wealth building by: k. gene christian, regional director charitable estate and gift planning...
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WEALTH BUILDINGWEALTH BUILDING
By: K. Gene Christian, Regional DirectorCharitable Estate and Gift Planning ServicesProvidence Health System - Oregon
503-216-2226/phone503-216-4140/Faxgchristian@providence.org
…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.
WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING
TRADITIONALLY, HOWTRADITIONALLY, HOW IS IT ACCOMPLISHED? IS IT ACCOMPLISHED?
1.Develop a unified credit shelter estate plan (will or living trust)
WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING
TRADITIONALLY, HOW TRADITIONALLY, HOW IS IT ACCOMPLISHED?IS IT ACCOMPLISHED?
2. Fund 401Ks, IRAs, ROTHs, VULs, etc. for tax-sheltered growth
WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING
TRADITIONALLY, HOW TRADITIONALLY, HOW IS IT ACCOMPLISHED?IS IT ACCOMPLISHED?
3. Buy Life Insurance to replace income earner(s)’ salary.
WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING
TRADITIONALLY, HOW TRADITIONALLY, HOW IS IT ACCOMPLISHED?IS IT ACCOMPLISHED?
4. Place what is left into investments/real property to produce capital gain and/or high cash flow.
WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING
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.
WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING
Nearly 80% of all Americans have “charitable receptivity.”
WHY IS THIS IMPORTANT?
WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING
E. WHY IS THIS IMPORTANT?E. WHY IS THIS IMPORTANT?
There are only three potential heirs in
estate planning...
$$$CharityGovernmentPeople
WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING
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!
WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING
A CASE ILLUSTRATIONA CASE ILLUSTRATION
WEALTH BUILDING
...and the role of Charitable Planning...
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
WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING
CASE PROFILE - cont.CASE PROFILE - cont.
•Nearing retirement - they want to travel more
•Don’t want to dramatically affect children’s inheritance - close family
WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING
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
WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING
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
WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING
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
WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING
Sale vs. UnitrustSale vs. Unitrust
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-
WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING
Sale vs. UnitrustSale vs. Unitrust
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
WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING
Sale vs. UnitrustSale vs. Unitrust
II. Analysis of Tax Deduction
Sale vs. CRT • Tax Deduction $ -0- $64,171
• Tax Savings (34%) N/A $21,891
WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING
Sale vs. UnitrustSale vs. Unitrust
III. Analysis of Estate Tax
Sale vs. CRT • Asset Included
In Estate $215,326 $ -0-
• Estate Tax (37%) ($ 79,671) N/A
WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING
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
WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING
SUMMARY OF BENEFITSSUMMARY OF BENEFITS
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
NOTE: See footnotes section in booklet for formulas used
WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING
SUMMARY OF BENEFITSSUMMARY OF BENEFITS
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
NOTE: See footnotes section in booklet for formulas used
WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING
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
WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING
STANDARD WEALTH ACCUMULATIONSTANDARD WEALTH ACCUMULATION
$1,865,000
NICE & BIG PERSONAL ESTATE
31.1 years pass
TODAY
2033 AD
WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING
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
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