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WEALTH BUILDING By: K. Gene Christian, Regional Director Charitable Estate and Gift Planning Services Providence Health System - Oregon 503-216-2226/phone.

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Presentation on theme: "WEALTH BUILDING By: K. Gene Christian, Regional Director Charitable Estate and Gift Planning Services Providence Health System - Oregon 503-216-2226/phone."— Presentation transcript:

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2 WEALTH BUILDING By: K. Gene Christian, Regional Director Charitable Estate and Gift Planning Services Providence Health System - Oregon /phone /Fax …and the role of Charitable Planning...

3 TRADITIONALLY, WHAT IS IT? WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING TRADITIONALLY, WHAT IS IT? Definition: Development and implementation of planning strategies which will minimize taxation while moving a person(s) toward financial independence.

4 TRADITIONALLY, HOW IS IT ACCOMPLISHED? WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING TRADITIONALLY, HOW IS IT ACCOMPLISHED? 1.Develop a unified credit shelter estate plan (will or living trust)

5 TRADITIONALLY, HOW IS IT ACCOMPLISHED? WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING TRADITIONALLY, HOW IS IT ACCOMPLISHED? 2. Fund 401Ks, IRAs, ROTHs, VULs, etc. for tax-sheltered growth

6 TRADITIONALLY, HOW IS IT ACCOMPLISHED? WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING TRADITIONALLY, HOW IS IT ACCOMPLISHED? 3. Buy Life Insurance to replace income earner(s) salary.

7 TRADITIONALLY, HOW IS IT ACCOMPLISHED? WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING TRADITIONALLY, HOW IS IT ACCOMPLISHED? 4. Place what is left into investments/real property to produce capital gain and/or high cash flow.

8 WHAT IS THE ROLE OF CHARITABLE PLANNING IN WEALTH BUILDING? WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING WHAT IS THE ROLE OF CHARITABLE PLANNING IN WEALTH BUILDING? Definition: It assumes that wealth accumulation decisions should be based as much on what the wealth-holder values, as the value of the wealth-holders assets.

9 WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING Nearly 80% of all Americans have charitable receptivity. WHY IS THIS IMPORTANT?

10 E. WHY IS THIS IMPORTANT? WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING E. WHY IS THIS IMPORTANT? There are only three potential heirs in estate planning... $$$ CharityGovernmentPeople

11 OPPORTUNITIES IN THE NEW MILLENIUM? WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING OPPORTUNITIES IN THE NEW MILLENIUM? The Nation is aging rapidly Three affluent generations alive simultaneously Huge transfer of wealth occurring Financial markets over 15 years have soared Combined taxation remains relatively high You bet!

12 A CASE ILLUSTRATION WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING A CASE ILLUSTRATION WEALTH BUILDING...and the role of Charitable Planning...

13 CASE PROFILE WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING CASE PROFILE Bob (age 59) and Alice (age 58) Auburn He owns/manages a small residential construction company She is an independent contractor currently consulting for ODOT

14 CASE PROFILE - cont. WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING CASE PROFILE - cont. Nearing retirement - they want to travel more Dont want to dramatically affect childrens inheritance - close family

15 CASE PROFILE - cont. WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING CASE PROFILE - cont. $300,000 life insurance on him $125,000 life insurance on her $628,000 his SEP-IRA $310,000 her 401(k) & IRAs from past employers $12,000 in ROTH IRAs $170,000 home paid off $320,000 rental properties (four homes) They have a $1,865,000 estate:

16 Rental properties A VISUAL LOOK AT THE AUBURNS ESTATE... WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING A VISUAL LOOK AT THE AUBURNS ESTATE... Life Insurance Home ROTHS Her 401(k) & IRAs His SEP IRA

17 Sale vs. Unitrust WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING Sale vs. Unitrust I. Analysis of Increased Income Sale vs. CRT Value of Rentals$320,000$320,000 Closing Costs ($ 22,400) ($ 22,400) Taxable Value $297,600$297,600

18 Sale vs. Unitrust WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING Sale vs. Unitrust I. Analysis of Increased Income - cont. Sale vs. CRT Taxable Value$297,600$297,600 Or. Cost Basis $ 88,000 N/A Cap. Gain Tax ($ 55,963)$ -0- Dep. Cost Basis $ 5,000N/A Cap. Gain Tax ($ 26,311) $ -0-

19 Sale vs. Unitrust WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING Sale vs. Unitrust I. Analysis of Increased Income - cont. Sale vs. CRT Legal/App. Fees$ ? ($ 2,500) Investable Funds $215,326 $ 297,600 Pre-Tax Income (6%) $ 12,920$ 17, YR Exp. $770,854$1,065,390 PV of Income $264,440 $ 365,480

20 Sale vs. Unitrust WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING Sale vs. Unitrust II. Analysis of Tax Deduction Sale vs. CRT Tax Deduction$ -0- $64,171 Tax Savings (34%) N/A $21,891

21 Sale vs. Unitrust WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING Sale vs. Unitrust III. Analysis of Estate Tax S ale vs. CRT Asset Included In Estate $215,326 $ -0- Estate Tax (37%) ($ 79,671) N/A

22 SUMMARY OF BENEFITS WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING SUMMARY OF BENEFITS KEEP IN ESTATE 1.Lifetime after tax cash flow from rentals: $751,808 PUT IN CRT 1.Lifetime after tax cash flow from 6% pay CRT: $752,151 NOTE: See footnotes section in booklet for formulas used

23 SUMMARY OF BENEFITS WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING SUMMARY OF BENEFITS KEEP IN ESTATE 2.Lifetime value of income tax deduction benefit: -0- PUT IN CRT 2.Lifetime value of income tax deduction benefit: $159,244 NOTE: See footnotes section in booklet for formulas used

24 SUMMARY OF BENEFITS WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING SUMMARY OF BENEFITS KEEP IN ESTATE 3.Rentals value at the end of lifetime: $653,869 PUT IN CRT 3.CRT value at the end of lifetime: $965,235 NOTE: See footnotes section in booklet for formulas used

25 KEEP IN ESTATE vs. UNITRUST WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING KEEP IN ESTATE vs. UNITRUST KEEP CRT 1. $ 751,8081. $ 752, $ 159, $ 653,8693. $ 965,235 $1,496,913$1,959,345 PERSONAL ESTATE PERSONAL AND CHARITABLE ESTATE

26 STANDARD WEALTH ACCUMULATION WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING STANDARD WEALTH ACCUMULATION $1,865,000 NICE & BIG PERSONAL ESTATE 31.1 years pass TODAY 2033 AD

27 Adding the Charitable Dimension WEALTH BUILDING AND THE ROLE OF CHARITABLE PLANNING Adding the Charitable Dimension CRT TODAY NICE & BIG BIG ESTATE PLUS BIG CRT 2033 AD …………………………………………………………………………. MUCH LARGER PERSONAL & CHARITABLE ESTATE!! = Rentals

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30 REFERENCE MATERIAL Special Committee on Again (U.S. Senate) American Association of Retired Persons (AARP) Social Security Administration The Oregonian OHSU notes and material The National Committee on Planned Giving National Woodlands Magazine Successful Money Management Seminars Fortune Magazine Crescendo Software Company The Legacy Companies, LLC


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