Give! Even If It Doesn't Hurt!!!

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.