Financial Planning Association – Dallas Chapter November 12, 2013 Dr. Jeffrey W. Steed, MBA Senior Director of Gift Planning The University of Texas at Arlington H Case Studies Involving Gift Planning

Retirement Years... Traveling Carefree

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How can advisors help clients in their retirement years using gift planning tools? Retirement Years...

Helping Clients in Retirement Years Agenda 1. Impacting Through A Legacy Gift 2. Funding Retirement Living 3. Maximizing Annual IRA Distributions 4. Diversifying a Retirement Portfolio 5. Increasing Retirement Income Securely 6. Reducing/Avoiding Gift Tax

FUNDING RETIREMENT LIVING Step #1 Mr. and Mrs. Page establish an endowment through their Last Will and Testament or Revocable Trust. They do not feel that they can prudently give away major gifts during retirement due to a minimal estate size. Step #2 At their passing, charity receives income payments every year for student scholarships. RESULT: Their impact on the lives of charity continues perpetually. Impacting Through A Legacy Gift The Page Endowed Scholarship Helping Clients in Retirement Years

FUNDING RETIREMENT LIVING Step #1 Mr. and Mrs. Johnson establish a Charitable Remainder Trust (CRT) and give their farm to the CRT. Establish the Johnson Charitable Remainder Trust Step #2 After the CRT sells the farm, income is distributed periodically to Mr. and Mrs. Johnson to fund retirement living. After Mr. And Mrs. Johnson pass away, charity receives the CRT remainder. Funding Retirement Living Step #3 Helping Clients in Retirement Years

FUNDING RETIREMENT LIVING Step #1 Mrs. Lyle (“non-itemizer tax filer“) contacts her IRA custodian for a qualified charitable distribution. IRA Custodian Step #2 IRA custodian mails a check directly to charity. RESULT: Mrs. Lyle benefits charity with pre- tax dollars and does not pay tax on the amount. NOTES: - Donor must be Benefit ends 12/31/13 - Maximum: $100,000 - Qualifies for MRD Maximizing Annual IRA Distributions Helping Clients in Retirement Years

FUNDING RETIREMENT LIVING Step #1 Mr. May establishes a Charitable Remainder Trust (CRT) and gives a concentrated, appreciated stock position (or other asset) to the CRT without capital gain taxes initially. Establishes the May Charitable Remainder Trust Step #2 The CRT sells the stock, diversifies the CRT portfolio and income is distributed periodically to Mr. May. After Mr. May passes away, charity receives the CRT remainder. Diversifying a Retirement Portfolio Step #3 Helping Clients in Retirement Years

FUNDING RETIREMENT LIVING CHARITABLE GIFT ANNUITY (CGA): Mrs. Wright (age 70) establishes a $100,000 CGA at 5.10% ($5100 annually) CHARITABLE GIFT ANNUITY (CGA): Mrs. Wright (age 70) establishes a $100,000 CGA at 5.10% ($5100 annually) The CGA allows for Mrs. Wright to have an initial partial income tax deduction and provides $5100 annually in income to her. After Mrs. Wright passes away, charity receives the CGA remainder. Increasing Retirement Income Securely STATUS QUO: Mrs. Wright purchases a five-year $100,000 CD at 1.50% ($1500 annually). STATUS QUO: Mrs. Wright purchases a five-year $100,000 CD at 1.50% ($1500 annually). OR Helping Clients in Retirement Years

 Desire to pass company to children (C-Corp) with minimal tax  No pre-sale agreements exist  FLP owns 99% LP interest, while donor keeps 1% GP interest until death (stepped-up at death to children)  Discounted valuation of LP interest by qualified appraisal  No active participation by the FLP or GP in the C-corporation and no debt  Various types of Lead Trusts – this is a non-grantor lead trust (Family Lead Trust).  Donor has other assets for retirement  Appreciation of assets in Trust not taxable Charitable Lead Annuity Trust Facts/Assumptions Reducing/Avoiding Gift Tax

(Or 10% of $2,200,000) #2 #1 #3 #4 #5 At Samantha’s death, the remaining 1% GP interest is distributed to family (stepped-up costs basis) #6

Potential Gift Planning Solutions: 1.An individual does not feel that he/she can give much to charity while living due to a minimal estate size, but he/she is charitable. »Bequest gift? 2.An individual is wanting to sell her/his farm in order to move to a retirement center. »Charitable Remainder Trust? 3.An individual complains about being forced to take a taxable IRA distribution. »IRA Charitable Rollover? 4.A client mentions that most of their portfolio is tied up in one stock – possibly employer stock. »Charitable Remainder Trust? 5.A client is concerned about CD rates. »Charitable Gift Annuity? 6.A client desires to distribute closely held stock to children with reduced/eliminated gift tax. »Charitable Lead Trust? Helping Clients in Retirement Years

Questions? Helping Clients in Retirement Years Dr. Jeffrey W. Steed, MBA Senior Director of Gift Planning The University of Texas at Arlington (817) Case Studies Involving Gift Planning

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