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Financial Planner

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  • 1. Financial Planner Gift planning ideas from Cornell University Fall 2008 A Cornell Experience That Keeps Paying Dividends Friendships, jobs, success: George and Roberta “Bobbie” Schneider owe most of the good things in their lives to their Cornell connections. “They started at Cornell and flowed from there,” said George, now in his ninth year as a lecturer in entrepreneurship at the Johnson School. “We have a great feeling for George ’59 and Roberta “Bobbie” ’59 the university.” George and Bobbie Schneider found creative ways to “give back” through gift planning. look forward to celebrating their many lasting connections to campus and classmates next spring in Ithaca at “Bobbie and I owe most of their 50th Reunion. the good things that have happened to us in our lives to After graduating from the same our Cornell connections.” high school, George came to Cornell —George Schneider ’59 to major in mechanical engineering, Bobbie in child development. continued on page 5 Create Your Own Good News in Uncertain Times In the newspaper, on television, on the Internet—stories about the challenges facing the American economy are everywhere. We have been buffeted about on the waves of rising gasoline prices and falling returns on income-producing investments. We have been bounced through the crests and troughs of an up-and-down stock market. Most of us are ready for some good news. continued on page 2 Look inside! A free guide is available from Cornell University. Office of Trusts, Estates, and Gift Planning
  • 2. 2 In the midst of these economic you save will depend on your challenges, charitably minded marginal federal income-tax bracket. people have ample reason to take heart. While you are unable to drive Example: Joe and Donna T expect down the cost of regular unleaded, to have taxable income of about there are strategies to brighten your $250,000 in 2008, which puts them own personal economic forecast in the 33% federal tax bracket. They —strategies that can even take decide to make an unrestricted gift advantage of some of the current of $20,000 to support our operating economic challenges. budget this year. In essence, you can create your Result: This gift saves Joe and own good news—if you incorporate Donna $6,600 in federal income tax the right strategies into your ($20,000 x 33%). Note: They may be year-end tax planning. able to save state income tax as well. In this issue of Financial Planner, 2008 Federal Income-Tax Rate Schedule we examine seven of the most Rate Taxable Income powerful and most creative strategies Single Taxpayers Married, Filing Jointly that you can use before year-end. 10% $0 - 8,025 $0 - 16,050 15% $8,026 - 32,550 $16,051 - 65,100 1. Cut Your 2008 25% $32,551 - 78,850 $65,101 - 131,450 28% $78,851 - 164,550 $131,451 - 200,300 Tax Bill While 33% $164,551 - 357,700 $200,301 - 357,700 Supporting Cornell 35% $357,701+ $357,701+ A gift to Cornell University by December 31 will not only enable 2. Plan Your Charitable Gift you to make an investment in our to Do Double Duty—Give mission but can also allow you to Appreciated Assets slash your federal tax obligation this year. If you itemize your deductions In most cases, if you give for federal tax purposes, the amount appreciated assets that you have held for more than one year, you can University Photography Cornell University’s North Campus housing is home for many new and returning students each fall. ContaCt us today (800) 481-1865
  • 3. 74 6.9% 78 7.6% 3 82 8.5% 86 9.9% 90 11.3% You may tailor such a unitrust for SSee forr yourself.e lf. e e fo yo u rs your retirement by including special income-only and make-up provisions Try our gift Discover more that allow annual payments to be calculator at: benefits online made only to the extent the trust has www.alumni.cornell.edu/ “income” and for any difference to www.alumni.cornell.edu/ gift_planning/annuity be made up in future years when the gift_planning trust has excess income. or contact us today at deduct1-800-481-1865 and the full fair-market value If the trustee invests for capital avoid capital-gain or tax. appreciation until you retire, the trust will grow substantially but gift_planning@cornell.edu Example: Karen B makes a gift will distribute no income until that to Cornell of stock worth $50,000 point. If the trust is then invested purchased seven years ago for $12,000. for income, significant payments will be available to supplement your She is allowed a deduction for the retirement income. stock’s full $50,000 value, which saves her $16,500 in her 33% bracket. In 4. Increase Your Cash Flow addition,Cornell University in Karen avoids $5,700 Office of Trusts, Estates, capital-gain tax that she would have With the current low interest rates and Gift Planning owed had she sold the stock. Total on traditional investments, you may savings: $22,200. find that this is a perfect time to consider creative charitable planning 3. Reduce Your Taxable strategies that allow you to make a Income and Invest in gift, generate a charitable deduction, Your Future and receive payments based on the value of your contribution. Have you already made the maximum deductible contributions Collectively these are called to your qualified retirement plan? life-income gifts. There are various Did you know there is another way options available to generate income to increase your retirement security for life; one of the most popular and and reduce current income taxes at versatile is the charitable gift annuity. the same time? The amount of income from a gift One popular way to achieve these annuity depends on the amount of objectives is through the use of a the contribution and the age(s) of the charitable remainder unitrust. You can beneficiary(ies). make contributions to a unitrust you establish at Cornell University with Benefits of a $100,000 Charitable Gift Annuity the stipulation that the trust make Beneficiary(ies) Annual Tax-Free Charitable payments to you (or beneficiaries Age(s) Rate Payment Amount Deduction you designate) each year, based on 70 6.1% $ 6,100 $3,782 $39,880 the value of the assets in the trust. 80 7.6% $ 7,600 $5,358 $49,611 90 10.5% $10,500 $8,316 $59,254 Payments can continue for life or for a 70-70 5.6% $ 5,600 $3,388 $30,518 specified period of time up to twenty 80-80 6.6% $ 6,600 $4,567 $42,018 years. When the payments stop, the 90-90 8.7% $ 8,700 $6,716 $52,997 remaining assets pass to Cornell. * Based on 4.2% IRS discount rate (announced monthly) www.alumni.cornell.edu/gift_planning
  • 4. 4 5. Trade Your “Income Interest” for a Major Deduction If you have already funded a life-income gift with Cornell and find you no longer need the additional income, this may be an opportune time to give up that life-income interest and generate another charitable deduction. Reason: The value of an income interest goes up when the IRS discount rate is down, as it is currently. 6. Harvest Your Losses For many of us, it has not been an easy year in the stock market. It is typical to fund a year-end gift with appreciated securities to avoid the tax on the gain, but the recent turbulence in the markets may have left you with some losses. You can use these poor performing investments to fund a gift to Cornell—but not directly. With a two-pronged strategy, you can harvest your losses and make a gift to Cornell. 1. Sell the poor performing securities. The loss from the sale offsets other investment gains from this and prior years and any excess losses can offset ordinary income up to $3,000. 2. Give the proceeds of the sale to Cornell. There is a corresponding charitable tax deduction that further minimizes the impact of past losses and helps to rebalance your financial and charitable goals. 7. Make a Significant Gift Without Leaving Home A special tax-law provision gives you a significant deduction for making a gift of your home to Cornell—yet allows you to continue living there for the rest of your life. You keep what is known as a “life estate” and transfer what is known as the “remainder interest” to us. This is a potent planning strategy at any time; but, as with a gift of an income interest, it is even more valuable when the IRS discount rate is low. Example: Dave and Sharon, both 72, are entitled to a deduction for 2008 of more than $214,000 for a gift of a remainder interest in their $500,000 home at the prevailing IRS 4.2% discount rate. In their 35% tax bracket, this saves them more than $75,000; and they are able to remain in their home for the rest of their lives.
  • 5. Sage Hall is home to the Johnson School on Cornell’s Ithaca Campus. A Cornell Experience continued from front page After a stint in the Navy, George spent more than 37 years in management positions, including CFO for a company run by Cornell trustee Eli Manchester and president and COO of a medical products company. “Although I never worked as an engineer, my degree was invaluable because it taught me how to think,” he said. As they moved all “We both had scholarships, over the Northeast, so it’s the right thing to Bobbie worked as a do,” Bobbie said. “And it teacher while raising feels so good to give back.” their children, all Cornell graduates (two engineers and a history and government major). “I taught young children my entire career and really used my Cornell education,” she said. After George retired, the couple moved back to Ithaca so George could start Cornell’s business incubator. They love it here. From their home by the golf course, they walk to campus and enjoy lectures, concerts, and sports—especially hockey. In 2001, the Schneiders created a charitable remainder trust that will ultimately benefit Cornell University. Separately, they established a donor-advised fund account with the Cornell University Foundation that simplified their charitable giving. George says, “We found, from a tax standpoint, that putting the money with Cornell was the most efficient method for our long-term goals.” The Schneiders have since elected the new endowment strategy for their trust that was made possible by a 2007 IRS ruling. The new strategy will help the Schneiders’ trust realize the same investment returns as the endowment and, in turn, they expect a larger gift benefiting Cornell’s students, academic programs, and facilities. “We both had scholarships, so it’s the right thing to do,” Bobbie said. “And it feels so good to give back.” 5
  • 6. Cornell Welcomes 40 New Cayuga Society Members Make Your Moves Now Creating Your Legacy in Troubled Fina ncial Times To assist you in your planning, we would A Philanthropist’ s It is a pleasure to welcome more than 40 new Cayuga Society Guide to Federa l like to send you a complimentary copy of our Taxes in ’08 members this year. In total, the Cayuga Society now honors more guide, Creating Your Legacy in Troubled than 4,000 individuals who have included Cornell in their will or Financial Times: A Philanthropist’s Guide established another planned gift for Cornell. Because all planned to Federal Taxes ’08. gifts represent a lifetime commitment to Cornell University, the Cayuga Society has no minimum gift level, and membership is To get your copy, just return the attached complimentary. card or call our office at (800) 481-1865. Are You Too Young to Have a Will? Absolutely Not! Consider joining your classmates today in supporting future generations of Tree photograph by Christian Carroll Cornellians. Many of Cornell’s bequests have come from alumni, parents, and friends who made a provision for the university decades ago. Nonprofit Org. U.S. Postage Get Started Today. We Can Help. PAID Cornell Learn more about how to leave a lasting legacy through your will or other University 130 East Seneca Street, Suite 400 charitable estate and gift planning options. You can call (800) 481-1865 or simply Ithaca, NY 14850-4353 complete and return the enclosed confidential reply card. Sample bequest language “I hereby give, devise, and bequeath to Cornell University [or alternatively to Cornell University for the College or Unit of…], an educational corporation in Ithaca, New York, for its general purposes {…dollars}{…percent}{all the rest, residue, and remainder of my estate}.”