Transcript of Integrating Estate Gifts into Planning. Integrating Estate Gifts into Planning Eddie Thompson,...
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- Integrating Estate Gifts into Planning
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- Integrating Estate Gifts into Planning Eddie Thompson, Ed.D.,
FCEP Founder & CEO eddie@ceplan.com Ben Powell, FCEP Senior
Vice President ben@ceplan.com Thompson & Associates Brentwood,
TN www.ceplan.com Matthew McBurnie, MBA, CEP, FCEP Executive
Director matthew-mcburnie@riversidehealthcare.net Riverside
Healthcare Foundation Kankakee, IL
www.riversidemc.net/foundation
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- Riverside Medical Center Kankakee, IL
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- The Foundation exists to develop resources that support
Riverside HealthCare in pursuit of its mission. Guided by the
principle that generosity is a powerful healing force, the
Foundation will develop resources by linking people with
opportunities that fuel their dreams, satisfy their desire to serve
others, and ignite their benevolent spirit. With its motto,
Generosity Heals, the Foundation will become the most compelling,
trusted, and effective vehicle in our region for remarkable
philanthropic journeys. Vision and Motto
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- Board leadership engagement An early participant experience
Solving an estate planning problem A remarkable employee The Impact
of Estate Planning
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- One participant to another Constant promotion Small group
presentations Key participants: Longtime donors Employees How does
Estate Planning work for us?
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- Donor focused Builds trust Generosity heals Why do it?
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- Limits on deductions is gaining ground Charities are competing
for decreasing discretionary income gifts Higher income and estate
tax rates will lead donors to lifetime and testamentary techniques
to reduce taxes and achieve their goals Charitable Deduction
Changes
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- Estate plans will become more complex as exemption amounts go
down and tax rates go up Charitable trusts and other leveraging
techniques to minimize taxes and maximize what can pass to heirs
Side Effects on Planning
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- They will do what they have done in the past Likely decrease
discretionary income gifts Increase giving through their estates
Increased taxes on estates make charitable estate gifts even more
attractive The Outcome on Giving
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- Major Gifts The effect on charities: The organizations that are
focused on relationships and are important to communities will be
fine after a few months as the new normal is accepted
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- The effect on charities: Organizations that pursue estate gifts
will see an increase in gifts to endowment and outright planned
gifts. Wise nonprofits will adapt to the changing market. Others
will struggle! Estate Gifts
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- Your future success depends on your efforts today! You must
plan to be successful You must then execute your plan KEEP YOUR
MESSAGE IN FRONT OF YOUR DONORS! Integrating Estate Gifts Into
Planning Practical Approaches to Address These Realities
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- Three types of gifts Three types of donors Two sources of
assets Three questions Four giving techniques A Few Fundamental
Concepts
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- Capital Annual Planned Three Types of Gifts
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- ~ 70% Give Out Of Habit ~ 23% Give Based On Emotion ~ 7% Are
Strategic Donors Three Types of Donors
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- Annual Planned Discretionary Income Net Worth Where Are We
Looking for Gifts?
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- Three Questions that must be answered for, and by, Strategic
Donors!!
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- #1 My Needs Do I have enough to live on for the rest of my
life?
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- #2 Heir Needs How much should I leave my heirs? Do I have
enough to live on for the rest of my life?
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- #3 Social Capital Would I rather my executor or trustee write a
check from my estate to the IRS, or to my favorite charities? How
much should I leave my heirs? Do I have enough to live on for the
rest of my life?
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- Financial Independence Inheritance for Heirs Charitable Gifts
Self Directed Tax Government Directed Total Wealth
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- 1.Many donors might not have the disposable income that they
once had 2.Or, are concerned that they may no longer have the
resources that they need to maintain their lifestyle Now, To the
Issues at Hand
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- "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: An
Important Question
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- Gifts of net worth Testamentary gifts Gifts that provide income
Gifts that also fulfill estate planning objectives 4 Types of Gifts
Donors Are Making
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- 26 Flashback to Chemistry Class
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- 27 An Estate Planners Version
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- Trend 100 % 20% Outright 20% Outright 40% Annual 40% Annual 40%
Lump 40% Lump Heirs
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- 40% Lump 40% Lump 100% 20% Outright 20% Outright 40% Annual 40%
Annual Heirs TCRUT TCLA/ UT Charity Trends in Charitable Estate
Planning
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- The Mechanics of a Trust
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- * Entirely Tennessee Inheritance Tax Estate Plan Retirement
Accounts Heirs $6,450,000 Heirs $6,450,000 After Planning: Heirs $
6,450,000 Charity $ 2,400,000 Taxes $ 450,000* After Planning:
Heirs $ 6,450,000 Charity $ 2,400,000 Taxes $ 450,000* Before
Planning: Heirs $ 7,200,000 Charity $ 0 Taxes $ 2,100,000
(potential immediate income & estate taxes) Before Planning:
Heirs $ 7,200,000 Charity $ 0 Taxes $ 2,100,000 (potential
immediate income & estate taxes) Credit Shelter Trust
$3,500,000 Credit Shelter Trust $3,500,000 Charity $2,400,000
Charity $2,400,000 Death of the first spouse Death of the surviving
spouse Passes to Heirs free of tax Other Assets$ 2,375,000 Life
Insurance$ 4,525,000 Retirement Accts. $ 2,400,000 Total Estate $
9,300,000 Other Assets$ 2,375,000 Life Insurance$ 4,525,000
Retirement Accts. $ 2,400,000 Total Estate $ 9,300,000 Health,
Education. Maintenance, Support Taxes $450,000 Taxes $450,000
$9,300,000 Surviving Spouse Outright $5,800,000 Surviving Spouse
Outright $5,800,000
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- Trends In Estate Planning 100 % 20% Outright 20% Outright 40%
Annual 40% Annual 40% Lump 40% Lump Heirs
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- Estate $3,800,000 ($2,000,000 in IRAs) Estate $3,800,000
($2,000,000 in IRAs) * 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 Remaining Assets $1,615,000 Remaining
Assets $1,615,000 Current Planning* Heirs $ 2,890,000 Charities $ 0
Taxes $ 910,000 Current Planning* Heirs $ 2,890,000 Charities $ 0
Taxes $ 910,000 Heirs $3,340,000 Heirs $3,340,000 Taxes $185,000 ET
Taxes $185,000 ET Taxes $185,000 Taxes $185,000 TCRUT $2,000,000
(7% ROI) TCRUT $2,000,000 (7% ROI) Recommended Plan Heirs $
3,340,000 Charities $ 2,896,000 Taxes $ 185,000 Recommended Plan
Heirs $ 3,340,000 Charities $ 2,896,000 Taxes $ 185,000 Charity
$2,896,000 Charity $2,896,000 5% payout For 20 years After Tax
Total** $1,725,000 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 Present Value of Recommended
Plan*** Heirs $ 3,340,000 Charities $ 2,855,000 Taxes $ 185,000
IRDs to Testamentary Charitable Remainder Trust
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- Wife $30,000,000 Death of 2nd Spouse Husbands Heirs $2,460,000
Tax $140,000 Husband $2,600,000 ILIT $10,000,000 Toms DSUEA -
$2,400,000 Wifes Heirs $15,290,000 Tax $4,710,000 State Tax -
$1,600,000 Fed Tax - $3,110,000 TCLTs $20,000,000 Charity
$15,000,000 5 yrs. 10 yrs. 15 yrs. 20 yrs. 6% payout 6% return
Wifes Heirs $20,000,000 Death of 1st Spouse ILIT $10,000,000 Wifes
Heirs $30,000,000 Example of TCLT if Husband Dies First
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- 40% Lump 40% Lump 100% 20% Outright 20% Outright 40% Annual 40%
Annual Heirs TCRUT TCLA/ UT Charity Trends in Charitable Estate
Planning
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- $18,000,000 * Actual future value of estate and gift may be
higher or lower at time of death. Heirs $24,145,000 Heirs
$24,145,000 $1,500,000 Credit Shelter Trust (No State Gap Trust)
Credit Shelter Trust (No State Gap Trust) $16,050,000 Surviving
Spouse Current Plan Heirs $12,975,000 Charities $ 525,000 Taxes $
7,400,000 Current Plan Heirs $12,975,000 Charities $ 525,000 Taxes
$ 7,400,000 Taxes $4,100,000 Taxes $4,100,000 QPRT $2,800,000 QPRT
$2,800,000 ILIT 100,000 ILIT 100,000 Charity $75,000 Charity
$75,000 Heirs $775,000 Heirs $775,000 Charity $450,000 GST Trust To
Heirs $3,000,000 GST Trust To Heirs $3,000,000 Foundation
$5,800,000 Foundation $5,800,000 Family Trusts $35,000,000 Family
Trusts $35,000,000 Lead Trust $9,600,000 Lead Trust $9,600,000 20
years 5% to Charity Remainder to Heirs $17,470,000 Recommended Plan
Heirs $24,145,000 Charities $10,125,000 Taxes $ 4,100,000
Recommended Plan Heirs $24,145,000 Charities $10,125,000 Taxes $
4,100,000 Present Value of Plan Heirs $11,175,000 Charities $
5,625,000 Taxes $ 4,100,000 Present Value of Plan Heirs $11,175,000
Charities $ 5,625,000 Taxes $ 4,100,000
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- Current Plan Heirs $21,700,000 Charities $19,730,000 Taxes
$13,220,000 Current Plan Heirs $21,700,000 Charities $19,730,000
Taxes $13,220,000 Recommended Plan* Heirs $43,760,000 Charities
$46,890,000 Taxes $ 5,260,000 Recommended Plan* Heirs $43,760,000
Charities $46,890,000 Taxes $ 5,260,000 Present Value of Plan**
Heirs $24,500,000 Charities $25,360,000 Taxes $ 5,260,000 Present
Value of Plan** Heirs $24,500,000 Charities $25,360,000 Taxes $
5,260,000 *Actual future value of estate and gift may be higher or
lower at time of death. **Present Value is discounted at 6%
$54,500,000 Marital Deduction $2,800,000 Marital Deduction
$2,800,000 Specific Bequests $3,550,000 Specific Bequests
$3,550,000 Charitable Bequests $10,300,000 Charitable Bequests
$10,300,000 CRT $20,000,000 CRT $20,000,000 CLTs $12,950,000 CLTs
$12,950,000 Heirs Charity 5 years 10 years 15 years 20 years Income
to Charity
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- 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! Introducing New Concepts to Donors
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- 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? Do
Tax Considerations Impact Giving?
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- Questions?