Give Out of Habit70%

Give Based on Emotion23%

Are Strategic Donors7%

Habitual

Strategic

Emotional

o People of all ages, but especially individuals 60-80

o Singles and Couples without children

o Singles and Couples with successful children

o Individuals who are fearful to leave a large inheritance to their heirs

o Individuals who do not believe their heirs need a large inheritance

o Business owners

o Anyone with appreciated assets

o Anyone with tax-deferred assets

o Anyone with a large estate (more than ET Exemption)

o 23 Churches, average of 25 planning units per church, median estate size is $800,000

o When introduced to the concept of planned giving and then shown how they can do it within their objectives and assets, there is a dramatic shift in participation

o Less than 5% of participants with a current plan had included a charitable gift in their plan before The Carpenter’s Plan

o 88% of participants included a charitable gift in their plan after The Carpenter’s Plan

o About 70% give out of habit

o About 23% give based on emotion

o About 7% are strategic donors

o Taking care of your heirs

o Connecting lifetime values with end of life decisions

o Directing social capital

o Heirs

o Taxes

o Charity

1. Taking care of your heirs

3

Financial Independence

FamilyLegacy

Gift Tax

1. Taking care of your heirs

2. Connecting lifetime values with end of life decisions

If you had to give away

a large sum of money,

what would you do?

1. Taking care of your heirs

2. Connecting lifetime values with end of life decisions

3. Directing social capital

Heirs Taxes Charity

1. Marital deduction

2. Estate tax exemption

3. Charitable deduction

An “estate” is everything an individual owns:

o Home

o Other real estate

o Bank accounts

o Investments

o Retirement benefits

o IRAs

o Insurance policies

o Personal effects

o Estate tax

o Gift tax

o Generation skipping tax

o Income tax

o Liquidity

o $11,400,000 estate/gift tax exemption

o Indexed for inflation

o 40% marginal estate tax rate

Power of Attorney for Health, Power of Attorney for Property, Living Will

Last Will & Testament Revocable Living Trust

A/B Trust PlanningILIT

Advanced Noncharitable Tools(e.g., FLPs, GRATs, QPRTs, etc.)

CRTs, CLTs, FamilyFoundations, etc.

o Gift of appreciated asset

o Bargain sale

o Bequests

o Gift of an IRA

o Life estate

o Charitable Gift Annuity

o Charitable Remainder Trusts

o Charitable Lead Trusts

o Living Lead Trusts

Property$200,000

($100,000 Basis)

Gift to Charity$200,000

Property to Charity

Income Tax Deduction of $200,000 may save $74,000*.

Gift to charity. Bypass of Capital Gain may save

$23,800*.Charity

$200,000

*assumes highest capital gains tax bracket of 23.8% and income tax bracket of 37%

The Charitable IRA Rollover is back in 2019:

A Qualified Charitable Distribution from an

IRA, owned by someone over 70½ to a

charity is not included as income and is not

counted as an itemized deduction.

…And it is "permanent"

A sale of property by the donor to the Charity for a price less than Fair Market Value.

The donor receives a charitable deduction for the difference between FMV and the sales price and bypasses the Capital Gains Tax on the portion of gain attributed to the gift.

Property$200,000

($100,000 Basis)

Sale Portion$151,329 Net Benefit

Cash to Donor $151,329Less: $18,008Plus: $18,008Net: $151,329

Net to donor is cash benefit plus net taxes saved or $151,329. Donor reduces taxes by $23,800 and makes $48,671 gift

Long-term capital gain is the difference between sale price and basis allocated to sale. Tax of $18,008 on gain is offset by charitable income tax deduction.

Property sold at bargain price to charity, income tax deduction saves $18,008. Captial gain bypass on gift portion may save $5,792.

Charity$48,671

*assumes highest capital gains tax bracket of 23.8% and income tax bracket of 37%

A provision in a will where a charitable organization receives assets at the time of a donors’ death.

o Fixed Amount

o Specific Property

o Percent of Residuary

o Contingent

o Bypass Income Tax

o Bypass Estate Tax

o Part or All of IRA

o Beneficiary Designation

IRA

Charity

$500,000

Heirs Government

$485,000

$500,000

Death of 2nd Spouse

Gift of an IRA

Surviving Spouse

Death of 1st Spouse

Retired CoupleHouse = $200,000Investment Accts - $150,000IRA’s = $50,000Life Insurance = $100,000

Total Estate

Income Tax onRetirement Accounts

Before Planning:Heirs $ 485,000

Charity $ 0Taxes $ 15,000

$15,000

$500,000

Heirs Government

$0

$500,000

Death of 2nd Spouse

Gift of an IRA

Surviving Spouse

Death of 1st Spouse

Retired CoupleHouse = $200,000Investment Accts - $150,000IRA’s = $50,000Life Insurance = $100,000

Total Estate

Charity

Income Tax onRetirement Accounts

RetirementAccounts

$50,000

After Planning:Heirs $ 450,000Charity $ 50,000Taxes $ 0

Before Planning:Heirs $ 485,000Charity $ 0Taxes $ 15,000

$450,000 $50,000

An agreement established by the donor transferring a deed of real property to a charitable organization while reserving for themselves the right to live on or use the property for life. Charitable deduction are limited to properties that are either personal residence or farms.

John Jones 75 Mary Jones 70

Home or Farm$200,000

Deed to Charity$200,000

After two lives, property to charity.

Income tax ded. of $109,588.

Deed to charity. Right to use property.

Charity$200,000

A legal contract between the donor and the charitable organization, where the donor exchanges cash, stock, or other assets for an agreed-upon income for life.

John Jones 82 Mary Jones 80

6.4% AnnuityProperty$200,000

($100,000 Basis)

Gift to Charity$200,000

Charity has remaining property.

Annuity of $12,800 for two lives. Tax-free amount $2,484. Effective payout rate of 9.4%

Gift to charity. Partial bypass $100,000 gain may save $10,493. Income tax deduction of $88,175 may save

$32,625.

Two LivesCharity

*assumes highest capital gains tax bracket of 23.8% and income tax bracket of 37%

o Testamentary

o Living

Used by donors to transfer assets to a trust, which then goes to the charitable organization after the death of the last beneficiary. The donor retains a fixed or variable income for life.

Charitable Remainder Unitrust% based on annual value of corpusChanges annually

Charitable Remainder Annuity Fixed amount% of original corpusNever changes

o Straight

o NICRUT (Net Income)

o NIMCRUT (Net Income & Makeup Provision)

o Flip trust (NIMCRUT or NICRUT to Straight)

$1,300,000Farm

CRUT$1,300,000

Charity

$588,000 Deduction

Avoid Cap Gains Tax

No Estate Tax on CRUT

Past Gross Income:$47,000

7,80036,00012,000

$102,800

Current Gross Income:

$47,00090,00012,000

$149,000$90,000/Yr.

For the rest of her life

81 Single Woman$2.4 Million Estate, Low on Cash

$3,000,000

Heirs Government

$2,700,000

$3,000,000

Death of 2nd Spouse

IRA to a CRT

Surviving Spouse

Death of 1st Spouse

Retired CoupleHouse = $500,000Other Assets - $500,000IRA’s = $1,000,000Life Insurance = $1,000,000

Total Estate

Charity

Income Tax onRetirement Accounts

After Planning:Heirs $ 2,700,000Charity $ 1,000,000Taxes $ 0

Before Planning:Heirs $ 2,700,000Charity $ 0Taxes $ 300,000

$300,000

CRUT$1,000,000

5%20 Years

$50,000/Year($35,000 after tax)

$700,000 Total

$3,000,000

Heirs Government

$0

$3,000,000

Death of 2nd Spouse

IRA to a CRT

Surviving Spouse

Death of 1st Spouse

Retired CoupleHouse = $500,000Other Assets - $500,000IRA’s = $1,000,000Life Insurance = $1,000,000

Total Estate

Charity

Income Tax onRetirement Accounts

After Planning:Heirs $ 2,700,000Charity $ 1,000,000Taxes $ 0

Before Planning:Heirs $ 2,700,000Charity $ 0Taxes $ 300,000

$2,000,000

CRUT$1,000,000

5%20 Years

$50,000/Year($35,000 after tax)

$700,000 Total

Established by a donor transferring assets to a trust which provides income to a nonprofit for a period of years. At the end of that period, the trust assets revert either to the donor or to someone else the donor designates.

o Grantor Vs. Nongrantor

o Living Vs. Testamentary

o Income to Charity

o Remainder to Family

o High Gift Tax and GST Exemption allows Grantors to gift large assets to family with no immediate tax

o Low Applicable Federal Rate (AFR) allows for large gift tax deductions for Charitable Lead Trusts

o Large GST exemption allows the grantor to exempt the assets from transfer taxes for multiple generations

o Only applies to a few wealthy people, but the impact could be huge!

Original Property$15,000,000

Original Property$15,000,000

Property Growth$20,101,435Term of 6 Years

Value $20,101,435Taxes $3,568,574

Family $16,532,861

Trust Principal$15,000,000Term of 6 years

Principal to Family$15,000,000

Charity - $4,500,000

Retain Asset vs. Charitable Lead Annuity Trust5% Annual Growth of Assets, 5% Annual Payment to Charity from CLT

* Future Values discounted at 3.5% for inflation to arrive at Present Value

Current PlanningHeirs $27,400,000Charities $ 0Taxes $ 3,600,000

Death of First Spouse

Death of Surviving Spouse

CLT PlanHeirs $31,000,000Charities $12,500,000Taxes $ 0

$31,000,000

10 y

ears

Incometo

Charity

15

ye

ars

CLTs$20,000,000

Surviving Spouse $20,000,000

Credit Shelter Trust$11,000,000

Heirs$31,000,000 $12,500,000

Present Value of Plan*

Heirs $24,251,742Charities $ 9,640,367Taxes $ 0

$5,000,000

$5,000,000

5% payout5% return

Testamentary Charitable Lead Trust

20

ye

ars

5y

ea

rs

$5,000,000

$5,000,000

Nashville, Tennessee

www.ceplanninginstitute.org