Tobacco Buyout:Tobacco Buyout:Exploring All The OptionsExploring All The Options

Recipients of Tobacco Buyout funds will face many financial challenges because of the tax liabilities associated with this additional income. For many, charitable options can present significant alternatives for:financial tax retirement, andestate planning.

The College of Agriculture & Life SciencesThe College of Agriculture & Life Sciences

The College of Agriculture & Life Sciences at N.C. State University has developed information resources to help: buyout payment recipients, professional advisors (attorneys, CPA’s, etc.) Cooperative Extension Agents, and the general public.

Information ResourcesInformation Resources We have launched a comprehensive website

dedicated to tobacco buyout issues.

http://www.tobaccobuyout.cals.ncsu.edu We have also launched our new planned

giving website to serve as a resource for donors and professional advisors.

http://www.calsncsu.planyourgift.org

Tobacco WebsiteTobacco Website

This website includes complete information about the buyout and it will be updated on a continuing basis.

It links to NC State’s Department of Agricultural and Resource Economics and the Office of College Advancement.

It also links to other regional websites and other programs at NC State that assist agriculture.

A Word of Caution…A Word of Caution…

Every individual’s circumstances are different. There is no one “right” answer. The information included on the website should

not be considered legal or financial advice. We urge everyone to consult with their legal and

financial advisors to ensure they are making the best decisions with their buyout funds.

What Are the Charitable What Are the Charitable Options?Options?

Outright Gifts Life Income Gifts:

Charitable Remainder Trusts Charitable Gift Annuities

Deferred Life Income Gifts: Deferred Charitable Gift Annuities

It’s A Matter of ChoiceIt’s A Matter of Choice

There are many choices for recipients to consider for their buyout funds…simply pay the increased taxes, orplan for current or retirement income, andmake an investment in their communities here in North Carolina by supporting charitable organizations.

Many Options…Many Options…Benefit charities in local communitiesCooperative Extension4-H Youth Development Family and Consumer Science agricultural programs, or multiple charitable interests.Gifts can be used to support ongoing

programs, create endowment funds, establish scholarships or many other options.

Outright GiftsOutright Gifts

Recipients making outright cash gifts to support charitable organizations of their choice may qualify for a charitable income tax deduction (for those who itemize).

The deduction is for the full amount of the contribution.

It can help offset income or capital gain tax liabilities.

Life Income GiftsLife Income GiftsOften called deferred gifts, life income gifts

enable individuals to make a significant gift while:

reserving an income for life and receiving a current charitable income tax

deduction.Gifts can be in the form of a Charitable Gift

Annuity or Charitable Remainder Trust.

Life Income GiftsLife Income GiftsGifts provide a current year income tax deduction for the value of the future gift to a charity.

They also providing income to the donor and up to one additional income beneficiary for their lifetimes.

Life income gifts can play a significant role in financial and tax planning and offer attractive returns.

Deferred Life Income GiftsDeferred Life Income Gifts

Deferred charitable gift annuities can help individuals by providing immediate tax advantages while deferring income until a later time, such as retirement.

Because the income payments do not occur immediately, the gift annuity value grows and the income payments and charitable deductions are larger.

The charitable income tax deduction is used in the year of the gift, often when tax liabilities are larger.

Additional Benefits…Additional Benefits…

All of these charitable options remove the gift assets from the donor’s estate, a concern if the individual’s estate might qualify for federal and state estate taxes.

They allow the donor to designate their gifts to programs or services that are aligned with their interests.

They can support current operations, program funds, capital projects or endowments.

An Example:An Example: Charlie and Anne Charlie and Anne Charlie and Anne (both 61) have been tobacco

farmers for 30+ years with little set aside for their retirement.

They hope to farm nine more years before retiring. They want to plan for their retirement years, but

could also use more income now. Over the next 10 years they will receive $700,000

from the tobacco buyout.

One Option: One Option: A Charitable Remainder UnitrustA Charitable Remainder Unitrust

In 2005 they fund a 5.75% Charitable Remainder Unitrust with $50,000. In years 2-10 they will add $35,000 per year.

From their buyout payments they retain $20,000 in 2005 to use for other needs, and $35,000 in years 2-10.

They receive an immediate charitable income tax deduction of $12,643 in 2005.

Their first year income will be $2,875. Each year, as the value of the assets in the trust increases (or decreases) so will their income.

Additional Features…Additional Features…They will receive over $511,683 in estimated income distributions over their lifetimes.Ultimately, their total charitable deductions will be $112,560 (the initial gift plus the nine additions to the trust).At the time the couple retires in 2014, their projected income from the trust will be just over $19,000.The value of the trust is not taxable in either of their estates.Ultimately, the projected charitable remainder will be approximately $387,000.

An Opportunity of a LifetimeAn Opportunity of a Lifetime

For many recipients, tobacco buyout payments are an opportunity of a lifetime.

We realize charitable options will not be of interest to everyone, nor will NC State be everyone’s favorite charity.

However, for many recipients charitable gift strategies may provide the answers for their financial, tax, retirement and estate planning… and their desire to support agriculture.

Additional OpportunitiesAdditional Opportunities

Many recipients of the Tobacco Buyout funds may elect to leave farming and retire.

Our website also features information about our Landscapes of Opportunity program as well as information on Planning the Future of Your Family Farm.

These programs can be important in considering what to do with real estate, including ways to keep the valuable land in agricultural use.

We Are Here to Help You!We Are Here to Help You!

Visit our main CALS website:

http://www.cals.ncsu.edu Visit the new tobacco buyout resource site:

http://www.tobaccobuyout.cals.ncsu.edu Visit our planned giving site:

http://www.calsncsu.planyourgift.org