The Tip of the Iceberg!

The Tip of the The Tip of the Iceberg!Iceberg!

NWPGRT Annual ConferenceNWPGRT Annual Conference

September, 2006September, 2006

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

Planning Giving These Days?

• The Nation is Age Rapidly

• Favorable IRS Tax Code (Section 664)

• Strength of Financial Markets During Last 20 Yrs

• Four Affluent Generations Alive Simultaneously

• Huge Transfer of Wealth Occurring

• 40% of Americans Have A Retirement Plan

• The Nation is Age Rapidly

• Favorable IRS Tax Code (Section 664)

• Strength of Financial Markets During Last 20 Yrs

• 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…

Rationale for “Give it Twice”Rationale for “Give it Twice”

The Old RuleThe Old Rule

Rationale for “Give it Twice”Rationale 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

Rationale for “Give it Twice”Rationale for “Give it Twice”

The New RuleThe New Rule

90/90/90/90/180180!!

Rationale for “Give it Twice”Rationale 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

Rationale for “Give it Twice”Rationale 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)

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

Planning Giving These Days?

• The Nation is Age Rapidly

• Favorable IRS Tax Code (Section 664)

• 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 Age Rapidly

• Favorable IRS Tax Code (Section 664)

• 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

LET’S REVIEW AGAIN…Why So Much Attention…?

LET’S REVIEW AGAIN…Why So Much Attention…?

• The Nation is Age Rapidly

• Favorable IRS Tax Code (Section 664)

• 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 Age Rapidly

• Favorable IRS Tax Code (Section 664)

• 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

What About the Future for More Traditional Fundraising Efforts?What About the Future for More Traditional Fundraising Efforts?

IT WILL BE INTERESTING!

• 501(c)(3)s will double in 12-15 years

• Foundation Giving Trends Downward

• Donors Are Spreading Out Their Giving

• Small Amounts of Cash To Give

IT WILL BE INTERESTING!

• 501(c)(3)s will double in 12-15 years

• Foundation Giving Trends Downward

• Donors Are Spreading Out Their Giving

• Small Amounts of Cash To Give

Personal Observation…Personal Observation…

PLANNED GIVING is a fertile and growing field

of opportunity while TRADITIONAL

FUNDRAISING may become increasingly

competitive during the next 20-30 years.

PLANNED GIVING is a fertile and growing field

of opportunity while TRADITIONAL

FUNDRAISING may become increasingly

competitive during the next 20-30 years.

Thank You for Thank You for Attending this Session Attending this Session

Today!Today!