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TRANSCRIPT
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Legacy Gift Planning:
Matching the Right Gift
to the Donors’ Circumstances
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• Definition of Legacy Gift Planning
• Types of Legacy Gifts
o Bequests
o Beneficiary designations, joint accounts, POD and TOD
o Lifetime Income Gifts
Charitable Gift Annuities
Charitable Remainder Unitrusts (CRUTs) Charitable Remainder Annuity Trusts (CRATs)
o Charitable IRA Rollovers
• Case Studies
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Charitable giving from accumulated resources rather than income.
Income
WagesInterest and dividends
Retirement incomeSocial Security
Annuity payments
Accumulated Resources
Savings AccountsReal Estate
Personal PropertyRetirement Plans
InsuranceAppreciated Securities
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• A gift established by a provision in your will.
• The easiest way to make the biggest gift.
• Revocable – it can be changed.
• Can be for specific dollar amount or percentage.
• Can be a specific property.
• Can be contingent.
• Can be residual.
• Can take care of family and charities in the same document.
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• Beneficiary Designations
o Life Insurance
o Retirement Accounts
• Joint property with right of survivorship
• POD and TOD accounts.
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For donors who are at least 70 ½ years old:
• Can rollover up to $100,000 directly to a qualified charity.
• No tax consequences (no income tax on the amount rolled over and no charitable deduction).
• Must be done directly from the IRA Administrator to Charity.
• With the recent increase in the standard deduction, this is now attractive to more people.
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A charitable gift annuity provides income during donor’s lifetime.
• Guaranteed Income for one or two lifetimes
• Tax advantageso Charitable contribution deduction for the year
of the gifto Part of the annuity income is tax-free
• Age-based rates
• After donor’s death, remainder goes to charity
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Age Rate AnnuityTax Free
Portion
Charitable
Deduction
60 4.7% $470 $309 $2661
70 5.6% $560 $407 $3,686
80 7.3% $730 $581 $4,763
90 9.5% $950 $855 $6,152
• Offers more flexibility than a gift annuity
• Can pay a fixed amount of income (CRAT) or a fixed percentage of income (CRUT)
• Can be for life or a term of years
• Donor may be able to add to it (CRUT)
• Tax advantages
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• TINKS• Retired• Both have defined benefit plans• No family or children• The millionaires next door.
Issue: Losing sleep. “What’s going to happen to our stuff?”
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Solution:
Permanent Endowment with Foundation
Both have wills made with contingent beneficiary: Rest, Residue, and Remainder to the Permanent Endowment.
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• 93 Years old• Never married, no children• He has $65,000 in redeemable bonds
paying him 6%• His bonds were called
Issue: James needs to replace the income.
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Solution:
• $65,000 Charitable Gift Annuity• 9.5% = Annual payment of $6,175• $5,600 tax-free• Charitable contribution: $44,838• Expected remainder: $32,500
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John: 70, retired. Two kids.Yoko: 62, working
• Intended to retire to a home John owns in West Virginia.
• BUT, Yoko got a new job in Florida.• Wanted his WV home to benefit his church.• Wanted his kids to get benefit during his
lifetime.• Qualified appraisal: $80,000
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John wanted a Charitable Gift Annuity that would make payments to his daughters. At the daughters’ ages, the rate is 4.3%Payments to kids: $3,440
But:Foundation’s Gift Acceptance Policy doesn’t permit real estate to be the basis of a CGA, and the policy has a minimum age for CGA recipients.
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Solution:
Donated the house to Foundation to create a NICRUT. Until the house sold, the trust payment would be the net income.
After the house sold, it “flipped” to a regular 5% unitrust.
The kids split 5% of the market value each year for their lives.
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$220,000 Family FoundationTrustees: • Dad, Age 102 (widowed)• Daughter, Age 75 (single, no kids)• Trusted family friend, Age 85
Issue: Daughter was managing the trust5% payout ruleAnnual 990
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Solution:
• Dissolved the Family Foundation.• Created Donor Advised Fund with United
Methodist Foundation.• No payout rule• No IRS filings (Included in UM Foundation’s
990)• Former trustee is now adviser
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• Ima is widowed, Age 90• Has a will leaving estate to her two grown
daughters• Survivor’s pension plus her own pension• Owns $40,000 HH-series bonds• Wants to “get rid” of the bonds• Daughter had previously converted other
HH Bonds and thought it was a pain• Loves her church
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Solution:
• Ima cannot avoid paying taxes on the interest by donating the HH bonds during her lifetime
• She did a codicil to her will making a specific bequest of the HH bonds. Her beneficiaries will avoid paying IRD taxes.
• She is contemplating using cash to start the endowment during her lifetime.
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