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Presentation Transcript

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This material was not intended or written to be used, and cannot be used, to avoid penalties imposed under the Internal Revenue Code. This material was written to support the promotion or marketing of the products, services, and/or concepts addressed in this material. Anyone to whom this material is promoted, marketed, or recommended should consult with and rely solely on their own independent advisors regarding their particular situation and the concepts presented here.


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Is Charitable Planned Giving Right for You?

  • Have you considered making a significant gift to a charitable organization?

  • Are you interested in reducing your current income tax bill?

  • Would you like to continue your support to a charity without affecting what you will leave to your own family?

  • Do you want to pass on your wealth to your family in a tax-efficient way?


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Is Charitable Planned Giving Right for You?

Do you have…

  • Enough assets to live off in retirement

  • A large taxable income asset

    • Bonus or commission check

    • Sale of real estate

    • Sale of business

    • Individual Retirement Account (IRA) or qualified plan

    • Annuity


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Creating a Charitable Legacy

Helps you to accomplish three significant goals:

  • Receive a current charitable income tax deduction

  • Provide a meaningful contribution to charity

  • Make a tax-efficient wealth transfer to loved ones


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Creating a Charitable Legacy: The Enhanced Charitable Trust

Enhanced Charitable Trust is a charitable lead annuity trust (CLAT) that guarantees a charitable gift through purchase of a life insurance policy

You receive:

  • Now—Charitable income tax deduction

    Charity receives:

  • During your lifetime—Annual income stream

  • At your death—Large lump-sum payment

    Your family receives

  • At your death—Remaining trust assets


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Enhanced Charitable Trust: How Does it Work?

  • You gift an asset to the trust

  • You receive a current charitable income tax deduction

    • 30% adjusted gross income (AGI) limit

    • 20% AGI limit for private charity or gift of capital gain property

    • 5-year carry-forward

  • Your gift to the trust is taxable gift that is reduced by the amount of the charitable deduction

  • The taxable gift can be offset by applying your lifetime gift tax exemption ($1 million per individual in 2010)


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How Does it Work—cont.

A portion of the Enhanced Charitable Trusts assets

are used to purchase an income-producing asset

to provide an annual payout to charity

  • Generally 10–15% of donated assets goes towards purchase of income-producing asset

  • Municipal bonds make a viable option for annual payment to charity due to their federal income tax-free nature


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How Does it Work—cont.

For maximum leverage, the majority of the trust’s

assets are used to purchase a single premium

life insurance policy

  • Trust is the owner, premium payor and beneficiary of the life insurance policy

  • Upon death of insured, trust pays out final charitable contribution

  • Remainder of death benefit and other trust assets are paid to non-charitable trust beneficiary and trust terminates


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Life Insurance—the Perfect Fit

Life insurance inside an Enhanced Charitable Trust

offers multiple advantages

  • Provides a guaranteed amount for charity and family*

  • Gives your family tax-free insurance policy benefits

  • May maximize the charitable deduction

  • Provides charity with final payout that is liquid

* A universal life insurance policy with a secondary guarantee feature will remain in force provided that sufficient premium is paid.


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Enhanced Charitable Trust (ECLAT)

Donor receives up-frontcharitable deductionand makes a taxable gift

Gift to trust

Donor

ENHANCED CHARITABLE TRUST

Trust purchasesincome-producing asset

Trust purchaseslife insurance

Annual income to Charity

Upon Donor’s death…

Non-charitable trustbeneficiaries receive remaining trust assets

Trust makes final payment to Charity

Beneficiaries


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Hypothetical Example

Margaret, female business executive, age 67

Her grandson is suffering from leukemia

  • She received a bonus of $750,000 this year

  • Key Goals:

    • Minimize the impact of income taxes

    • Provide benefit to St. Jude Children’s Research Hospital

    • Maximize wealth transfer to her children

  • Current and future tax implications:

    • 45% combined state and federal income tax

    • 4.0% Section 7520 Applicable Federal Rate


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Enhanced Charitable Trust (ECLAT)

She receives a $675,000 charitable deduction; $75,000 taxable gift

Margaret gifts $750,000 to trust

ENHANCED CHARITABLE TRUST

$650,000Trust purchases $1,948,000 single-pay life insurance policy*

$100,000Trust purchasesmunicipal bonds

$4,000 annual income to the St. Jude Children’s Research Hospital

Upon Margaret’s death…

Trust makes a finalpayment of $1,340,000 to St. Jude Children’s Research Hospital

Her children receive $708,000 from death benefit and municipal bonds

Beneficiaries

* TransACE® policy based on a 67-year old female preferred non-smoker


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Saves income taxes of $303,750 in 45% tax bracket

TransACE® policy DB and muni bonds

Benefits of an Enhanced Charitable Trust


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Enhanced Charitable Trust Offers Flexibility

  • Ability to customize a strategy tailored to meet specific goals/needs. Donor decides:

    • Amount passed on to charity

    • Amount passed on to loved ones

    • Amount of income tax deduction

      No guesswork—remainder is guaranteed through life insurance

Charity/ Deduction

Loved Ones

Loved Ones

Charity/ Deduction


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Summary

  • Benefits to you, as the grantor:

    • Current income tax deduction

    • Leverage assets to pass on wealth to loved ones through purchase of life insurance

    • Minimize potential estate tax

    • Benefit charity of choice

    • Confidence and peace of mind knowing that Transamerica is a name you can trust

  • Benefits to the charity:

    • Annual income

    • Large, liquid lump-sum gift at death of insured


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Enhanced Charitable Trust

TransACE® is a nonparticipating, flexible-premium universal life insurance policy issued by Transamerica Life Insurance Company, Cedar Rapids, IA 52499. Policy Form #1-12611107 (CVAT), Group Certificate #2-72336107 (CVAT) for certificates issued under a group policy issued to the Rhode Island National Consumer Protection Trust. Policy form and number may vary, and this policy may not be available in all jurisdictions.

Transamerica Life Insurance Company (“Transamerica”) and its representatives do not give tax or legal advice. This presentation is provided for informational purposes only and should not be construed as tax or legal advice. Clients and other interested parties urged to consult with and rely solely upon their own independent advisors regarding their particular situation and the concepts presented here.

Discussions of the various planning strategies and issues are based on our understanding of the applicable federal income, gift, and estate tax laws in effect at the time of this presentation. However, tax laws are subject to interpretation and change, and there is no guarantee that the relevant tax authorities will accept Transamerica’s interpretations. Additionally, this material does not consider the impact of applicable state laws upon clients and prospects.

Although care is taken in preparing this material and presenting it accurately, Transamerica disclaims any express or implied warranty as to the accuracy of any material contained herein and any liability with respect to it. This information is current as of June 2010.



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