund assets. Charitable gift annuities are not included in the IRS Statistics of Income, Bulletin – Winter 2007 Sources:The Foundation Center’s Foundation Yearbook, June 2007;Chronicle of Philanthropy, May 2007; IRS Statistics of Income, Bulletin – Winter 2007

6. 2007 Sources of Charitable Giving ($ Billions) Bequests $23.15 Corporations $15.69 7.6% 5.1% Foundations $38.52 12.6% Individuals 74.8% $229.30 Source: AAFRC Trust for Philanthropy/Giving USA 2008 Sources of Charitable Giving

7. Pension Protection Act of 2006 contains several important charitable provisions(August ’06) • The law includes: • A statutory definition of “Donor Advised • Fund” as part of the Internal Revenue Code • Charitable IRA Rollover provisionto certain • qualified charities for taxpayers over 70½ • Special substantiation and deductibility rules • for certain charitable contributions • An extension of rules surrounding “excess • business holdings” in donor advised funds • U.S. Treasury results from the review of DAFs is due in late 2007 • Increased scrutiny around taxation of carried interest Legislative Environment 442962.1.0

8. Evaluating Different Structured Giving Vehicles

9. Selecting the Right Giving Solution Donor-Advised Fund Split Interest (PIF/CRT*) Private Foundation • No start-up fees** • PIF***: No start up fee • CRT: Legal expenses to draft documents, plus additional fees • Start-up fees • Typically no annual distribution is required at account level**** • Provides income stream to non-charitable beneficiaries • 5% annual distribution for charitable purpose required • Generally does not include excise taxes • Income taxes to non-charitable beneficiaries • Excise taxes • Deduction limitation 50/30 (federal) • Deduction limitation 30/20 (federal) • Capital gains tax avoided or deferred • Choice to name PIF or CRT as you wish • Generally, choice of anonymity or recognition on grants • Foundation information is publicly available via IRS Form 990-PF and www.grantsmart.org • Create a legacy of giving • Create a legacy of giving • Create a legacy of giving • Donor-recommended distributions and investments must be approved by sponsoring charity’s board • Control over distributions and investment management (CRT only) • Control over grants and investment management * Charitable Lead Trusts are not considered here. ** Sponsoring Charities for DAF programs will generally assess administrative fees. ***Fidelity Charitable Gift Fund Pooled Income Fund **** Certain minimum account activity requirements generally apply.

10.         Private Foundation or Donor-Advised Fund? Questions to Ask Private Foundation Donor-Advised Fund 1. Do you have $1 million or more to contribute? 2. Do you want control over the investments? 3. Do you want control over grantmaking? 4. Want to hire family to oversee your philanthropy? 5. Are you looking for simplicity? 6. Do you want the largest tax deduction possible? 7. Do you want the option to remain anonymous on grants?

11. Regulatory Considerations TYPE OF ASSET ALLOWABLE DEDUCTION* Key Regulations CASH Private Foundation Charity with DAF program 30% of AGI 50% of AGI PUBLIC SECURITIES Private Foundation Charity with DAF program 20% of AGI; generally deductible at FMV 30% of AGI; generally deductible at FMV If shares are subject to Rule 144, it would continue to apply after those shares are donated OTHER SECURITIES Private Foundation Charity with DAF program Self-dealing and Excess business holdings rules apply (IRC Sec. 4943) 20% of AGI; generally limited to cost basis 30% of AGI; generally deductible at FMV *For assets other than cash, deductions assume that the property has been held at least 12 months; if held less than one year, then deduction is generally limited to cost basis.

12. Regulatory Considerations (cont.) TYPE OF ASSET ALLOWABLE DEDUCTION* Key Regulations 20% of AGI; generally limited to cost basis 30% of AGI; generally deductible at FMV Rule against self-dealing; excess business holdings rule PRIVATE COMPANY STOCK Private foundation Charity with DAF program Rule against self-dealing REAL ESTATE Private foundation Charity with DAF program 20% of AGI; generally limited to cost basis 30% of AGI; generally deductible at FMV *For assets other than cash, deductions assume that the property has been held at least 12 months; if held less than one year, then deduction is generally limited to cost basis.

13. Considerations for Administrating Private Foundations • Monitor income and expenditures • Assist in monitoring, calculating, and distributing 5% annually • Verify the IRC Section 501(c)(3) status of potential grant recipients • Issue grant checks • Coordinate preparation of foundation’s federal return • Compliance monitoring

14. Assets and Funding Considerations for a Private Foundation • Tax deduction may be limited to cost basis for some assets, not fair market value (FMV) • Foundation may need to liquidate assets to distribute required 5% of the FMV of its investments each year • Self-dealing transactions • Jeopardy investments • Excess business holdings

15. Unwinding a Private Foundation? Time to unwind a Private Foundation? • Are the administrative responsibilities of your foundation too burdensome? • Would you prefer to remain anonymous on grants? • Are you bothered by constant solicitations for charitable grants? • Do family members disagree about grantmaking priorities? • Do you worry about who will run your foundation in the future? Ways to unwind a Private Foundation? • Distribute assets into more than one entity • Merge or consolidate with another private foundation • Distribute assets to a public charity, such as one with a donor-advised fund program

16. What is a Donor-Advised Fund? • DAFs have been around since the 1930’s, but witnessed significant growth starting in the 1990’s • One can make an irrevocable contribution to a charity with a DAF program and be eligible for an immediate tax deduction, advise how their contributions are invested, and recommend grants from their DAF to their favorite charities, often with the option of remaining anonymous • A DAF allows your client to combine the most favorable tax benefits with the flexibility to support their favorite charities on their own timetable • In the last decade, many people have discovered that with a DAF, they are able to better support their favorite charities

17. Donor establishes DAF with contribution to charity.Donor names DAF and designates Account Holders, who have recommendation privileges over the DAF. Step 1 Charity accepts additional contributions from donor and 3rd-party contributors for allocation to the DAF. Step 2 All donors may be eligible for an immediate tax deduction for their irrevocable contributions. Step 3 Account Holders recommend grants to qualified charities. Step 4 How to Establish a Donor-Advised Fund

18.         Personal benefits Consolidate charitable giving Instill a spirit of giving in future generations Build a charitable legacy by naming successors to assumeprivileges over the DAF Enable more support to charities Benefits of Donor-Advised Funds Financial benefits Potential immediate federal income tax deduction* Usually no tax on appreciation of donated capital gain property Ability to support multiple charities from the proceeds of the sale of a single block of stock Flexibility to recommend charitable grants on donor’s own timetable (often subject to minimum grant activity requirements) * You may need to itemize deductions and certain other limits may apply

19. Complement to a Private Foundation Advantages of public charity with a DAF program: • Helps to groom children to run a private foundation – teaches them about philanthropy • Maximizes charitable tax deductions • Fund private foundation up to the limit and • Contribute to a public charity with a DAF program for the difference between the deduction limits of the two

20. Combining DAFs with Split-Interest Giving Vehicles Public Charity with DAF program Donates Assets Charitable Remainder Trust (CRT) Distributes Remainder Client/Donor Pays Income • Becomes eligible to take a partial tax deduction • Pays lifetime income from assets back to client and/or other income beneficiary(ies) • At donor’s death, distributes remaining assets to charity with DAF program

21. Why Charitable Planning for Your Practice? Helps advisors: • Deepen client relationships • Differentiate your practice from others • Become involved in legacy planning, which potentially leads to new relationships with future generations

22. Income Tax Strategies:Assets to Consider Giving During Life

23.        Private C-Corp Shares Private S-Corp Shares Certain LLC and limited partnership interests Residential Real Estate Other Real Estate Cash Value of Life Insurance Art & Collectibles Contributing Special Assets to Charities

24. Contribute securities to the Gift Fund Sell securities & donate net cash proceeds to charity $100,000 $9,000 $91,000 $22,850 Current Fair Market Value of Securities Federal Long-term Capital Gains Tax Paid* (15%) Assumes cost basis of $40,000, and long-term capital gains of $60,000 Charitable Contribution/Charitable Deduction** Value of Charitable Deduction Less Capital Gain Taxes Paid*(Assumes donor was in the 35% federal income tax bracket) $100,000 $0 $100,000 $35,000 With a direct donation to the charity, the donor’s federal income taxes are reduced by an additional $12,150 and the charity receives $9,000 more Save More Taxes, Do More Good: Hypothetical Case Study • Situation: • Married couple • $100,000 of long-term appreciated securities • Cost basis: $40k; unrealized long-term gains: $60k Strategy: • Contribute securities directly to charity rather than selling them first • Sell securities & donate net cash proceeds to charity ($91,000) or Contribute securities to the Gift Fund ($100,000) Benefits: • Less in taxes, more in charitable contributions • With a direct donation to the charity, the donor’s federal income taxes are reduced by an additional $12,150 and the charity receives $9,000 more * Assumes all realized gains are subject to the maximum federal long-term capital gain tax rate of 15%. Does not take into account any state or local taxes. **Availability of certain federal income tax deductions may depend on whether you itemize deductions. Charitable contributions of capital gain property held for more than one year are usually deductible at fair market value. Deductions for capital gain property held for one year or less are usually limited to cost basis. This is a hypothetical example for illustrative purposes only. State and local taxes, the federal alternative minimum-tax and limitations to itemized deductions applicable to taxpayers in higher-income brackets are not taken into account.

25. Charitable Venture Capitalist: HypotheticalCase Study • Situation: • Venture capitalist with portfolio of non-publicly traded stock • Shares in S-Corps, Private C-Corps, and interests in limited partnerships • Wants to give to a variety of charities, but does not have much cash to give at this time Strategy: • Contribute assets to a public charity with a DAF program • Benefits: • Recommend grants from a single DAF • Eligible for a tax deduction for the fair market value of the contribution as determined by an appraisal • Avoid tax on gain from the sale of the donated property since the property, at the time of the sale and thereafter, is the asset of the charity and not that of the donor.

26. Why Donate Real Estate? Key potential benefits for donors: • Avoid capital gains tax on unrealized appreciation • Deduct fair market value of the property • Carry forward deduction for up to five years if client’s contribution exceeds limit on charitable deductions

27. Ready to Retire: HypotheticalCase Study • Situation: • Married couple; age 70; AGI: $6 million • Recently sold family business; wants to sell home and retire • Strategy: • Clients contribute home to a charity with a DAF program • Charity sells the property for $3 million • Charity allocates the proceeds to four DAFs of $750,000 each - one for each adult child • Benefits: • Tax deduction for donation • Avoids capital gains tax • Enable more support to charities Client contribution of $3 million to charity DAF with $750K for child #1 DAF with $750K for child #2 DAF with $750K for child #3 DAF with $750K for child #4

28. Contributions of Private Company Stock: HypotheticalCase Study • Situation: • Client wants to contribute stock of a privately held company. • Client is philanthropically inclined, but some of the charities they want to support do not have the resources or experience to accept or efficiently liquidate private company stock. • Strategy: • Client contributes privately held stock to a charity with a DAF program • In order to claim tax deduction of $5K or more for a contribution of a non-publicly traded asset, donors must obtain qualified appraisal. Benefits: • Tax deduction for donation • Avoids capital gains tax • Enable more support to charities

29. Estate Planning Strategies:Which Assets to Give at Death

30. Why Make Charitable Giving Part of an Estate Plan? Clients want to: • Continue charitable donations beyond death • Make their wishes known • Specify the most tax-efficient assets to donate • Reduce taxes for heirs • Specify one or more charities as beneficiaries in their will or trust in case family members pre-decease them

31. Estate Planning Benefits of Gifts to Charities with DAF Programs Clients can: • Decrease estate taxes by reducing size of the taxable estate by contributing to charity with a DAF during their lifetime or by making a bequest to a charity with a DAF • Teach heirs about philanthropy by giving family members recommendation privileges on DAF • Get flexibility in planning for a charitable legacy

32. If donors name a charity with a DAF as: • A Primary beneficiary • A Contingent beneficiary • Charitable beneficiary in a split-interest trust established at death They will benefit fromthese advantages: • Name a DAF as beneficiary and no need to decide today which causes the contribution will ultimately support • At death, gift to the charity with a DAF program, family members or advisors can recommend which charities to support Leaving a Charitable Legacy Naming a Charity with a DAF Program as Beneficiary in a Will

33.     Which Assets to Consider Gifting at Death IRD*-Producing Assets: Non-qualified stock options Restricted stock Installment sale notes Retirement plan assets *Income in respect of the decedent

34. Tax Benefits of Giving IRD Assets to Charity Benefits to the decedent: Decedent’s estate can take a charitable deduction for the assets donated to charity Benefits to the charity: The charity is not required to pay taxes on IRD

35. Disclosures Information provided is general and educational in nature. It is not intended to be, and should not be construed as, legal or tax advice. Fidelity does not provide legal or tax advice. Content provided relates to taxation at the federal level only. Availability of certain federal income tax deductions may depend on whether you itemize deductions. Rules and regulations regarding tax deductions for charitable giving vary at the state level, and laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of the information provided. Charitable contributions of capital gain property held for more than one year are usually deductible at fair market value. Deductions for capital gain property held for one year or less are usually limited to cost basis. Consult an attorney or tax advisor regarding your specific legal or tax situation. Fidelity makes no warranties with regard to the information provided or results obtained by its use. Fidelity disclaims any liability arising out of your use of, or any tax position taken in reliance on, the information furnished herein. Fidelity Charitable Services, Fidelity Private Foundation Services®, and the pyramid logo are registered service marks of FMR LLC. The Fidelity®Charitable Gift FundSM (“Gift Fund”) is an independent public charity with a donor-advised fund program. Various Fidelity companies provide non-discretionary investment management and administrative services to the Gift Fund. Charitable Gift Fund and the Charitable Gift Fund logo are service marks, and Giving Account® is a registered service mark, of the Trustees of the Fidelity Investments® Charitable Gift Fund. Fidelity and Fidelity Investments are registered service marks of FMR LLC, used by the Gift Fund under license. 472912