How to Make a Difference Now and in the Future

Transcription

1 How to Make a Difference Now and in the Future Josh D. McDowell Founder Josh McDowell Ministry Jay R. Link, CGPA Senior Planned Giving Consultant The Great Commission Foundation

2 What We Will Cover What Denotes a Legacy? Six Strategies 1. Direct Gift of Appreciated Assets 2. Donor Advised Fund 3. Direct Charitable IRA Rollover 4. Charitable Gift Annuity 5. Charitable Remainder Trust 6. Bequest Q & A

3 Legacy Probing Questions How will I be remembered after I leave planet Earth? What intangibles will I pass on to family, friends and others? How have I made a difference in the lives of others? What do I want to both carefully guard and intentionally pass on? What does my harvest of righteousness look like? Did my life point people to God or to someone or something else? What story of my walk with Christ do I leave for the future? Will heaven s population be greater or lesser because of me?

4 Legacy Why is It so Important? The Bible specifically speaks to the notion of legacy. Proverbs 13:22 A good man leaves an inheritance to his children s children. Daniel 12:3 Those who lead many to righteousness will shine like stars for ever and ever. Psalm 127:4 Like arrows in the hand of a warrior, so are the children of one s youth. I Corinthians 4:2 Now it is required that those who have been given a trust must prove faithful.

5 Legacy A Working Definition Since the notion of legacy involves both what you do now and its future impact, a good working definition of legacy would be: How should I both live and give while here on earth so that I live on in the souls of others for eternity?

6 Taxes, Taxes, Taxes!!! Income Taxes Federal: 0% to 39.6% State: 0% to 13.3% Federal Capital Gain Tax 15% to 20% State Capital Gain Tax 0% to 13.3% National average 5% Affordable Care Act Tax 3.8%

7 Capital Gains Taxes are Optional Pay them, Postpone them, or Bypass them Death Charitable Giving transferring tax dollars to kingdom dollars

8 Strategies with more current focus and benefit 1. Direct Gift of Appreciated Assets 2. Donor Advised Fund 3. IRA Charitable Rollover Today Long Term Near Term

9 #1-Direct Gift of Appreciated Assets What is it? Appreciated assets are the ones that have increased in value since you acquired them such as: Stocks, bonds and mutual funds Real estate Business interests Artwork and Collectables

10 Benefits of Gifting Appreciated Assets Experience multiple layers of tax savings. Give substantially more from assets vs. cash flow. Transfer tax dollars to kingdom dollars.

11 #2-Donor Advised Fund (DAF) What is it? A charitable giving fund that is a separately administered by a public non-profit charity into which donors make irrevocable, tax-deductible contributions and from which they make grants to various charities. Has existed since the 1930s. Is similar to a private foundation without the regulations. Is gaining in popularity. Nearly 202,000 DAFs in 2012 (up 26% from 2007) Over $45.3B invested in 2012 (up 42% from 2007) Nearly $14B contributed in 2012 (up 39% from 2007)

12 How a DAF Works Jon & Carol Donor Advised Fund 5 4 Charities 1. Open account 2. Gift cash/assets 3. Receive tax deduction 4. Grant gifts 5. Advise on grants

13 Ways to Benefit from a DAF Tax-wise Giving receive a tax deduction in the year you make gift(s) to fund; recommend grants at your leisure. Anonymous Giving recommend grants without being identified as the donor, if that is your preference. Family Giving include children and grandchildren in deciding which charities to recommend to receive grants in order to nurture a giving heart in the lives of those you love.

14 DAF Case Study Joe and Dawn Green Worked in real estate and acquired several rental properties over the years. Would like to donate one of the properties to support ministries that evangelize the lost. Would also like to engage their children in their charitable endeavors. Selling the property would trigger a 30% capital gains tax. What can they do?

15 DAF Case Study Solution Established the Green Family Fund using a DAF and contributed the property to the fund. This gave them an income tax deduction and bypassed federal and state capital gains taxes. They, along with their children, did research on their favorite ministries that evangelized the lost. Once property was sold, they convened a family board meeting where they reviewed the ministries researched, voted on the most effective ones, and recommended grants to those ministries from their DAF.

16 A DAF may be for you if you Desire the benefits of a private foundation without all the red tape. Need time to decide which ministries to support but want a tax deduction now. Anticipate making both cash and non-cash gifts. Want freedom to change beneficiaries. Prefer your giving to be anonymous. See the value of making your giving a family affair.

17 #3-IRA Charitable Rollover What is it? A Charitable Rollover is made by the custodian or trustee of your IRA directly to a qualified charity of your choice. It is subject to the following stipulations: Traditional IRAs only (no Roth IRAs). Must be at least age 70 ½. Up to $100,000 per year. Effective through 12/31/2014. (if approved for 2014) 401(k) and 403(b) do not qualify. Must first roll into IRA.

18 IRA Charitable Rollover Features and Benefits Satisfies Required Minimum Distribution (RMD) rules. Tax Neutral excluded from income and as a tax deduction. May avoid surtaxes (Medicare premiums, tax on Social Security). May avoid limits on charitable and other deductions. May prevent a boost into higher tax bracket. Easy to do.

19 An IRA Rollover may be for you if you Have a traditional IRA. Are required to take the RMD but don t need the income. Give more than 50% of your AGI. Want to make a lifetime gift from a large IRA balance. Intend to leave the charity as beneficiary of your IRA. Do not itemize and therefore don t receive a tax benefit for your charitable contributions.

20 Strategies with current & future focus and benefit 4. Charitable Gift Annuity 5. Charitable Remainder Trust Today Long Term Near Term

21 #4-Charitable Gift Annuity (CGA) What is it? A Charitable Gift Annuity is an agreement between a donor and charity. In exchange for the donor s irrevocable gift, the charity is contractually obligated to pay a fixed lifetime income to one or two annuitants. Because the annuity s present value is less than the amount transferred, a portion is a gift.

22 How a CGA Works Cash or Securities Annuity Reserve Gift Portion Income for life 1 Charitable deduction At death 1 Annuity rates range from 4.7% for those 65 to 9.0% for those 90 and older. Also, a portion of the income received is tax-free. Charity

23 CGA Case Study Debra Needmore Debra is 78 and is in the 15% income tax bracket. Debra has $50,000 in a CD that is paying 1%. She wants a higher return with out additional risk. She wants to be able to make a charitable donation to a ministry that spreads the Gospel.

24 GG Case Study Charitable Gift Annuity vs. Certificate of Deposit Gift Annuity Certificate of Deposit Income before tax $3,200 1 $500 Income after tax $3,133 $425 Rate 6.4% 2 1.0% Donation $50,000 $0 Tax deduction/savings $22,188/$3,328 $0 1 $2,755 of this amount is tax free. 2 Effective yield is 7.9% due to a portion of income being tax free.

25 A CGA may be for you if you Are 65 years of age and older (if married, both over 65). Desire interest rates more than current savings or CD rates. Need stable, secure income during retirement. Have appreciated securities and want to bypass capital gains. Want to support kingdom work.

26 #5-Charitable Remainder Trust (CRT) What is it? A Charitable Remainder Trust is a legal arrangement where cash or other property is transferred to an individually designed trust to pay income to the donor, or a beneficiary designated by the donor, for a number of years or for life. At the end of the trust period, assets remaining are distributed to charity.

27 How a CRT Works Cash or Other Property Charitable Remainder Trust Income for life or period of years 1 Charitable deduction 1 Period of years can t exceed 20 years. Donor sets the percentage of distribution to be between 5% and 50%. Also, income is taxed based upon the character it has in the trust. Will usually be ordinary income. 1 or more Charities

28 A CRT may be for you if you Want to transfer assets with value greater than $100,000. Desire to have more than one or two beneficiaries. Want to choose an annual amount that is either a fixed amount or fixed percentage of the value of the trust assets as that value changes from year to year. Have appreciated assets and want to bypass capital gains. Prefer flexibility to change remainder charity. Understand and accept the upfront set-up costs and ongoing maintenance requirements.

29 Strategies with more future focus and benefit 6. Bequest Today Long Term Near Term

30 #6-Bequest What is it? A bequest is a transfer of wealth that occurs upon a donor s death by will or a trust. Common types are: Specific a certain amount of cash, securities, or property. Percentage a stated percentage of donor s estate. Residual a portion of estate after distribution of specific bequests. Key Point: Use of percentages provides greater equity among all recipients (individual and charitable) since values of specific assets may change from the time when will or trust is created to when assets are distributed upon death.

31 Bequest Distinction between good and bad assets Good --those that pass to heirs without tax consequences. Bad those that pass with tax consequences: IRD (income in respect of a decedent) assets. There are several specific types but the most common is qualified retirement plans. Strategy: Structure your estate so that good assets pass to individuals and bad assets pass to charities which are tax exempt and therefore not subject to tax consequences.

32 Bequest Case Study David Wisdom David has a $2 million dollar estate including an IRA of $500,000. His son is named as beneficiary of the IRA. His estate plan provides $500,000 in bequests to several charities and the remainder is for the benefit of his children. His son has a combined federal and state tax rate of 45% What can he do?

33 Bequest Case Study Solution A tax-wise option would be for David to instead name charity as the beneficiary of his IRA and leave the other assets to his children. There would be no tax on the IRA since the beneficiary is a tax-exempt charity and the children would receive more. Current Plan New Plan Change IRS $225,000 $0 -$225,000 Children $1,275,000 $1,500,000 +$225,000 Charity $500,000 $500,000 No Change

34 Build Your Legacy and Let Us Help Our services are designed for you, our partners. This is our ministry to you. Your information is kept confidential, and there is never any cost or obligation to give. You may have multiple charitable interests. We believe the Holy Spirit will guide you in your giving choices. We can interact with your trusted advisors, as desired.

35 Benefits of Including Us on Your Team Experience no pressure, no cost and no hidden agenda. Receive help from friends you know and trust. Understand the full array of your options. Benefit from wise stewardship.

36 How may we serve you? Please feel free to contact us. We look forward to the opportunity to be of service to you and pledge our finest efforts and complete confidentiality. Jay R. Link, CPGA Senior Planned Giving Consultant The Great Commission Foundation (616) Michelle Oney Director of Development Josh McDowell Ministry (972) ext 125

37 Questions and Answers your question to Jay or Josh at