Presentation Transcript

1. Giving In The Current Environment Dr. Eddie Thompson CEO and Founder eddie@ceplan.com www.ceplan.com
2. We will explore the type of gifts donors are making in this difficult economy Agenda: A few fundamental concepts Four types of gifts Six examples Trends, tools and conclusions
3. A Few Fundamental Concepts: Three types of gifts Three types of donors Two sources of assets Three questions Four giving techniques
4. Three Types of Gifts Annual Capital Planned
5. Three Types of Donors About 70% Give Out Of Habit About 23% Give Based On Emotion About 7% Are Strategic Donors
6. Where are we Looking for Gifts? Planned Annual Discretionary Income Net Worth ?
7. Three Questions… …that must be answered for and by Strategic Donors!!
8. # 1—My Needs Do I have enough to live on for the rest of my life? How would most donors answer today?
9. # 2—Heirs’ Needs How much shouldI leave my heirs? Not only how much, but WHEN should they get it!
10. # 2—Heirs’ Needs
11. # 3—Social Capital When your executor writes a large check from your estate would you rather it go to the IRS or to my favorite charities? Which would your donors pick?
12. Tax Total Wealth Self Directed Charitable Gifts Financial Independence Inheritance for Heirs Government Directed
13. Now to the issues at hand: Many of their donors no longer have the disposable income that they once had and/or are concerned that they may no longer have the resources that they need to maintain their lifestyle.
14. An Important Question: "If a number of my donors don't feel like they can write me check, but they still want to give, what other ways to give are available to them?" There are many answers to that question, but here are a few that fit in the current economic environment:
15. 4 Types of gifts donor are making: Gifts of net worth Testamentary gifts Gifts that provide income Gifts that also fulfill estate planning objectives
16. 1. Gifts from Net Worth Less cash, but still same charitable intent. Investment assets, real estate, etc. may allow the donor to do more now than they realize is possible
17. 2. Testamentary Gifts While many donors are worried about making a current major gift because they are uncertain about their own future, the idea of making a testamentary gift may make perfect sense. Such a gift comes from "what's left" and does not impact the donors current use of the assets.
18. Types of Testamentary Gifts Bequests Testamentary Trusts PODs IRDs Insurance
19. IRDs IRAs, 401ks, 403bs, etc What are they? Are they taxable in an estate? Doctors / Professionals / Others and IRDs A plan that works almost every time!
20. IRDs to Testamentary Charitable Remainder Trust Estate 3,800,000 ($2,000,000 in IRAs) Current Planning* Heirs $ 2,890,000 Charities $ 0 Taxes $ 910,000 Remaining Assets $1,615,000 TCRUT $2,000,000 (7% ROI) Taxes $185,000 ET Recommended Plan Heirs $ 3,340,000 Charities $ 2,896,000 Taxes $ 185,000 5% payout For 20 years After Tax Total** $1,725,000 Present Value of Recommended Plan*** Heirs $ 3,340,000 Charities $ 2,855,000 Taxes $ 185,000 Heirs $3,340,000 Charity $2,896,000 Taxes $185,000 * Actual future value of estate and gift may be higher or lower at time of death. ** Income Tax calculated at a 28% rate *** Future Values discounted at 3.5% for inflation to arrive at present values
21. 3. Gifts that provide income for the donor Charitable Gift Annuities may be just what they are looking for while also allowing them to fulfill their charitable intent CD rates are very low Concern about ROI on traditional investments
22. Betty’s story 83 woman with farm land
23. 62 year old client with a 36 year old wife She has a good income He wants to make sure she has enough to retire on Each year he funds a deferred CGA with $50,000 These CGAs would begin paying out when she is 60.
24. Retired doc Two houses
25. 4. Gifts that also fulfill estate objectives While the current economic environment has caused many problems, it has also created some unique opportunities..
26. Flashback to Chemistry Class
27. An Estate Planner’s Version
28. Trend 100% 40% Lump 20% Outright 40% Annual Heirs
29. Trends In Charitable Estate Planning 100% 40% Lump 20% Outright 40% Annual TCLA/UT TCRUT Heirs Charity
30. The Mechanics of a Trust
31. Gifting To Children CGAs Donors wants to give at his death $1,000,000 to each of his four children He does not want to leave them money outright He has directions in his Will to establish four CGAs at $1,000,000 each for his four children
32. Estate Plan Other Assets $2,375,000 Life Insurance $4,525,000 Retirement Accts. $2,400,000__ Total Estate $9,300,000 Before Planning: Heirs $7,200,000 Charity $0 Taxes $2,100,000 (potential immediate income and estate taxes) $9,300,000 Death of the first spouse After Planning: Heirs $6,450,000 Charity $2,400,000 Taxes $450,000* Credit Shelter Trust $3,500,000 Surviving Spouse Outright $5,800,000 Health, Education. Maintenance, Support Death of the surviving spouse Passes to Heirs free of tax Retirement Accounts Heirs $6,450,000 Charity $2,400,000 Taxes $450,000 * Entirely Tennessee Inheritance Tax
33. Lead Trusts One such opportunity is the ability of wealthier individuals to pass assets to their heirs while they are living at a lower cost because of the current depressed values. Many wealthier donors are looking for ways to leverage the current low values, and arrangements like a Charitable Lead Trust may be just what they are looking for. The Lead Trust creates a charitable deduction the donor can use to move an even greater value of assets to his or her heirs free of tax. When combined with the current low interest rates that allow for larger deductions and historically high tax exemptions, this may be the best time in history to utilize such arrangements. Such arrangements also provide for immediate annual gifts to charity that help fulfill the donor's desire to give
34. Trends In Estate Planning 100% 40% Lump 20% Outright 40% Annual Heirs
35. Tax $140,000 Husband’s Heirs $2,460,000 Wife $30,000,000 Wife’s Heirs $30,000,000 ILIT $10,000,000 ILIT $10,000,000 Husband $2,600,000 Charity $15,000,000 Tax $4,710,000 Wife’s Heirs $20,000,000 Wife’s Heirs $15,290,000 TCLTs $20,000,000 5 yrs. 10 yrs. 15 yrs. 20 yrs. Example of TCLT if Husband Dies First Death of 1st Spouse Tom’s DSUEA - $2,400,000 Death of 2nd Spouse 6% payout 6% return State Tax - $1,600,000 Fed Tax - $3,110,000
36. Trends In Charitable Estate Planning 100% 40% Lump 20% Outright 40% Annual TCLA/UT TCRUT Heirs Charity
37. Putting it all together
38. Family Trusts $35,000,000 Foundation $5,800,000 $18,000,000 QPRT $2,800,000 ILIT 100,000 Current Plan Heirs $12,975,000 Charities $ 525,000 Taxes $ 7,400,000 $1,500,000 $16,050,000 $450,000 Recommended Plan Heirs $24,145,000 Charities $10,125,000 Taxes $ 4,100,000 Credit Shelter Trust (No State Gap Trust) Surviving Spouse Charity GST Trust To Heirs $3,000,000 Heirs $775,000 Lead Trust $9,600,000 Taxes $4,100,000 Charity $75,000 20 years 5% to Charity Heirs $24,145,000 Present Value of Plan Heirs $11,175,000 Charities $ 5,625,000 Taxes $ 4,100,000 Remainder to Heirs $17,470,000 * Actual future value of estate and gift may be higher or lower at time of death.
39. Introducing new concepts to donors: Put their needs first Help them achieve their objectives and goals Show a better use of social capital Give them time to think about it Trust them!
40. Charitable Estate Planning Goal is to create the best plan for the donor Educates donors about how a gift fits into their objectives Based on values of donor Typically results in larger gifts
41. Do taxes considerations impact giving? Do you think donors give so they can get a charitable deduction? Do you think donors would rather give to local charities than to the IRS Do you think tax considerations impact the technique a donor may use to achieve their charitable intent?
42. Questions? Dr. Eddie Thompson CEO and Founder eddie@ceplan.com www.ceplan.com