Give! Even If It
Doesn’t Hurt!!!
By David Kauwe, CLU, ChFC, LUTCF, RFC
Associate with Consultus, LLC
Several Charitable Estate Planning Tools Can
Be Extremely
Profitable to You as well as Your Chosen Charity!
You can receive the following benefits when you choose to
bless the lives of others:
1. A
Tax
Deduction for the Remainder of the Assets that will ultimately go to
the charity.
2. The
Capital
Appreciation on the Assets Donated to the Trust will Escape
Taxation due to the Charitable Nature of the Trust.
3. You
will Receive
a Certain Percentage of the Value of the Charitable Trust Assets at
least Annually and You will Receive that Income for Up to
20 Years.
4. As
Trustee of the Charitable Trust, You Will be able to Manage
the Assets and Diversify the Investments in the Trust to Benefit
You and Ultimately the Charity.
5. By
Setting
Up a Life Insurance Contract to Replace the Asset Donated to the Trust
You Can Provide a Source of Tax-Free Income for You and Provide
a Income
Tax-Free Benefit for Your Heirs.
Let’s look at an Example:
Let’s say you purchased stocks for $500,000 20 years ago and
they have now appreciated to be worth 3
Million Dollars. You decide to
sell them. You would pay Long Term
Capital Gains of up to 20% or $500,000 would go to Uncle Sam. That would then leave you $2,500,000 to invest.
If you invested it in a 5 year CD at the current rate of 2.23%,
After
taxes you would have $30,328 to spend each
year. Then upon your death, you
may be subject to up to 40% Estate Taxes.
Let’s see what would happen if you set up a Charitable
Trust. Donate the 3,000,000 Dollars to it and set up yourself as the Trustee
and Recipient of the Trust. Upon
the selling the stocks, you’ve now got the Full $3,000,000 to
invest. You pay No Taxes. The capital appreciation is not realized
because of the Charitable Nature of the Trust.
You’ll receive 10% of the Trust or $300,000 each
year for the Next 20 years. With
different types of assets you invest in, you would actually receive monies
based on a four-tier accounting system, some ordinary income, some capital
gains, some tax-free and return of principal.
Over the 20 years, that would yield a Gross Total of $6,000,000 or
After Tax Total of $3,900,000 . As an added bonus you would receive a Current
Tax Deduction on the expected ultimate donation to the Charity.
By setting up a $3,000,000 Life Insurance Contract and
funneling dollars into it over the first 20 years, you then would be able to
withdraw TAX-FREE Income for the subsequent 20 years. You could
receive close to $3,440,000 TAX-FREE, in addition to the previous Net
Spendable $1,480,000 from the Charitable Trust, imagine up to $4,920,000
Net Spendable Income. Upon your
death, the Remaining Benefit from the Life Insurance will go Income
Tax Free to your beneficiaries, but you may be still subject to the
Estate Tax.
This is an Awesome Way to provide for You,
Your Heirs, Your Favorite Charity, sadly leaving the IRS to miss out on
taxes they were so much looking forward to receiving.
David A. Kauwe CLU ChFC LUTCF RFC is an Associate with
Consultus LLC, a Financial and Estate Planning Firm located in Durham, NC.
dave@hawaiiandaves.com or at (919) 698-8832 cell.
