Old North State Council, BSA

PLANNED GIVING OVERVIEW

Boy Scouts of AmericaCouncil Fund Development Team

Finance Impact Department – Council Operations Group

Planned Giving – What is it?

• Sign your kids up for sports – give up your Saturdays

• Send your kids to college – give up your savings.

• Ask your boss to play golf – give up winning

• Volunteer to be a Scout leader – give up an hour a week.

Win Donor

Win Charity

Win Heirs

Values

What Worries You?

Estate Concerns

Probate CostsEstate Tax

Accidental DisinheritanceCapital Gains Tax

Unforeseen Expenses

Got wills?

• 60% of American adults have wills

–This means 4 out of 10 don’t

–What about wills that aren’t up to date?

–Only 8% of those with wills included a charity in it

With A Current Will …

• YOU specify distributions to anyone

• YOU nominate guardians and personal

representatives

• YOU can create trusts

• YOU can give to any charities you want

Without A Current Will …

• May be COSTLY • STATE picks beneficiaries• COURT picks administrator/personal

representative• COURT determines special needs• NO distributions to charity• NO tax savings strategies employed

Estate Tax Simplified• If you had a partnership with a neighbor –

who did nothing to help you or add value – would you keep putting all your assets and best ideas into the partnership?

– NO!! You’d stay up all night trying to figure out how to keep more for yourself

– That’s estate planning

Estate Distribution

Only Three Places

Family Charity Government

Phases of Life

• Estate Accumulation – 40 Years

• Estate Conservation – 10 Years

• Estate Distribution – 2 Hours

We Three Kings(of Tax Savings Are…)

1. THE ANNUAL EXCLUSION

$13,000 a year to anyone, per

person, each year and no gift

tax is owed. A spouse can give

another $13,000/person/year

E.g. Married couple can give

$26,000/year to each child and

grandchild, tax free.

We Three Kings(of Tax Savings Are…)

2. THE MARITAL EXCLUSION

Unlimited tax free transfers between spouses

$10 Billion? No Problem. NO TAX.

(Exception for non-U.S. spouses)

We Three Kings(of Tax Savings Are…)

3. THE LIFETIME EXCLUSION (Non-Marital) $5 million

during 2011-12 for an individual. Husband $5 million,

Wife $5 million – if one only uses part of their

exclusion, i.e. 75%, the other can also use the

remaining 25% of late spouse’s exemption.

A MOVING TARGET. . .

Year Exemption Top Rate

2008 $2M 45%2009 $3.5M 45%2010 Repealed

Repealed *2011-12 $5M

35%

* Possible capital gains tax on appreciated assets or follow 2011 plan and the asset basis is stepped up to current value – option is up to estate .

Year Exemption Top Rate

2008 $2M 45%2009 $3.5M 45%2010 Repealed

Repealed *2011-12 $5M

35%

* Possible capital gains tax on appreciated assets or follow 2011 plan and the asset basis is stepped up to current value – option is up to estate .

Ways to give that benefit you, your family and Your Council/BSA…

• With planned gifts, you create win-win-win solutions for you, your heirs and your council.– You can make a gift that costs nothing during your lifetime.– You can give stock and realize larger tax savings.– You can get a regular paycheck for life in return for your gift.– You can donate your house, continue to live there, and get a

tax break all at the same time.– You can use annuity or trust distributions to purchase

wealth-replacement insurance for your children/heirs.

Bequests

1. Specific Bequest

2. Contingent

3. Percentage

Add/Change a Bequest?

Codicil – an addition to

an existing will–Only needs to be one

paragraph/page

Designating Your Council/BSA as beneficiary of your Retirement Plan: 401(k) or IRA

• Bypass probate

• $0.00 cost to you, today

• Qualifies you for membership in Heritage

Society

• Provide for the future of local Scouting

Stock Gifts

• Still an excellent way to make gifts

• Giving appreciated stocks to charity (instead of selling) avoids CG taxes

• Stock owned for more than 12 months – fair market value deduction

Stock Gifts

Example: Donor considers a gift of $100,000. Should he make his gift with:

a) stock (with a $10,000 basis);b) the sales proceeds from the stock;c) or a personal check?

GIFTS OF STOCKS

1. PERSONAL CHECK• Tax Owed By Donor 0 (but after-tax dollars!)• Tax Deduction/Gift $100,000• Capital Gains Tax Avoided 0

2. STOCK SOLD, PROCEEDS DONATED• Tax Owed By Donor $13,500• Tax Deduction/Gift $86,500• Capital Gains Tax Avoided 0

3. STOCK GIVEN TO COUNCIL• Tax Owed by Donor 0• Tax Deduction/Gift $100,000• Capital Gains Tax 0

Real Estate Gifts

• Also an excellent way to make gifts

• Same tax benefits to donor as for stock gifts

• Gifts of mortgaged property not good for anyone (unless very small)

IRAs – What to Do?

• IRA’s are Retirement Plans – not Inheritance Plans

• Can be hit with Income Taxes and Estate Taxes

• Often the worst thing you can leave your heirs

Who Gets Which Asset?

Jane has a large, taxable estate. It includes a block of stocks worth $500,000 and an IRA worth $500,000. She wants one to go to her children, the other one to your council.

• Who should get the stocks?

• Who should get the IRA?

IRA To Children -- Bad

• IRA to kids could be double taxed• IRA to council saves taxes (council is tax exempt)

Stocks $500,000

IRA $500,000

Children $500,000

JVC/BSA $500,000

Income Challenge

• Not sure you want to give it away now

• Dividends often 2% or less

• You’d like some extra income

What Can You Do?

Solution

BSA Gift Annuity• Guaranteed payments for life

• Rates based on age – will not change

• Income tax deduction, no estate tax

• Most payments part tax-free

• No commissions (unlike commercial annuities)

BSA Gift AnnuityJohn Jones 70

Property$25,000

($10,000 Basis)

Bypass $15,000 gain Tax deduction = $7,788.35

Property$25,000

5.8% Annuity

One Life

Payout $1,450 Tax-free part = $444 Effective rate 8.2%

Scouting$25,000

After one life, goes to council

Gift Annuity Rates (2010)

AGE PAYOUT RATE

60 5.2%

70 5.8%

80 7.2%

85 8.1%(Check with your advisor for current rates)

Challenge

• Have property you no longer need

• Want some income and a tax deduction now.

Do I have to make an outright gift?

Phil & Betty

• Property worth $300,000

• Only paid $40,000 for it

• Currently receive no income from it

• Want supplemental retirement income

Charitable UnitrustPhil – Age 70 Betty - Age 70

5.00% UnitrustProperty$300,000 Principal

$300,000Scouting$300,000Two LivesBypass

$260,000 gain

Deduction: $126,700 Income $15,000/yr.(compared to $0 before) Gift to the BSA

after their lives

CHARITABLE UNITRUSTS• Great way to turn non-income producing

assets into income producers• Asset removed from estate (no estate tax,

probate costs)• Can add to it at any time, in any amounts• Good for land, cash, stocks, etc.

A Shift in Estate Planning Philosophy

Conventional Estate Planning– Keep as much as you can– Pass to heirs as much as possible

Estate Planning for the Modern Philanthropist• Keep as much as you need• Pass to heirs what you deem appropriate• Control distribution of what you can’t keep

The Modern Philanthropist Philosophy

“I want my children to have enough to do anything, but not enough to do nothing.”

Warren Buffett

Affluenza ProjectJessie O’Neill, founder of the Affluenza Project and heir of

a wealthy family, lists the following outcomes when “valuables” are passed on without “values:”

Jessie O’Neill, founder of the Affluenza Project and heir of a wealthy family, lists the following outcomes when

“valuables” are passed on without “values:”

Inability to delay gratification;

Inability to tolerate frustration;

Low future motivation;

Low self-esteem; Low self-worth; Lack of self

confidence;

Inability to delay gratification;

Inability to tolerate frustration;

Low future motivation;

Low self-esteem; Low self-worth; Lack of self

confidence;

Lack of personal identity;

Social & emotional isolation;

Feelings of failure, depressions, anxiety;

Unrealistic expectations and lack of accountability;

False sense of entitlement;

Inability to form intimate relationships.

Lack of personal identity;

Social & emotional isolation;

Feelings of failure, depressions, anxiety;

Unrealistic expectations and lack of accountability;

False sense of entitlement;

Inability to form intimate relationships.

“The parent who leaves his son enormous wealth

generally deadens the talents and energies of the son,

and tempts him to lead a less useful

and less worthy life than he otherwise would.”

“The parent who leaves his son enormous wealth

generally deadens the talents and energies of the son,

and tempts him to lead a less useful

and less worthy life than he otherwise would.”

- Andrew Carnegie- Andrew Carnegie

Moving Toward A “Values-Based”Planning Process

Moving Toward A “Values-Based”Planning Process

Values-Based Estate Planning?Values-Based Estate Planning?

• Estate planning is not just the documentation used to transfer material wealth

• It is the process of passing on the family’s true wealth – its traditions, morals, and virtues

• The process of identifying shared family values as a family

Why is Values Based Planning Important?Why is Values Based Planning Important?

65% of all family fortunes are lost by the end of the 2nd generation

90% of all family fortunes are lost by the end of the 3rd generation

65% of all family fortunes are lost by the end of the 2nd generation

90% of all family fortunes are lost by the end of the 3rd generation

MORE INFORMATION?

www.bsaonsc.org/finance • Rodney Carpenter: rcarpent@bsamail.org

or (336) 378-9166

• Your family and your own advisors!