WEALTH BUILDING By: K. Gene Christian, Regional Director Charitable Estate and Gift Planning Services Providence Health System - Oregon 503-216-2226/phone

WEALTH BUILDINGWEALTH BUILDING

By: K. Gene Christian, Regional DirectorCharitable Estate and Gift Planning ServicesProvidence Health System - Oregon

503-216-2226/phone503-216-4140/[email protected]

…and the role of Charitable Planning...

WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING

TRADITIONALLY, WHAT IS IT?TRADITIONALLY, WHAT IS IT?

Definition:

Development and implementation of

planning strategies which will minimize

taxation while moving a person(s)

toward financial independence.


TRADITIONALLY, HOWTRADITIONALLY, HOW IS IT ACCOMPLISHED? IS IT ACCOMPLISHED?

1.Develop a unified credit shelter estate plan (will or living trust)


TRADITIONALLY, HOW TRADITIONALLY, HOW IS IT ACCOMPLISHED?IS IT ACCOMPLISHED?

2. Fund 401Ks, IRAs, ROTHs, VULs, etc. for tax-sheltered growth



3. Buy Life Insurance to replace income earner(s)’ salary.



4. Place what is left into investments/real property to produce capital gain and/or high cash flow.


WHAT IS THE ROLE OF WHAT IS THE ROLE OF CHARITABLE PLANNING IN CHARITABLE PLANNING IN WEALTH BUILDING?WEALTH BUILDING?

Definition: It assumes that wealth accumulation decisions should be based as much on what the wealth-holder values, as the value of the wealth-holder’s assets.


Nearly 80% of all Americans have “charitable receptivity.”

WHY IS THIS IMPORTANT?


E. WHY IS THIS IMPORTANT?E. WHY IS THIS IMPORTANT?

There are only three potential heirs in

estate planning...

$$$CharityGovernmentPeople


OPPORTUNITIES IN THE OPPORTUNITIES IN THE NEW MILLENIUM?NEW MILLENIUM?

• The Nation is aging rapidly

• Three affluent generations alive simultaneously

• Huge transfer of wealth occurring

• Financial markets over 15 years have soared

• Combined taxation remains relatively high

You bet!


A CASE ILLUSTRATIONA CASE ILLUSTRATION

WEALTH BUILDING

...and the role of Charitable Planning...


CASE PROFILECASE PROFILE

•Bob (age 59) and Alice (age 58) Auburn

•He owns/manages a small residential construction

company

•She is an independent contractor currently consulting

for ODOT


CASE PROFILE - cont.CASE PROFILE - cont.

•Nearing retirement - they want to travel more

•Don’t want to dramatically affect children’s inheritance - close family


CASE PROFILE - cont.CASE PROFILE - cont.

•$300,000 life insurance on him

•$125,000 life insurance on her

•$628,000 his SEP-IRA

•$310,000 her 401(k) & IRAs from past employers

•$12,000 in ROTH IRAs

•$170,000 home paid off

•$320,000 rental properties (four homes)

•They have a $1,865,000 estate:

Rental properties


A VISUAL LOOK AT THE A VISUAL LOOK AT THE AUBURN’S ESTATE...AUBURN’S ESTATE...

Life Insurance

Home

ROTHS

Her 401(k) & IRAs

His SEP IRA


Sale vs. UnitrustSale vs. Unitrust

I. Analysis of Increased Income

Sale vs. CRT • Value of Rentals$320,000 $320,000

• Closing Costs ($ 22,400) ($ 22,400)

• Taxable Value $297,600 $297,600



I. Analysis of Increased Income - cont.

Sale vs. CRT • Taxable Value $297,600 $297,600

• Or. Cost Basis $ 88,000 N/A

• Cap. Gain Tax ($ 55,963) $ -0-

• Dep. Cost Basis $ 5,000 N/A

• Cap. Gain Tax ($ 26,311) $ -0-



I. Analysis of Increased Income - cont.

Sale vs. CRT • Legal/App. Fees $ ? ($ 2,500)

• Investable Funds $215,326 $ 297,600

• Pre-Tax Income (6%) $ 12,920 $ 17,856

• 31.1-YR Exp. $770,854 $1,065,390

• PV of Income $264,440 $ 365,480



II. Analysis of Tax Deduction

Sale vs. CRT • Tax Deduction $ -0- $64,171

• Tax Savings (34%) N/A $21,891



III. Analysis of Estate Tax

Sale vs. CRT • Asset Included

In Estate $215,326 $ -0-

• Estate Tax (37%) ($ 79,671) N/A


SUMMARY OF BENEFITSSUMMARY OF BENEFITS

KEEP IN ESTATE

1. Lifetime after tax cash flow from rentals:

$751,808

PUT IN CRT

1. Lifetime after tax

cash flow from

6% pay CRT:

$752,151

NOTE: See footnotes section in booklet for formulas used



KEEP IN ESTATE

2. Lifetime value of income tax deduction

benefit:

-0-

PUT IN CRT

2. Lifetime value of income tax deduction

benefit:

$159,244




KEEP IN ESTATE

3. Rentals value at the end of lifetime:

$653,869

PUT IN CRT

3. CRT value at the end of lifetime:

$965,235



KEEP IN ESTATE vs. UNITRUSTKEEP IN ESTATE vs. UNITRUST

KEEP CRT

1. $ 751,808 1. $ 752,151

2. -0- 2. $ 159,244

3. $ 653,869 3. $ 965,235

$1,496,913 $1,959,345 PERSONAL ESTATE PERSONAL AND

CHARITABLE ESTATE


STANDARD WEALTH ACCUMULATIONSTANDARD WEALTH ACCUMULATION

$1,865,000

NICE & BIG PERSONAL ESTATE

31.1 years pass

TODAY

2033 AD


Adding the Charitable DimensionAdding the Charitable Dimension

CRT

TODAY

NICE & BIG

BIG ESTATEPLUS

BIG CRT

2033 AD

………………………………………………………………………….

MUCH MUCH LARGER LARGER PERSONAL & PERSONAL & CHARITABLE CHARITABLE ESTATE!!ESTATE!!

=

Rentals

REFERENCE MATERIAL

Special Committee on Again (U.S. Senate)

American Association of Retired Persons (AARP)

Social Security Administration

The Oregonian

OHSU notes and material

The National Committee on Planned Giving

National Woodlands Magazine

Successful Money Management Seminars

Fortune Magazine

Crescendo Software Company

The Legacy Companies, LLC

Documents

WEALTH BUILDING By: K. Gene Christian, Regional Director Charitable Estate and Gift Planning Services Providence Health System - Oregon 503-216-2226/phone