Preserving Your Financial Resources Development Office

Preserving Preserving Your Financial Your Financial

Resources Resources

Development Office800 West Jefferson StreetKirksville, Missouri 63501

Phone: 1-866-626-2878, ext. 2180

Kirksville College of Osteopathic MedicineA College of A.T. Still University

Presented by:Presented by: Randy Rogers, CFP®

Associate Vice President of Institutional Advancement

04/10/23 copyright www.brainybetty.com 2006

All Rights Reserved

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This seminar is for informational purposes only and is not intended as legal or tax advice. Please consult your legal, financial, or tax advisors for information of this nature and how any desired change may impact your particular situation.

See Your Advisors See Your Advisors

Questions to be Answered

1. How do I get out of debt and accumulate assets to build wealth?

2. Why are knowledgeable advisors important to me?

3. Why should I be concerned about income, dividend, and capital gain tax rates?

4. How does the time value of money concept apply to my retirement funds?

5. If I own real estate in two states, will I have probate costs in both states?

6. What are estate taxes?

7. Can I avoid estate taxes by giving all my assets to heirs before I die?

8.How can I supplement my/spouse’s retirement income & make a gift to charity?

The Life Cycle ofDebt and Assets

• Debt Accumulation

• Debt Reduction

• Asset Accumulation

• Asset Distribution

Why Plan for Why Plan for Income and Estate Taxes? Income and Estate Taxes?

•To give you more disposable income fromreduced income tax rates

•To take advantage of reduced dividend and capital gain tax rates

•To reduce or avoid estate taxes for the benefit of heirs

Federal Income Tax Federal Income Tax RatesRates

2007 Rates (Single Individual)

35% ($349,701+)

33% ($160,851 - $349,700)

28% ($77,101 - $160,850)

25% ($31,851 - $77,100)

15% ($7,826 - $31,850)

10% (0 - $7,825)

Capital Gain Tax RatesCapital Gain Tax Rates

2008 Rate (long-term)

• 2008 – 2010 ~ No capital gain taxes on 10 & 15% tax brackets)

• 15% for all higher brackets

• Short term gains (one year or less) are taxed at the taxpayers highest ordinary income tax rate

Four Time Tested Ways Four Time Tested Ways to Reduce Your Income to Reduce Your Income

TaxTax

Deduct (itemized deductions, tax credits)

Convert (tax-free or less taxed securities)

Divert (income to child - lower tax rate)

Defer ( contribute to retirement plan)

Estate Planning is Estate Planning is Necessary…Necessary…

To make sure assets are distributed in accordance with one’s wishes.

To make sure probate is avoided.

To make sure estate taxes are avoided or reduced.

To make sure your wishes concerning life support issues are respected.

Federal Estate and Gift TaxFederal Estate and Gift Tax

Gross estate includes all asset values

at date of death

Unlimited marital deduction

Estate tax credit

Annual gift tax exclusion

Charitable contributions

Gross Estate Includes All Gross Estate Includes All Assets Valued at Date of Assets Valued at Date of

DeathDeath• Cash, CDs, money market funds, US Treasuries

• Stock, bonds, mutual funds

• Life insurance

• Personal residence, vacation home

• Other real estate

• Retirement Funds (subject to possible double-taxation)

• All other assets owned by the decedent

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Unlimited Marital Unlimited Marital DeductionDeduction

at Death of First Spouse at Death of First Spouse

Surviving Spouse has no estate tax liability at that time;

but, WATCH OUT LATER!

Estate Tax Credit for Every Estate Tax Credit for Every IndividualIndividual

ESTATE TAX EXEMPTIONS AND RATES2008-2011

Year Rate Credit Exempt Amount Top Tax

2008 $780,800 $2,000,000 45%

2009 $1,455,800 $3,500,000 45%

2010 One year repeal of estate tax

2011 $345,800 $1,000,000 55%

Annual Gift Tax ExclusionAnnual Gift Tax Exclusion

• Annual gift tax exclusion amount of $12,000 per recipient to an unlimited number of recipients. (Inflation indexed)

• Married couples may elect to split gifts i.e., $24,000 per couple.

• Direct payments of medical expenses and qualified tuition costs are excluded from Federal Gift Tax.

Estate Planning ToolsEstate Planning Tools

Estate Owner

WillLiving will anddurable power of attorney

Trusts

The WillThe Will(with pour-over provisions)(with pour-over provisions)

If you have no plan, your state has one for you (State Testate Laws)

Probate Process

Avoid Probate by Title, Contract, or Trust

Living Will and Living Will and Durable Power of Durable Power of

AttorneyAttorney

Living Will Living Will (Health Care Directive)(Health Care Directive)

To determine the course of health care including:

Withholding of artificially supported

nutrition and hydration.

Use of medications to relieve pain without regard to other consequences.

General Durable Power of General Durable Power of AttorneyAttorney

Appoints an agent to act in one’s behalf in the event of incapacity.

TrustsTrusts

Revocable Living Trust ~ (to avoid probate)

By-Pass Trust ~ (to maximize estate tax savings)

The Revocable Living The Revocable Living Trust Allows You To:Trust Allows You To:

Own, control, change, and/or revoke

Be the trustee

Have complete control during your lifetime

Avoid probate (and ancillary probate)

Dr. Joe Dr. Joe and and Mary’s Mary’s Estate Estate AnalysiAnalysiss

Estate (Joe’s Death)$2,500,000

Costs (8%)$200,000

Remainder$2,300,000

No Estate Tax(at death of first spouse)

Mary Receives$2,300,000

Costs (8%)$184,000

Federal Estate Tax of$52,200

Children Receive$2,063,800

Sheltered by Marital Deduction

Mary’s Death Depleted by Costs and Estate Tax

Without PlanningWithout Planning

17.5% Shrinkage17.5% Shrinkage

Dr. Joe and Mary with Bypass (B) TrustMaximizing Unified Tax Credit Amounts

Estate (Joe’s Death)$2,500,000

Costs (8%)$200,000

Amount Remaining$2,300,000

No Estate Tax

Mary Owns$300,000

Costs (8%)$24,000

B-Trust for Mary$2,000,000

Estate Tax-0-

Children Receive$2,276,000

9% Shrinkage

Life Income PlanLife Income PlanCharitable Gift AnnuityCharitable Gift Annuity

Simple one-page contract

Transfer cash, stock, bonds

Guaranteed fixed payments for one or two-lives

Payout percentage based on age of income recipients

Tax benefits – deduction & income

Future gift to charity in donor’s name

CharitableCharitable Gift Annuity Gift Annuity One & Two-Life Payout One & Two-Life Payout RatesRatesSample One - Life

RatesSample Two - Life Rates

Age 55 5.5% Both Age 55 5.0%

Age 60 5.7% Both Age 60 5.4%

Age 65 6.0% Both Age 65 5.6%

Age 70 6.5% Both Age 70 5.9%

Age 75 7.1% Both Age 75 6.3%

Age 80 8.0% Both Age 80 6.9%

Age 85 9.5% Both Age 85 7.9%

* Rates effective July 1, 2003

You Have a Choice…

Choose Action

√ to reduce your income taxes

√ to maximize your assets before and after retirement

√ to plan your estate more efficiently√ to pass your assets on to heirs and

charities of your choice