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Charitable Estate Planning: A Christian Perspective

Church seminar in charitable estate planning

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Page 1: Church seminar in charitable estate planning

Charitable Estate Planning: A Christian Perspective

Page 2: Church seminar in charitable estate planning

Why plan? • Because we are

responsible for our stewardship of resources

• Because we care about others around us

Page 3: Church seminar in charitable estate planning

Estate planning problems in the Bible:

Luke 15:11-13. Jesus continued: “There was a man who had two sons. The younger one said to his father, ‘Father, give me my share of the estate.’ So he divided his property between them. Not long after that, the younger son got together all he had, set off for a distant country and there squandered his wealth in wild living.”

Page 4: Church seminar in charitable estate planning

Conflict Luke 12:13-14a. Someone in the crowd said to him, “Teacher, tell my brother to divide the inheritance with me.” Jesus replied, “Man, who appointed me a judge or an arbiter between you?” Then he said to them, “Watch out! Be on your guard against all kinds of greed;”

Page 5: Church seminar in charitable estate planning

1. Leave instructions such as rules to prevent wastefulness and disputes

2. Avoid taxes and expenses

Estate planning allows you to

Page 6: Church seminar in charitable estate planning

Your Own Plan

The Government

Plan

Which do you have?

Page 7: Church seminar in charitable estate planning

Do you want the government plan? • Your spouse receives one-

third of your separate personal property, children get the rest

• Your spouse can use one-third of your separate real property, children get the rest. (If no children, spouse gets ½, rest to parents and siblings.)

Texas Probate Code Ch. II § 38(b)

Page 8: Church seminar in charitable estate planning

Do you want the “government plan”? Minor child or grandchild receives entire inheritance…

on his 18th birthday

Page 9: Church seminar in charitable estate planning

Projected investment decision

Page 10: Church seminar in charitable estate planning

Without a will, guardianship of minor children is decided in the courts

Page 11: Church seminar in charitable estate planning

If you were leaving on a trip for three weeks, would you leave instructions for the person watching your things?

Page 12: Church seminar in charitable estate planning

What kind of

instructions can you leave?

Simple: Division, guardianship

Complex: Trust plans

Page 13: Church seminar in charitable estate planning

Example instructions

• Maybe not in one lump sum

• Maybe for specific items – education or first house

Page 14: Church seminar in charitable estate planning

Spendthrift protection

You can protect inheritance payouts from creditors, divorce, or heir borrowing against future income

Page 15: Church seminar in charitable estate planning

“A very rich person should leave his kids enough to do anything but not enough to do nothing”

- Warren Buffet

• Instead of guaranteed income, match dollars earned.

• Make income contingent on passing drug tests.

Page 16: Church seminar in charitable estate planning

Do you want the “government plan”?

• I want all of the contents and values of my estate to be made public in court records.

• I want any interested salespeople or swindlers to be able to find out exactly how much each of my heirs is receiving.

• I want to pay the court costs and attorneys fees associated with a probate proceeding.

Page 17: Church seminar in charitable estate planning

You can choose to pass assets privately through non-probate transfers or a living trust

Page 18: Church seminar in charitable estate planning

Do you want the “government plan”?

I want to pay the maximum estate taxes knowing in extreme cases this could leave as little as 36% of my estate.

Estate taxes (40%) plus generation skipping taxes (40%) for a large estate being given to grandchildren with previous gifting combines for a 64% tax rate

Page 19: Church seminar in charitable estate planning

Do you want the “government plan”?

I don’t want to decide my medical treatment or have anything to say

about who will make medical or financial

decisions for me if I am incapacitated

Page 20: Church seminar in charitable estate planning

Do you want the “government plan”?

I want to leave absolutely no money to any church or Christian organization

Page 21: Church seminar in charitable estate planning

If you want to leave money to a church or nonprofit organization, there are ways to get immediate tax benefits

Page 22: Church seminar in charitable estate planning

Giving a church or charity the irrevocable right to own farmland or a home after death by a remainder deed is immediately deductible

Page 23: Church seminar in charitable estate planning

Deduction for remainder interest in $100,000 of farm land by age 59 donor

1.8% (Dec 10)

$68,233 11.6% (May 89)

$15,684

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Donor CRT Charity

Initial Transfer

Anything Left at Death

Payments During Life

Page 25: Church seminar in charitable estate planning

Donor CRT Charity

Initial Transfer

Anything Left at Death

Payments During Life

Page 26: Church seminar in charitable estate planning

There are no capital gains taxes when the donor transfers to the CRT or when

the CRT sells the asset

Page 27: Church seminar in charitable estate planning

2011 2012 2013 2014 2015 … Death

A Charitable Gift Annuity trades a gift for a lifetime

income

2010

Typically larger

organizations like LCU

Page 28: Church seminar in charitable estate planning

Example donor ages & rates July, 2010, American Council on Gift Annuities

30 3.7% 40 4.1% 45 4.4% 50 4.8% 55 5.0% 60 5.2% 65 5.5% 70 5.8% 75 6.4% 80 7.2% 85 8.1% 90+ 9.5%

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2011 2012 2013 2014 2015 … Death

No capital gains tax is paid when

transferred to charity

2010

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2011 Qualified Charitable Distribution for IRAs

Early distribution (before 59 ½)

Regular distribution (59 ½ to 70 ½)

Required minimum distribution (after 70 ½)

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After age 70 ½ participants must take required minimum distributions (account balance / remaining life expectancy) or pay 50% penalty

$10,000

$10,000 income IRA

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Giving after 70 ½

For 2011, congress extended the Qualified Charitable Distribution (QCD): counts toward required minimum distribution without income or deduction

$10,000

$0 income

IRA $0 deduction

Page 33: Church seminar in charitable estate planning

Qualified Charitable Distribution (QCD)

$10,000

$0 income

IRA $0 deduction

$100,000 per person maximum

Participant 70 ½ or older

No private foundations, donor

advised funds, charitable trusts, or

charitable gift annuities

IRAs or IRA rollovers only; no

401(k), 403(b), SEP, SIMPLE,

pension or profit sharing plans

Page 34: Church seminar in charitable estate planning

There are many options in charitable planning and estate planning.

The biggest risk is putting it off until “tomorrow”!