Seminar slides covering charitable estate planning from a Christian perspective

1. Charitable Estate Planning: A Christian Perspective

2. Why plan?
•Because we are responsible for our stewardship of resources
•Because we care about others around us

3. Estate planning problems in the Bible:
Luke 15:11-13. Jesus continued: “There was a man who had two sons. The younger one said to his father, ‘Father, give me my share of the estate.’ So he divided his property between them. Not long after that, the younger son got together all he had, set off for a distant country and there squandered his wealth in wild living.”

4. Conflict
Luke 12:13-14a. Someone in the crowd said to him, “Teacher, tell my brother to divide the inheritance with me.” Jesus replied, “Man, who appointed me a judge or an arbiter between you?” Then
he said to them, “Watch out! Be on your
guard against all kinds of greed;”

5. 1.Leave instructions such as rules to prevent wastefulness and disputes
2.Avoid taxes and expenses
Estate planning allows you to

6. Your Own Plan
The Government Plan
Which do you have?

7. Do you want the government plan?
•Your spouse receives one- third of your separate personal property, children get the rest
•Your spouse can use one- third of your separate real property, children get the rest. (If no children, spouse gets ½, rest to parents and siblings.)
Texas Probate Code Ch. II § 38(b)

8. Do you want the “government plan”?
Minor child or grandchild receives entire inheritance… on his 18th birthday

9. Projected investment decision

10. Without a will, guardianship of minor children is decided in the courts

11. If you were leaving on a trip for three weeks, would you leave instructions for the person watching your things?

12. What kind of instructions can you leave?
Simple: Division, guardianship
Complex: Trust plans

13. Example instructions
•Maybe not in one lump sum
•Maybe for specific items – education or first house

14. Spendthrift protection
You can protect inheritance payouts from creditors, divorce, or heir borrowing against future income

15. “A very rich person should leave his kids enough to do anything but not enough to do nothing”
- Warren Buffet
•Instead of guaranteed income, match dollars earned.
•Make income contingent on passing drug tests.

16. Do you want the “government plan”?
•I want all of the contents and values of my estate to be made public in court records.
•I want any interested salespeople or swindlers to be able to find out exactly how much each of my heirs is receiving.
•I want to pay the court costs and attorneys fees associated with a probate proceeding.

17. You can choose to pass assets privately through non-probate transfers or a living trust

18. Do you want the “government plan”?
I want to pay the maximum estate taxes knowing in extreme cases this could leave as little as 36% of my estate.
Estate taxes (40%) plus generation skipping taxes (40%) for a large estate being given to grandchildren with previous gifting combines for a 64% tax rate

19. Do you want the “government plan”?
I don’t want to decide my medical treatment or have anything to say about who will make medical or financial decisions for me if I am incapacitated

20. Do you want the “government plan”?
I want to leave absolutely no money to any church or Christian organization

21. If you want to leave money to a church or nonprofit organization, there are ways to get immediate tax benefits

22. Giving a church or charity the irrevocable right to own farmland or a home after death by a remainder deed is immediately deductible

23. Deduction for remainder interest in $100,000 of farm land by
age 59 donor
1.8% (Dec 10) $68,233
11.6% (May 89) $15,684

24. Donor
CRT
Charity
Initial Transfer
Anything Left at Death
Payments During Life

25. Donor
CRT
Charity
Initial Transfer
Anything Left at Death
Payments During Life

26. There are no capital gains taxes when the donor transfers to the CRT or when the CRT sells the asset

27. 2011 2012 2013 2014 2015 … Death
…
A Charitable Gift Annuity trades a gift for a lifetime income
2010
Typically larger organizations like LCU

28. Example donor ages & rates July, 2010, American Council on Gift Annuities
30 3.7%
40 4.1%
45 4.4%
50 4.8%
55 5.0%
60 5.2%
65 5.5%
70 5.8%
75 6.4%
80 7.2%
85 8.1%
90+ 9.5%

29. 2011 2012 2013 2014 2015 … Death
…
No capital gains tax is paid when transferred to charity
2010

30. 2011 Qualified Charitable Distribution for IRAs
Early distribution (before 59 ½)
Regular distribution (59 ½ to 70 ½)
Required minimum distribution (after 70 ½)

31. After age 70 ½ participants must take required minimum distributions (account balance / remaining life expectancy) or pay 50% penalty
$10,000
$10,000 income
IRA

32. Giving after 70 ½
For 2011, congress extended the Qualified Charitable Distribution (QCD): counts toward required minimum distribution without income or deduction
$10,000
$0 income
IRA
$0 deduction

33. Qualified Charitable Distribution (QCD)
$10,000
$0 income
IRA
$0 deduction
$100,000 per person maximum
Participant 70 ½ or older
No private foundations, donor advised funds, charitable trusts, or charitable gift annuities
IRAs or IRA rollovers only; no 401(k), 403(b), SEP, SIMPLE, pension or profit sharing plans

34. There are many options in charitable planning and estate planning.
The biggest risk is putting it off until “tomorrow”!