Highlights of Heckerling 2022

 The American Heart Association Professional Advisor Network is proud to present the top five charitable estate planning highlights from the 56th Annual Heckerling Institute on Estate Planning. We’ll also address common problems and solutions in estate and charitable gift planning that advisors face.
1. Anticipated Estate and Income Tax Changes

Anticipating changes to the tax code, planning was abundant in 2021. But Congress didn’t pass any proposals. The House approved the Build Back Better Act in September, but the Ways and Means Committee omitted any deemed realization proposals as outlined in the Fiscal Year 2022 Greenbook. 

Several private letter rulings made their mark in 2021, including some that involved charitable contributions of non-cash assets. 

In Chiarelli v. Commissioner, T.C. Memo. 2021-27 (March 3, 2021), the taxpayer didn’t follow the longstanding requirements to deduct non-cash gifts over $5,000. In addition to upholding the earlier decision, the court imposed a 20% negligence accuracy-related penalty. 

The Tax Court upheld for the Service in Pankratz v. Commissioner, T.C. Memo. 2021-26 (March 3, 2021). The donor didn’t provide the required appraisal for a parcel of real estate and a building he donated to several religious organizations. The taxpayer didn’t rely on his CPA’s advice, nor did he review the return before submission without an appraisal. 

Each of the cases could have been avoided by following the prescribed procedure and obtaining the required appraisal to submit with the return. 

Common Problem in Advising: Assuring clients follow instructions

AHA Professional Advisor Network Benefit: For cash and non-cash assets, the American Heart Association offers a variety of non-cash philanthropic solutions, from real estate to wine to privately owned business interest to cryptocurrency(link opens in new window). 

2. Self-Dealing Rules for Private Foundations
Brad Bedingfield’s presentation, “Deserve’s Got Nothing to Do with It” - Deconstructing the Self-Dealing Rules for Private Foundations,” gave an overview of the self-dealing rules that apply not only to foundations but to CRTs and CLTs as well as certain “interests or expectancies” from estates and trusts.

General principles of self-dealing are broad and apply regardless of whether the foundation benefits from the transaction and can be a direct or indirect transaction. Disqualified persons include substantial contributors, managers of the foundation, or family to name a few. 

General rules to follow:

  • Separate functions of the foundation from the family office or business of the founder.
  • Seek professional advice on management. 
  • Use great caution in financial decisions.
  • Most transactions (including arm’s length transactions) are prohibited acts of self-dealing and need to be avoided to ensure compliance and avoid consequences and penalties.

Common Problem in Advising: Finding turnkey solutions for charitable gifts of cash and non-cash assets

AHA Professional Advisor Network Benefit: The American Heart Association Donor Advised Fund Program(link opens in new window) offers a solution to the burdens of managing a private foundation and can accept most forms of non-cash assets. Your clients’ financial advisor can manage the assets in the DAF.
3. International Giving
Martin Hall’s presentation, “When Charity Does Not End at Home – Options for Tax-Effective International Giving,” was a comprehensive overview of advising clients on charitable donations in foreign countries and receiving a U.S. income tax or estate tax deduction. The information is also timely with the events in Ukraine and the refugees in surrounding countries. 

Hall established the general rules for a donation to a charitable organization to be eligible for a deduction:

  • Must operate for religious, charitable, scientific, literary or educational purposes, amateur sports and prevention of cruelty to children or animals.
  • Doesn’t participate in or support political campaigns.
  • Doesn’t partake in self-dealing.
  • Contributions can’t be earmarked.
  • Based in the United States.

Once established, the rules are clear on how one can contribute and obtain a tax benefit as well: 

  • Seek out a public U.S. charity that has offices overseas.
  • Seek an “American Friends of Organizations” (AFOO) as outlined by the IRS.
  • Private foundations have no restriction from making a grant to an overseas charity, but they must comply with Chapter 42 of the Tax Code.
  • Donor Advised Funds are permitted to make grants overseas using the same guidelines as above. Great care should be used to avoid an excise tax on taxable distribution.

Another issue to consider is related to treaties with foreign countries. The U.S. has treaties with Canada, Mexico and Israel that treat gifts to charities in those countries as eligible for income tax deductions. 

Common Problem in Advising: Finding turnkey solutions for charitable gifts of cash and non-cash assets 

AHA Professional Advisor Network Benefit: American Heart Association Donor Advised Fund Program(link opens in new window) account holders can make a grant to a foreign charity if there is a U.S. affiliate of the charity.

4. Diversity, Equity and Inclusion
The panel conversation “Ethics and Professionalism in Today’s Society: How to Discuss, Address and Promote Diversity, Equity and Inclusion in Your Trusts and Estates Practice and with Your Clients” was moderated by Steven Mignogna, Gerard Brew, Crystal West Edwards, Terrence Franklin and Richard Nenno.

Each of these esteemed jurists had a different prospective on diversity, equity and inclusion and how to work with clients and their families as they face life-threatening situations as well as generations of oversight. 

Common Problem in Advising: Overcoming fear of risks in life and the certainty of death

AHA Professional Advisor Network Benefit: Receive access to planning tools for you and your clients. Information on the American Heart Association Social Impact Fund can be found at Social Impact Fund
5. Retirement Benefits 
As always, Natalie Choate provided valuable insight into the rules for distributing retirement plans — required minimum distributions (RMD) and at death. The U.S. Treasury’s “Notice of Proposed Rulemaking” issued on Feb. 23 can be found in the Federal Register. The proposed rules come on the heels of the 2019 SECURE ACT, which drastically changed the minimum distribution rules. The proposed rules are much more complicated and may be a nightmare for taxpayers and planners. 

Choate said seeking assistance from the IRA custodian to determine the timing and the amount of the RMD will become more valuable than in the past and that the exact facts will play a more important role than ever. Designating a charity as the beneficiary of a retirement plan is a tax-favored way to dispose of a complicated asset and avoid the distribution quagmire. 

Common Problem in Advising: IRA planning for income tax and estate tax is overwhelming

AHA Professional Advisor Network Benefit: We provide customized illustrations for gifts of retirement assets, qualified charitable distributions(link opens in new window), beneficiary designations and more. As a member of the network, you also get access to philanthropic planning continued education opportunities, including our upcoming 20th Anniversary Trust & Estates Conference on April 28. Join the network and register now at heart.org/estate(link opens in new window).

Please consider joining the AHA Professional Advisor Network to offer your clients meaningful options to reach their unique personal and financial goals and grow your practice while helping save more lives from heart disease and stroke. 
About the Author 
John CullumJohn W. Cullum, CFP®  
Senior Advisor 
Charitable Estate Planning 
[email protected] 

John is based in Charlotte, North Carolina, and serves the southern states for the American Heart Association. 
After a 35-year private banking and trust career, John took early retirement and decided to do something that would make a difference. He worked in college fundraising and has dedicated the last six years to the AHA, collaborating with professional advisors to connect the philanthropy of their clients with the organization’s mission. He has served on numerous philanthropic boards, most recently Wing Haven Gardens in Charlotte. 
John is a graduate of the University of South Carolina and University of North Carolina at Chapel Hill Young Executive Institute. He has two adult sons, a 5-year-old granddaughter, 2-year-old Plott Hound and is an avid gardener. 
*This material was not produced in conjunction with or endorsed by the Heckerling Institute on Estate Planning. The Heckerling Institute is not responsible for its content. For information about the Heckerling Institute, visit www.law.miami.edu/heckerling.