Gift Planning Opportunities KSU Foundation Gift Planning Department
- Slides: 31
Gift Planning Opportunities KSU Foundation Gift Planning Department Lori Rogge, CAP Darci Cain, CTFA
Consider Gift Planning: ü Investments ü Strategies ü Charitable Giving
Early Retirement Charlie and Elaine Caus Charlie – 60 – Mgr Hardware Store Elaine – 60 – HR Director of Packing Plant 401(k)’s Stock Rentals Home Savings UL Charlie UL Elaine No Children Charlie’s Nieces (Tara – 10; Sidney -15) $1, 000 500, 000 325, 000 200, 000 50, 000 250, 000
What strategies would you suggest for Charlie and Elaine to increase their income? • • • Utilize 401(k) and SS now Selling stock-reinvest at higher dividend Gifting stock to CRUT or CGA Partial Retirement Sell property-reinvest Utilize net unrealized appreciation w/co stk in 401(k) • Rental income • Cash value on UL policies possible 103 exchange
What unanswered questions would you ask of Charlie and Elaine? • • • • Philanthropic intent Estate Issues—contingent beneficiaries LTC Education coverage for girls Health insurance coverage Intent of rental properties, marketable Value of home Cost of travel What does retirement mean (never working again)? Rental income Debt on rentals Gifting to girls CV of LI—premiums on policy
How would you help Charlie and Elaine keep their taxes as low as possible? • • • CRUT CGA Outright gifts Stock basis—how to handle gifted vs. purchased 1035 Exchange Diversify portfolio with tax exempt securities Life insurance Highly appreciated stock Minimum funded LI w/o MEC
Consider Outright Gift: ü Reduce tax (plus cash from gift/sale) ü Bypass gain on gift ü Deduction offsets tax liability
How would you suggest Charlie and Elaine preserve their assets in the event of their incapacitation or death? • • • Wills Trust DPOA Living Wills LTC Beneficiary designation Distribution of property Life Insurance 401(k) beneficiary—charity or nieces
Consider Beneficiary Designations: ü Maintain control during life ü Charitable intentions ü Desire estate tax deduction ü Does not want $ given to IRS
What options would you offer to Charlie and Elaine regarding their philanthropic intentions? • • • Life Estate Bargain Sale Donor Advised Funds CGA CRUT CLUT IRA Rollover if available Term insurance Second to die policy Need to determine how much income they have from rental—is gifting possible?
Consider a Life Estate: ü Current tax deduction ü Preserves lifetime use ü Transfer to charity without probate ü Reduces estate tax ü Possible conversion to trust for income later
How would you suggest providing for Tara and Sidney’s college education? • • • Mutual funds 529 Plan Life Insurance Stock Roth IRA Sell rental properties Annual gifts EE Bonds UGMA/UTMA College Education Unitrust/Annuity Trust (kiddie tax) Work study Scholarships and financial aid
BREAK TIME
Land Strategies and Investment Opportunities Bob and Sue Land Bob – 68 – Farmer Sue – 72 – Teacher 2 K Acres Land Home + 20 acres SEP Savings Grain Machinery 50 hd of Cattle UL Policy - Bob UL Policy – Sue $2, 000 350, 000 300, 000 500, 000 50, 000 250, 000 Sue – son Steve (father deceased) 2 grandchildren Bob & Sue - Cara
What recommendations do you have for handling their debt? • • • Credit card- what is interest rate, is this a recent purchase, making min. payments or long term balance, reason for debt? Use money in savings to pay debt Possible to use SEP proceeds- but will be taxable • • Are there any tax benefits for the mortgage? Depends on itemized deductions Could use savings, cattle, land or machinery to pay off debts. Land purchase- debt on purchase Improvements made on the property?
How could Bob and Sue receive income during retirement? • • • KPERS-income, lump sum or combo SEP Sale of land, cattle, machinery, grain (consider storage fee) Investments from the sale of land, cattle, etc. Need for deductions if selling assets CRUT, CGA Social Security Land Lease- Cash rent. Share Crop (wind farm; recreational assumptions) SPIA Borrow on LI
Consider a Charitable Trust: ü Bypass capital gain ü Increase income ü Receive a current charitable income tax deduction May deduct 30% (appreciated property gift) to 50% (cash gift) of your AGI in the year of the gift, carried forward for five years if needed ü Reduce federal estate taxes ü Diversify assets ü Utilize professional asset management
What considerations should Bob & Sue explore as they liquidate their land, cattle and machinery? • • • • Recapture, depreciation Capital gains Value of machinery at auction Price of cattle Charitable options CRUT, outright gifts-ILIT wealth replacement How much land do they want to keep? Will they keep the house or move? 1031 exchange Conservation easement Cash rent/Share crop Debt consideration Family use of land (emotional issue) How much income will they produce from sale of land, cattle and machinery? Consider tax implications of selling
What types of estate issues do you foresee for Bob and Sue? How could they be rectified? • • • • • What plans are in place? Titles of assets-corporations; farm What amount left to heirs & grandchildren Will there be different amounts to kids Education of grandchildren Cara vs. Steve Estate taxes- Annual reviews Gifting to children or charity Move the LI to ILIT Bequest, outright, CRUT, wealth replacement Beneficiary designation of SEP (IRD) Lead Trust (CLUT) Life Estate Roth rollover Estate rates Exemptions Recapture
Consider a Charitable Lead Trust: ü Receive charitable deduction ü Donor not taxed on trust income (non-grantor) ü Reduced gift/estate taxes ü Assets returned to family
What income vehicles would you recommend as they enter retirement? • • • • KPERS Annuities, Mutual Funds, REITs SEP Lease/sell land- mineral rights, water, gas, oil CRUT, CGA Discuss timing of asset liquidation Social Security Cash value of LI 1031 Exchange Income now? Title of land Stay on farm? What do the children want?
Consider a Charitable Gift Annuity: ü Provides supplemental payments for life ü Partially tax-free payments ü Portion of capital gains tax pro-rated ü Receive a current charitable income tax deduction
What key information do you need to help Bob and Sue make the best financial decisions? • • • • Financial background-current income-future income needs (travel) Land Title of property Trustee Current plans-will/trust/POA Risk tolerance-investment philosophy Tax status Family information-relationships between children- grandchildren Charitable intent- by both Retirement living LTC Beneficiary Health status Location of land Social Security Private school
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