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H. Dr. Jeffrey W. Steed, MBA Senior Director of Gift Planning The University of Texas at Arlington. elping Clients In Retirement Years. Case Studies Involving Gift Planning. Financial Planning Association – Dallas Chapter November 12, 2013. Retirement Years. Traveling Carefree.

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H

Dr. Jeffrey W. Steed, MBA

Senior Director of Gift Planning

The University of Texas at Arlington

elpingClients

In Retirement Years

Case Studies Involving Gift Planning

Financial Planning Association – Dallas Chapter

November 12, 2013


Retirement Years...

Traveling Carefree


Retirement Years...

Transitioning


Retirement Years...

Without Time Constraints


Retirement Years...

Being Prepared


Retirement Years...

Staying Independent


Retirement Years...

Enjoying Life


Retirement Years...

Financially Managing


Retirement Years...

How can advisors help clients in their retirement years using

gift planning tools?


Agenda

  • Impacting Through A Legacy Gift

  • Funding Retirement Living

  • 3. Maximizing Annual IRA Distributions

  • 4. Diversifying a Retirement Portfolio

  • 5. Increasing Retirement Income Securely

  • 6. Reducing/Avoiding Gift Tax

Helping Clients in Retirement Years


Impacting Through A Legacy Gift

FUNDING RETIREMENT LIVING

The Page Endowed Scholarship

Step #1

Mr. and Mrs. Page establish an endowment through their Last Will and Testament or Revocable Trust. They do not feel that they can prudently give away major gifts during retirement due to a minimal estate size.

RESULT: Their impact on the lives of charity continues perpetually.

Step #2

At their passing, charity receives income payments every year for student scholarships.

Helping Clients in Retirement Years


Funding Retirement Living

FUNDING RETIREMENT LIVING

Establish the Johnson Charitable Remainder Trust

Step #1

Mr. and Mrs. Johnson establish a Charitable Remainder Trust (CRT) and give their farm to the CRT.

Step #2

After the CRT sells the farm, income is distributed periodically to Mr. and Mrs. Johnson to fund retirement living.

Step #3

After Mr. And Mrs. Johnson pass away, charity receives the CRT remainder.

Helping Clients in Retirement Years


Maximizing Annual IRA Distributions

FUNDING RETIREMENT LIVING

IRA Custodian

Step #1

Mrs. Lyle (“non-itemizer tax filer“) contacts her IRA custodian for a qualified charitable distribution.

  • RESULT: Mrs. Lyle benefits charity with pre-tax dollars and does not pay tax on the amount.

  • NOTES:

  • Donor must be 70.5+

  • Benefit ends 12/31/13

  • Maximum: $100,000

  • Qualifies for MRD

Step #2

IRA custodian mails a check directly to charity.

Helping Clients in Retirement Years


Diversifying a Retirement Portfolio

FUNDING RETIREMENT LIVING

Establishes the May Charitable Remainder Trust

Step #1

Mr. May establishes a Charitable Remainder Trust (CRT) and gives a concentrated, appreciated stock position (or other asset) to the CRT without capital gain taxes initially.

Step #2

The CRT sells the stock, diversifies the CRT portfolio and income is distributed periodically to Mr. May.

Step #3

After Mr. May passes away, charity receives the CRT remainder.

Helping Clients in Retirement Years


Increasing Retirement Income Securely

FUNDING RETIREMENT LIVING

STATUS QUO:

Mrs. Wright purchases a five-year $100,000 CD at 1.50% ($1500 annually).

CHARITABLE GIFT ANNUITY (CGA):

Mrs. Wright (age 70) establishes a $100,000 CGA at 5.10% ($5100 annually)

OR

The CGA allows for Mrs. Wright to have an initial partial income tax deduction and provides $5100 annually in income to her.

After Mrs. Wright passes away, charity receives the CGA remainder.

Helping Clients in Retirement Years


Reducing/Avoiding Gift Tax

Charitable Lead Annuity Trust

Facts/Assumptions

  • Desire to pass company to children (C-Corp) with minimal tax

  • No pre-sale agreements exist

  • FLP owns 99% LP interest, while donor keeps 1% GP interest until death (stepped-up at death to children)

  • Discounted valuation of LP interest by qualified appraisal

  • No active participation by the FLP or GP in the C-corporation and no debt

  • Various types of Lead Trusts – this is a non-grantor lead trust (Family Lead Trust).

  • Donor has other assets for retirement

  • Appreciation of assets in Trust not taxable


(Or 10% of $2,200,000)

At Samantha’s death, the remaining 1% GP interest is distributed to family (stepped-up costs basis)

#6

#1

#5

#2

#4

#3


Potential Gift Planning Solutions:

  • An individual does not feel that he/she can give much to charity while living due to a minimal estate size, but he/she is charitable. »Bequest gift?

  • An individual is wanting to sell her/his farm in order to move to a retirement center. »Charitable Remainder Trust?

  • An individual complains about being forced to take a taxable IRA distribution. »IRA Charitable Rollover?

  • A client mentions that most of their portfolio is tied up in one stock – possibly employer stock. »Charitable Remainder Trust?

  • A client is concerned about CD rates. »Charitable Gift Annuity?

  • A client desires to distribute closely held stock to children with reduced/eliminated gift tax. »Charitable Lead Trust?

Helping Clients in Retirement Years


Questions?

Helping Clients in Retirement Years

Case Studies Involving Gift Planning

Dr. Jeffrey W. Steed, MBA

Senior Director of Gift Planning

The University of Texas at Arlington

(817) 272-9682

[email protected]


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