Estate Planning Opportunities for Believers… Salem Nazarene Foundation Presentation March 4, 2007.

Estate Planning Estate Planning Opportunities for Opportunities for

Believers…Believers…

Salem Nazarene Foundation Salem Nazarene Foundation PresentationPresentation

March 4, 2007March 4, 2007

Five Reasons Not to Make a Will1. The courts can do a better job deciding how to

disburse your assets than you can.

2. The courts can choose a better personal representative to handle your estate during probate than you can.

3. The courts can choose a more caring guardian for your minor children than you can.

4. The government will use your estate tax dollars more efficiently than your church or favorite charity would use a charitable bequest.

5. Your grieving loved ones will be better off looking after your affairs without your will.

Incorporated

September 1, 1983September 1, 1983

The Foundation shares the vision statement of Salem First Church of the Nazarene to promote the long-

term financial security and mission of the church.

Salem Nazarene Foundation

2007 Board Members

The Bible Memorial Fund

In 2006, The Foundation . . .

• Gave an NIV Bible to each baptismal candidate for a total of 44 Bibles.

In 2006, The Foundation . . .• Helped Matt Porter’s

college class go on a Work and Witness trip to New Orleans.

In 2006, The Foundation . . .

• Helped Skyler Anderson fund his “Project Amazon” missionary trip.

In 2006, The Foundation . . .

• Established The Firm Foundation Endowment Fund.

In 2006, The Foundation . . .• Hired Gene Christian to assist our

congregation with estate planning.

• Over 22 years experience in planned giving and development.

• Leading regional authority in estate and charitable planning.

• Consultant for Luis Palau and various churches and para-church organizations.

K. Gene Christian, BA, MEA.

Why So Much Attention On Estate Planning These Days?Why So Much Attention On

Estate Planning These Days?

• The Nation Is Aging Rapidly

• Overall Taxation Remains High

• Strength of Financial Markets

• Four Affluent Generations Alive Simultaneously

• Huge Transfer of Wealth Occurring

• 40% of Americans Have A Retirement Plan

• The Nation Is Aging Rapidly

• Overall Taxation Remains High

• Strength of Financial Markets

• Four Affluent Generations Alive Simultaneously

• Huge Transfer of Wealth Occurring

• 40% of Americans Have A Retirement Plan

““GIVE IT TWICE”GIVE IT TWICE”

A Unique Strategy in Estate A Unique Strategy in Estate Planning…Planning…

New Minimum Distribution New Minimum Distribution

Rules for IRAs Adopted Rules for IRAs Adopted

Four Years Ago…Four Years Ago…

Rational for “Give it Twice”Rational for “Give it Twice”

The Old RuleThe Old Rule

Rational for “Give it Twice”Rational for “Give it Twice”

90/90/9090/90/90

CORPUS GROWTHunder old minimum distribution rules

(assumes 10% annualized return)

10.5%

14.5%

20.0%

27.0%

8.0%6.2%

$-

$20,000.00

$40,000.00

$60,000.00

$80,000.00

$100,000.00

$120,000.00

$140,000.00

$160,000.00

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

$90,000

CORPUS

MANDATORY PAYOUTS

Rational for “Give it Twice”Rational for “Give it Twice”

The New RuleThe New Rule

90/90/90/90/180180!!

Rational for “Give it Twice”Rational for “Give it Twice”

PROJECTED CORPUS GROWTHusing new, uniform minimum distribution table

(assumes 10% annualized return)

4.60%5.70%

7.20%

9.50%

12.80%

3.80%

$-

$20,000.00

$40,000.00

$60,000.00

$80,000.00

$100,000.00

$120,000.00

$140,000.00

$160,000.00

$180,000.00

$200,000.00

-1.00%

4.00%

9.00%

14.00%

19.00%

24.00%

$184,080

CORPUS

MANDATORY PAYOUTS

Rational for “Give it Twice”Rational for “Give it Twice”

Sample for “Give it Twice”Sample for “Give it Twice”

PROPOSED ESTATE PLANPROPOSED ESTATE PLAN

Stocks & Bonds

Life

InsuranceHome

Personal Effects

REIT SharesQualified Plan (IRA)

2nd Passing2nd Passing

“Give it Twice” Trust (CRT)

A substantial gift to Charity!A substantial gift to Charity!

12 years pass12 years pass

8% income8% income

each yeareach year

for 12 yearsfor 12 years(Heirs)(Heirs)

QuestionsQuestionsor or

Comments?Comments?

Why So Much Attention on Estate Planning These Days?Why So Much Attention on

Estate Planning These Days?

• The Nation is Aging Rapidly

• Overall Taxation Remains High

• Strength of Financial Markets

• Four Affluent Generations Alive Simultaneously

• Huge Transfer of Wealth Occurring

• 40% of Americans Have Retirement Plan

• Real Estate Values Have Risen Tremendously

• The Nation is Aging Rapidly

• Overall Taxation Remains High

• Strength of Financial Markets

• Four Affluent Generations Alive Simultaneously

• Huge Transfer of Wealth Occurring

• 40% of Americans Have Retirement Plan

• Real Estate Values Have Risen Tremendously

A CASE ILLUSTRATIONA CASE ILLUSTRATION

REAL ESTATE SALE WITH A CHARITABLE TWIST…

CASE PROFILE…CASE 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

CASE PROFILE - cont.CASE PROFILE - cont.

•Nearing retirement - they want to travel more

•Don’t want to dramatically affect children’s inheritance - close family

CASE PROFILE - cont.CASE PROFILE - cont.

•$200,000 life insurance on him

•$125,000 life insurance on her

•$328,000 his SEP-IRA

•$210,000 her 401(k) & IRAs from past employers

•$12,000 in ROTH IRAs

•$170,000 home paid off

•$320,000 rental properties (two homes)

•They have a $1,365,000 estate:

Rental properties

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

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

Sale vs. UnitrustSale vs. Unitrust

I. Analysis of Increased Income Continued…

Sale vs. CRT • Taxable Value $297,600 $297,600

• Or. Cost Basis $ 88,000 N/A

• Cap. Gain Tax ($ 48,200) $ -0-

• Dep. Cost Basis $ 5,000 N/A

• Cap. Gain Tax ($ 26,500) $ -0-

Sale vs. UnitrustSale vs. Unitrust

I. Analysis of Increased Income Continued…

Sale vs. CRT • Legal/App. Fees $ ? ($ 2,500)

• Investable Funds $ 223,000 $ 297,600

• Pre-Tax Income $13,400 $ 17,900

• 31.1-YR Exp. $795,000 $1,065,500

• PV of Income $269,000 $ 365,500

TRADITIONAL WEALTH TRADITIONAL WEALTH ACCUMULATION…ACCUMULATION…

TODAY

NICE & BIG PERSONAL ESTATE

31.1 years pass

2037 AD

Adding the Charitable Dimension...Adding the Charitable Dimension...

CRT

TODAY

NICE & BIG

ESTATEX BIG CRT

2037 AD

………………………………………………………………………….

Even LARGER Overall Estate!

=

Rentals

Gift AnnuitiesGift Annuities

Charitable Retirement PlanningCharitable Retirement PlanningThrough...Through...

Low Interest Rate Environment Low Interest Rate Environment Continues…Continues…

• One-year CD rates under 3%

• Money market funds – 1%

• Ten-year Treasuries – 4%

• Thirty-year Treasuries – 4.5%

• Long-term Corporate Bonds – 4-5%

ChallengeChallenge

In Light of the Low Interest Rate In Light of the Low Interest Rate Environment What Can You do?Environment What Can You do?

Consider a Gift Annuity!Consider a Gift Annuity!

Definition:Definition:

“… “…A simple contract between an A simple contract between an individual(s) and a charity which individual(s) and a charity which

provides three favorable outcomes by provides three favorable outcomes by virtue of one financial transaction…”virtue of one financial transaction…”

Gift Annuity Rates…Gift Annuity Rates…

AGEAGE

60 5.7% 65 6.0% 70 6.5% 75 7.1% 80 8.0% 85 9.5% 90+ 11.3%

Single PersonSingle PersonCurrent RatesCurrent Rates

Reasons People Do Gift Annuities…Reasons People Do Gift Annuities…

•Good Source of Retirement IncomeGood Source of Retirement Income

•Replace Decreasing Bond or CD IncomeReplace Decreasing Bond or CD Income

•To Purchase Long-Term Care InsuranceTo Purchase Long-Term Care Insurance

•Supplemental Income for Parent or Supplemental Income for Parent or GrandparentGrandparent

Estate and Planned Estate and Planned Giving Services…Giving Services…

K. Gene Christian, BA, MEAK. Gene Christian, BA, MEA

The Salem Nazarene FoundationThe Salem Nazarene Foundation

Services Include…

Free Will and Trust Planning Guide

Free Estate Inventory Form

Free Personal Planning Assistance

QuestionsQuestionsor or

Comments?Comments?

Thank You for Thank You for Coming to Sunday School Coming to Sunday School

Today!Today!