Tobacco Buyout Exploring All The Options

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Tobacco Buyout Exploring All The Options

  1. 1. Tobacco Buyout: Exploring All The Options <ul><li>Recipients of Tobacco Buyout funds will face many financial challenges because of the tax liabilities associated with this additional income. For many, charitable options can present significant alternatives for: </li></ul><ul><ul><li>financial </li></ul></ul><ul><ul><li>tax </li></ul></ul><ul><ul><li>retirement, and </li></ul></ul><ul><ul><li>estate planning. </li></ul></ul>
  2. 2. The College of Agriculture & Life Sciences <ul><li>The College of Agriculture & Life </li></ul><ul><li>Sciences at N.C. State University has </li></ul><ul><li>developed information resources to help: </li></ul><ul><li>buyout payment recipients, </li></ul><ul><li>professional advisors (attorneys, CPA’s, etc.) </li></ul><ul><li>Cooperative Extension Agents, and </li></ul><ul><li>the general public. </li></ul>
  3. 3. Information Resources <ul><li>We have launched a comprehensive website dedicated to tobacco buyout issues. </li></ul><ul><li>http://www.tobaccobuyout.cals.ncsu.edu </li></ul><ul><li>We have also launched our new planned giving website to serve as a resource for donors and professional advisors. </li></ul><ul><li>http://www.calsncsu.planyourgift.org </li></ul>
  4. 4. Tobacco Website <ul><li>This website includes complete information about the buyout and it will be updated on a continuing basis. </li></ul><ul><li>It links to NC State’s Department of Agricultural and Resource Economics and the Office of College Advancement. </li></ul><ul><li>It also links to other regional websites and other programs at NC State that assist agriculture. </li></ul>
  5. 5. A Word of Caution… <ul><li>Every individual’s circumstances are different. </li></ul><ul><li>There is no one “right” answer. </li></ul><ul><li>The information included on the website should not be considered legal or financial advice. </li></ul><ul><li>We urge everyone to consult with their legal and financial advisors to ensure they are making the best decisions with their buyout funds. </li></ul>
  6. 6. What Are the Charitable Options? <ul><li>Outright Gifts </li></ul><ul><li>Life Income Gifts: </li></ul><ul><li> Charitable Remainder Trusts </li></ul><ul><li> Charitable Gift Annuities </li></ul><ul><li>Deferred Life Income Gifts: </li></ul><ul><li> Deferred Charitable Gift Annuities </li></ul>
  7. 7. It’s A Matter of Choice <ul><li>There are many choices for recipients to consider for their buyout funds… </li></ul><ul><li>simply pay the increased taxes, or </li></ul><ul><li>plan for current or retirement income, and </li></ul><ul><li>make an investment in their communities here in North Carolina by supporting charitable organizations. </li></ul>
  8. 8. Many Options… <ul><ul><li>Benefit charities in local communities </li></ul></ul><ul><ul><li>Cooperative Extension </li></ul></ul><ul><ul><li>4-H Youth Development </li></ul></ul><ul><ul><li>Family and Consumer Science </li></ul></ul><ul><ul><li>agricultural programs, or </li></ul></ul><ul><ul><li>multiple charitable interests. </li></ul></ul><ul><ul><li>Gifts can be used to support ongoing programs, create endowment funds, establish scholarships or many other options. </li></ul></ul>
  9. 9. Outright Gifts <ul><li>Recipients making outright cash gifts to support charitable organizations of their choice may qualify for a charitable income tax deduction (for those who itemize). </li></ul><ul><li>The deduction is for the full amount of the contribution. </li></ul><ul><li>It can help offset income or capital gain tax liabilities. </li></ul>
  10. 10. Life Income Gifts <ul><ul><li>Often called deferred gifts, life income gifts enable individuals to make a significant gift while: </li></ul></ul><ul><ul><ul><li>reserving an income for life and </li></ul></ul></ul><ul><ul><ul><li>receiving a current charitable income tax deduction. </li></ul></ul></ul><ul><ul><li>Gifts can be in the form of a Charitable Gift Annuity or Charitable Remainder Trust. </li></ul></ul>
  11. 11. Life Income Gifts <ul><li>Gifts provide a current year income tax deduction for the value of the future gift to a charity. </li></ul><ul><li>They also providing income to the donor and up to one additional income beneficiary for their lifetimes. </li></ul><ul><li>Life income gifts can play a significant role in financial and tax planning and offer attractive returns. </li></ul>
  12. 12. Deferred Life Income Gifts <ul><li>Deferred charitable gift annuities can help individuals by providing immediate tax advantages while deferring income until a later time, such as retirement. </li></ul><ul><li>Because the income payments do not occur immediately, the gift annuity value grows and the income payments and charitable deductions are larger . </li></ul><ul><li>The charitable income tax deduction is used in the year of the gift, often when tax liabilities are larger. </li></ul>
  13. 13. Additional Benefits… <ul><li>All of these charitable options remove the gift assets from the donor’s estate, a concern if the individual’s estate might qualify for federal and state estate taxes. </li></ul><ul><li>They allow the donor to designate their gifts to programs or services that are aligned with their interests. </li></ul><ul><li>They can support current operations, program funds, capital projects or endowments. </li></ul>
  14. 14. An Example: Charlie and Anne <ul><li>Charlie and Anne (both 61) have been tobacco farmers for 30+ years with little set aside for their retirement. </li></ul><ul><li>They hope to farm nine more years before retiring. </li></ul><ul><li>They want to plan for their retirement years, but could also use more income now. </li></ul><ul><li>Over the next 10 years they will receive $700,000 from the tobacco buyout. </li></ul>
  15. 15. One Option: A Charitable Remainder Unitrust <ul><li>In 2005 they fund a 5.75% Charitable Remainder Unitrust with $50,000. In years 2-10 they will add $35,000 per year . </li></ul><ul><li>From their buyout payments they retain $20,000 in 2005 to use for other needs, and $35,000 in years 2-10. </li></ul><ul><li>They receive an immediate charitable income tax deduction of $12,643 in 2005. </li></ul><ul><li>Their first year income will be $2,875 . Each year, as the value of the assets in the trust increases (or decreases) so will their income. </li></ul>
  16. 16. Additional Features… <ul><li>They will receive over $511,683 in estimated income distributions over their lifetimes . </li></ul><ul><li>Ultimately, their total charitable deductions will be $112,560 (the initial gift plus the nine additions to the trust). </li></ul><ul><li>At the time the couple retires in 2014, their projected income from the trust will be just over $19,000 . </li></ul><ul><li>The value of the trust is not taxable in either of their estates. </li></ul><ul><li>Ultimately, the projected charitable remainder will be approximately $387,000 . </li></ul>
  17. 17. An Opportunity of a Lifetime <ul><li>For many recipients, tobacco buyout payments are an opportunity of a lifetime. </li></ul><ul><li>We realize charitable options will not be of interest to everyone, nor will NC State be everyone’s favorite charity. </li></ul><ul><li>However, for many recipients charitable gift strategies may provide the answers for their financial, tax, retirement and estate planning… and their desire to support agriculture. </li></ul>
  18. 18. Additional Opportunities <ul><li>Many recipients of the Tobacco Buyout </li></ul><ul><li>funds may elect to leave farming and retire. </li></ul><ul><li>Our website also features information about our Landscapes of Opportunity program as well as information on Planning the Future of Your Family Farm. </li></ul><ul><li>These programs can be important in considering what to do with real estate, including ways to keep the valuable land in agricultural use. </li></ul>
  19. 19. We Are Here to Help You! <ul><li>Visit our main CALS website: </li></ul><ul><li>http://www.cals.ncsu. edu </li></ul><ul><li>Visit the new tobacco buyout resource site: </li></ul><ul><li>http://www.tobaccobuyout.cals.ncsu.edu </li></ul><ul><li>Visit our planned giving site: </li></ul><ul><li>http://www.calsncsu.planyourgift.org </li></ul>

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