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WEALTH BUILDING

WEALTH BUILDING. …and the role of Charitable Planning. By: K. Gene Christian, Regional Director Charitable Estate and Gift Planning Services Providence Health System - Oregon 503-216-2226/phone 503-216-4140/Fax gchristian@providence.org.

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WEALTH BUILDING

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  1. WEALTH BUILDING …and the role of Charitable Planning... By: K. Gene Christian, Regional Director Charitable Estate and Gift Planning Services Providence Health System - Oregon 503-216-2226/phone 503-216-4140/Fax gchristian@providence.org

  2. WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNINGTRADITIONALLY, WHAT IS IT? Definition: Development and implementation of planning strategies which will minimize taxation while moving a person(s) toward financial independence.

  3. WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNINGTRADITIONALLY, HOW IS IT ACCOMPLISHED? 1. Develop a unified credit shelter estate plan (will or living trust)

  4. WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNINGTRADITIONALLY, HOW IS IT ACCOMPLISHED? 2. Fund 401Ks, IRAs, ROTHs, VULs, etc. for tax-sheltered growth

  5. WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNINGTRADITIONALLY, HOW IS IT ACCOMPLISHED? 3. Buy Life Insurance to replace income earner(s)’ salary.

  6. WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNINGTRADITIONALLY, HOW IS IT ACCOMPLISHED? 4. Place what is left into investments/real property to produce capital gain and/or high cash flow.

  7. WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING WHAT IS THE ROLE OF CHARITABLE PLANNING IN 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.

  8. WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING WHY IS THIS IMPORTANT? Nearly 80% of all Americans have “charitable receptivity.” 80%

  9. WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNINGE. WHY IS THIS IMPORTANT? There are only three potential heirs in estate planning... $$$ People Government Charity

  10. WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNINGOPPORTUNITIES IN THE NEW MILLENIUM? • The Nation is aging rapidly You bet! • Combined taxation remains relatively high • Financial markets over 15 years have soared • Huge transfer of wealth occurring • Three affluent generations alive simultaneously

  11. WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNINGA CASE ILLUSTRATION WEALTH BUILDING ...and the role of Charitable Planning...

  12. WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNINGCASE 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

  13. WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNINGCASE PROFILE - cont. • Nearing retirement - they want to travel more • Don’t want to dramatically affect children’s inheritance - close family

  14. WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNINGCASE PROFILE - cont. • They have a $1,865,000 estate: • $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)

  15. Rental properties WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNINGA VISUAL LOOK AT THE AUBURN’S ESTATE... Life Insurance His SEP IRA Home ROTHS Her 401(k) & IRAs

  16. 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 PLANNINGSale vs. Unitrust

  17. 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 PLANNINGSale vs. Unitrust

  18. 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 PLANNINGSale vs. Unitrust

  19. 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 PLANNINGSale vs. Unitrust

  20. 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 PLANNINGSale vs. Unitrust

  21. 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 WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNINGSUMMARY OF BENEFITS NOTE: See footnotes section in booklet for formulas used

  22. 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 WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNINGSUMMARY OF BENEFITS NOTE: See footnotes section in booklet for formulas used

  23. 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 WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNINGSUMMARY OF BENEFITS NOTE: See footnotes section in booklet for formulas used

  24. WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNINGKEEP 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 ESTATEPERSONAL AND CHARITABLE ESTATE

  25. WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNINGSTANDARD WEALTH ACCUMULATION $1,865,000 TODAY 31.1 years pass NICE & BIG PERSONAL ESTATE 2033 AD

  26. WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNINGAdding the Charitable Dimension TODAY CRT Rentals 2033 AD …………………………………………………………………………. NICE & BIG BIG ESTATE MUCH LARGER PERSONAL & CHARITABLE ESTATE!! BIG CRT = PLUS

  27. 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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