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The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
The  3 Doors To Significant Giving
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The 3 Doors To Significant Giving

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  • 1. The Three Doors to Significant Charitable Gifts and How to Get Through Them Presented by: Tom Conway The National Christian Foundation © 2007 The National Christian Foundation
  • 2. The Realities of Life • I will die • I will take nothing with me • I will probably die at a time I did not anticipate • Someone else will get my “stuff” • I can only decide before I die who gets my “stuff” after I die
  • 3. PAGE 3 © 2005 THE© 2007 The National Christian Foundation NATIONAL CHRISTIAN FOUNDATION
  • 4. Cash is 7% 80 % of gifts of average are cash * gross estate.** *This percentage has been deduced from numbers in Giving USA 2005 and IRS statistics. **See Estate Tax Returns Filed in 2003: Gross Estate by Type of Property, Deductions, Taxable Estate, Estate Tax and Tax Credits, by Size of Gross Estate (available at http://www.irs.gov). PAGE 4 © 2005 THE NATIONAL CHRISTIAN FOUNDATION
  • 5. Missed Opportunities • In 2001 alone, taxpayers paid $3.5 billion in avoidable capital gains taxes that could have gone to charity. (2001 tax return survey – NewTithing Group) • 80% of real estate gifts offered by donors are refused by charities. PAGE 5 © 2005 THE NATIONAL CHRISTIAN FOUNDATION © 2007 The National Christian Foundation
  • 6. Three Important Questions • What assets do you have? • What assets do you need for yourselves and your heirs? • What will you do with the rest? PAGE 6 © 2005 THE NATIONAL CHRISTIAN FOUNDATION
  • 7. Three Doors to Charitable Gift Planning 1. The Transaction Door 3. The Income Tax Door 5. The Estate Tax Door PAGE 7 © 2005 THE NATIONAL CHRISTIAN FOUNDATION © 2007 The National Christian Foundation
  • 8. The Transaction Door • The goal – to lower current income tax by turning tax dollars into charitable dollars • The strategy – Have the donor gift a partial interest or entire interest in the real estate or business before he or she enters into a contract or agreement to sell it • The benefits to the donor - – Donor get a deduction for fair market value – Eliminates capital gain tax on the gifted portion – Tax deduction saves income taxes at your current rate – Ultimately more money goes to the charities of your choice PAGE 8 © 2005 THE NATIONAL CHRISTIAN FOUNDATION © 2007 The National Christian Foundation
  • 9. Comparison of Gift After or Before Sale Gift After Sale Gift Before Sale Sales Price of land/busn $ 1M $1M CG Tax Paid on sale $210,000 $0 Gift to Charity $790,000 $ 1M Taxes saved by gift (40%) $316,000 $400,000 Total taxes saved $106,000 $400,000 Additional Gift to Ministry $ 210,000 Tax Dollars Converted to Charitable Dollars $ 294,000 PAGE 9 © 2005 THE NATIONAL CHRISTIAN FOUNDATION
  • 10. The Smiths – Real Estate Sale The ‘Three Bucket Approach’ The Smiths have a parcel of real estate worth $3.5 million. They are ready to sell and have some charitable interest, but they also want to keep a large portion for themselves and their family. PAGE 10 © 2005 THE NATIONAL CHRISTIAN FOUNDATION © 2007 The National Christian Foundation
  • 11. Three questions for the Smiths: 2. How much do they want to retain for themselves? 3. How much do they want to give immediately? 4. How much do they want to invest for life income, but then give upon death? PAGE 11 © 2005 THE NATIONAL CHRISTIAN FOUNDATION © 2007 The National Christian Foundation
  • 12. Pre-Sale Gift of Property Interest The Smiths 20% 60% 20% Smith Giving Smith Smith Fund CRT Family $700,000 $2,100,000 $700,000 Charities / Ministries / Churches Income: $157,500/year for life At Death to Charity Tax Deduction: $700,000 Tax Deduction: $538,251 PAGE 12 © 2005 THE NATIONAL CHRISTIAN FOUNDATION © 2007 The National Christian Foundation
  • 13. Tax Treatment Upon Sale The Smiths 20% 60% 20% Smith Giving Smith Smith Fund CRT Family $700,000 $2,100,000 $700,000 Tax Free Sale Tax Free Sale Taxable Sale (but $1.2mm+ of deduction) $ 700,000 deduction $538,251 deduction Sell to Buyer PAGE 13 © 2005 THE NATIONAL CHRISTIAN FOUNDATION © 2007 The National Christian Foundation
  • 14. TRANSACTION CHALLENGES:  Buyer Under Contract  Dealing With Debt  Continue Private Use  Unrelated Business Taxable Income  Planning for ongoing costs & liabilities PAGE 14 © 2005 THE NATIONAL CHRISTIAN FOUNDATION © 2007 The National Christian Foundation
  • 15. Conversation Starters – R/E • Mr. Smith, do you or Mrs. Smith own any (investment) real estate other than your personal residence? • When did you purchase it? • Was it passed on to you (inherited)? • Has it grown in value? • What do you plan to do with it? • Have you ever considered selling it? PAGE 15 © 2005 THE NATIONAL CHRISTIAN FOUNDATION
  • 16. Conversation Starters – R/E • Do you have any real estate investments? • When do you expect to sell your real estate? • Will there be a lot of taxes? • What is your plan to lower or eliminate the taxes? • Do you still have that property for sale? • Are you interested in possibly selling without paying taxes? PAGE 16 © 2005 THE NATIONAL CHRISTIAN FOUNDATION
  • 17. Conversation Starters - BI • Mr. Jones – What do you do for a living? • What kind of a business is it? or What does your business do? He or she explains: • Do you have many employees? (Chances are the more employees they have, the bigger the business.) Yes, we have 80 employees • What are your long-term plans for the business? • Do you plan to sell it at some point? (either to an outsider or maybe to key employees). PAGE 17 © 2005 THE NATIONAL CHRISTIAN FOUNDATION
  • 18. Conversation Starters - BI • Do you plan on passing your business on to any of your children? Yes, I hope to sell it to my son • Are your children likely to take over the business? • Since your children are not taking over the business, who will? Will you sell it? • How will you deal with the tax cost of selling/transferring your business? • If you could lower the tax cost of selling/transferring your business by raising the benefit to your family and charity, would you be interested? PAGE 18 © 2005 THE NATIONAL CHRISTIAN FOUNDATION
  • 19. The Income Tax Door • The goal – maximize current income tax deduction limitations • The strategy: – Maximize the 50% AGI limitation by combining cash gifts and asset gifts – Move some income off of your tax return to another entity • The benefits to the donor – Maximizes current income tax deduction – Tax deduction saves income taxes at donor’s current rate – Can increase donor’s cash flow if done with non-liquid assets PAGE 19 © 2005 THE NATIONAL CHRISTIAN FOUNDATION
  • 20. Key’s to the Income Tax Door • Don’t pay Capital Gains Tax on gifts you will make to charity • Maximize your government matching gift program (the tax deduction) – 50% • Combine cash gifts (50%) and asset gifts (30%) PAGE 20 © 2005 THE NATIONAL CHRISTIAN FOUNDATION
  • 21. Conversation Starters • Mr. Brown, have you had a good year in your business? Yes. • Do you find yourself paying a lot of federal and state income taxes? Yes. • Do you end up spending much more on income taxes than what it costs you to live. Yes, considerably more. PAGE 21 © 2005 THE NATIONAL CHRISTIAN FOUNDATION
  • 22. Conversation Starters • In light of your financial success, you could enjoy a much higher lifestyle…why don’t you? • Are you paying high taxes in spite of your modest lifestyle? • Would you like to know how to lower your income taxes to an amount that more fairly reflects your lifestyle? PAGE 22 © 2005 THE NATIONAL CHRISTIAN FOUNDATION
  • 23. The Estate Tax Door • Two Strategies – Gifts made during life – Current Income Tax Benefit – Gifts made at the end of life – Estate Tax Benefit PAGE 23 © 2005 THE NATIONAL CHRISTIAN FOUNDATION
  • 24. Gifts Made During Life • The Goal – lower income tax during life for gifts they will make after death. • The Strategy – Give while living to a Charitable Remainder Trust; Create current income tax deduction; remove the assets from taxable estate. • The Benefits – Current income tax deduction saves income taxes at donor’s current rate. Could increase donor’s cash flow by reduced taxes. PAGE 24 © 2005 THE NATIONAL CHRISTIAN FOUNDATION
  • 25. The Taylors – SCENARIO: SCENARIO Mr. & Mrs. Taylor have three children. At their deaths, they would like to leave 25% of their estate to each child and the remaining 25% of their estate to their favorite charities. Is there any way they can enjoy less income taxes during life for gifts they plan on making at the end of life? PAGE 25 © 2005 THE NATIONAL CHRISTIAN FOUNDATION © 2007 The National Christian Foundation
  • 26. “I’m Giving to Charity at Death” Current Plan – The Taylors Estate Dea th Probate Estate $3,000,000 $3,000,000 $2,250,000 $750,000 Family Charity PAGE 26 © 2005 THE NATIONAL CHRISTIAN FOUNDATION © 2007 The National Christian Foundation
  • 27. “I’m Giving to Charity at Death” Proposed Plan: 2. During life, transfer Estate asset to Trust that will Gift go to charity at death. $750,000 $3,000,000 3. Transfer creates BIG Death Income Tax deduction (750k – 500k present Charitable value of inc.interest = $250k Income Tax Deduction Probate Estate 250k deduction). Trust $2,250,000 4. Trust makes payments Life Income – The Taylors to Owners for Life. 5. Only ‘non-charitable’ estate goes through probate. 6. Family receives intended gifts from Probate Estate. 7. Charity receives gift from Trust. Charity Family PAGE 27 © 2005 THE NATIONAL CHRISTIAN FOUNDATION © 2007 The National Christian Foundation
  • 28. Comparison of Gift Before and After Before After Amount to family $2.25M $2.25M Current inc.tax deduction $ 0 $ 250,000 Taxes saved on gift (30%) $ 0 $ 75,000 To Charity at death $750,000 $750,000 Potential to Charity now $0 $ 75,000 PAGE 28 © 2005 THE NATIONAL CHRISTIAN FOUNDATION
  • 29. Conversation Starters • Do you and Mrs. Taylor have wills? • Are your wills up to date, or when were they drawn up and signed? Probably five years ago. • Are you planning on doing any charitable giving upon your deaths? or do you have charitable giving in your estate plan? • Roughly how much do you plan to give to the Lord’s work at death? (Generally it is at the death of the last one to die.) PAGE 29 © 2005 THE NATIONAL CHRISTIAN FOUNDATION
  • 30. Conversation Starters • How do you view giving to charity through your estate? • Are you planning on doing that? • Have you discussed this with your children? How do your children feel about it? • Would you be open to a conversation with some people who could help you think through your options to maximize your charitable giving at death and also minimize your taxes during life? PAGE 30 © 2005 THE NATIONAL CHRISTIAN FOUNDATION
  • 31. Conversation Starters • Since you have decided to give to ministry at death, do you know you could have lower income taxes during life? Would you like to know how? • Would you like to lower your taxes ‘today’ in light of gifts you will be making ‘tomorrow’? PAGE 31 © 2005 THE NATIONAL CHRISTIAN FOUNDATION
  • 32. Gifts Made At the End of Life  The goal – lower (or eliminate) estate taxes  The strategy – Give life insurance to heirs and assets to charity – Look at Charitable Lead Trust – Make charity the beneficiary of IRA assets  The benefits to the donor – Lower estate taxes – Potentially double charitable giving at death – Pass on more assets to heirs during life PAGE 32 © 2005 THE NATIONAL CHRISTIAN FOUNDATION
  • 33. Gifts Made At the End of Life • Three Questions for Donors: 1. If the two of you were called home today, how much would go to the government in estate taxes? 2. If the two of you were called home today, how much would go to your children? 3. How do you feel about that? PAGE 33 © 2005 THE NATIONAL CHRISTIAN FOUNDATION © 2007 The National Christian Foundation
  • 34. The Myths of Estate Planning 1. Estate Planning is a one-time event 3. ‘I’ve got the highest priced attorneys in town, certainly they have done the best job money can buy’ 5. It’s my heirs money PAGE 34 © 2005 THE NATIONAL CHRISTIAN FOUNDATION
  • 35. The Truth Regarding Estate Planning 1. Estate taxes are optional 2. You will leave it all behind, but you get to choose the next steward 3. This is the last stewardship decision you will make 4. You can accelerate some of these gifts during life 5. You will give an account of your decision PAGE 35 © 2005 THE NATIONAL CHRISTIAN FOUNDATION
  • 36. Disclaimer Funded Giving Fund Parents want to share with their children. But $5,000,000 desire children to decide Estate how much to pay Govt. in taxes and how much to share with ministries and charity. Giving Fund Taxable By Child’s Disclaimer Non-taxable Portion portion of estate of Estate Net After Tax Amount Children Children PAGE 36 © 2005 THE NATIONAL CHRISTIAN FOUNDATION © 2007 The National Christian Foundation
  • 37. Conversation Starters • Mr. and Mrs. Johnson, do you have a will? • When was it last updated? • Do you know if you will be liable to pay estate taxes upon your death or deaths if a couple) or, do you know if you have a taxable estate? PAGE 37 © 2005 THE NATIONAL CHRISTIAN FOUNDATION
  • 38. Conversation Starters • Have you decided to share most of your estate with your family? What caused you to reach that decision? • Are you aware of the amount of taxes your family would pay upon the transfer of your estate to them? What steps have you taken to lower these? • If you could substitute charity for the Government in your estate plan, would you be interested? PAGE 38 © 2005 THE NATIONAL CHRISTIAN FOUNDATION
  • 39. “Make all you can, Save all you can, Give all you can.” John Wesley PAGE 39 © 2005 THE NATIONAL CHRISTIAN FOUNDATION
  • 40. PAGE 40 © 2005 THE NATIONAL CHRISTIAN FOUNDATION © 2007 The National Christian Foundation

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