Estate Planning
Opportunities for
Believers…
Salem Nazarene Foundation
Presentation
March 4, 2007
Five Reasons Not to Make a Will
1. The courts can do a better job deciding how to
2.
3.
4.
5.
disburse your assets than you can.
The courts can choose a better personal
representative to handle your estate during
probate than you can.
The courts can choose a more caring guardian
for your minor children than you can.
The government will use your estate tax dollars
more efficiently than your church or favorite
charity would use a charitable bequest.
Your grieving loved ones will be better off looking
after your affairs without your will.
Salem Nazarene Foundation
Incorporated
September 1, 1983
The Foundation shares the vision
statement of Salem First Church of
the Nazarene to promote the longterm financial security and mission of
the church.
2007 Board Members
The Bible Memorial Fund
In 2006, The Foundation . . .
• Gave an NIV Bible to each baptismal candidate
for a total of 44 Bibles.
In 2006, The Foundation . . .
• Helped Matt Porter’s
college class go on a
Work and Witness trip
to New Orleans.
In 2006, The Foundation . . .
• Helped Skyler Anderson fund his “Project
Amazon” missionary trip.
In 2006, The Foundation . . .
• Established The Firm Foundation Endowment Fund.
In 2006, The Foundation . . .
K. Gene Christian, BA,
MEA.
• Hired Gene Christian to assist our
congregation with estate planning.
• Over 22 years experience in
planned giving and development.
• Leading regional authority in
estate and charitable planning.
• Consultant for Luis Palau and
various churches and para-church
organizations.
Why So Much Attention On
Estate Planning These Days?
• The Nation Is Aging Rapidly
• Overall Taxation Remains High
• Strength of Financial Markets
• Four Affluent Generations Alive Simultaneously
• Huge Transfer of Wealth Occurring
• 40% of Americans Have A Retirement Plan
“GIVE IT TWICE”
A Unique Strategy in Estate
Planning…
Rational for “Give it Twice”
New Minimum Distribution
Rules for IRAs Adopted
Four Years Ago…
Rational for “Give it Twice”
The Old Rule
90/90/90
Rational for “Give it Twice”
CORPUS GROWTH
under old minimum distribution rules
(assumes 10% annualized return)
$160,000.00
30.0%
27.0%
$140,000.00
25.0%
CORPUS
$120,000.00
20.0%
20.0%
$100,000.00
$90,000
$80,000.00
14.5%
$60,000.00
10.5%
$40,000.00
8.0% MANDATORY PAYOUTS
6.2%
15.0%
10.0%
5.0%
$20,000.00
d
95
ye
ar
s
ol
d
90
ye
ar
s
ol
d
85
ye
ar
s
ol
d
ol
80
ye
ar
s
ol
ar
s
ye
75
70
ye
ar
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d
0.0%
d
$-
Rational for “Give it Twice”
The New Rule
180!
90/90/
Rational for “Give it Twice”
PROJECTED CORPUS GROWTH
using new, uniform minimum distribution table
(assumes 10% annualized return)
$200,000.00
24.00%
$184,080
$180,000.00
$160,000.00
19.00%
CORPUS
$140,000.00
$120,000.00
14.00%
12.80%
$100,000.00
9.50%
$80,000.00
9.00%
7.20%
$60,000.00
5.70%
4.60%
$40,000.00
4.00%
MANDATORY PAYOUTS
3.80%
$20,000.00
d
95
ye
ar
s
ol
d
90
ye
ar
s
ol
d
85
ye
ar
s
ol
d
ol
80
ye
ar
s
ol
ar
s
ye
75
70
ye
ar
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d
-1.00%
d
$-
Sample for “Give it Twice”
PROPOSED ESTATE PLAN
Stocks &
Bonds
Life
Insurance
Personal Effects
REIT Shares
Home
Qualified
Plan (IRA)
2nd Passing
“Give it Twice”
Trust (CRT)
8% income
each year
12 years pass
(Heirs)
for 12 years
A substantial gift to Charity!
Questions
or
Comments?
Why So Much Attention on
Estate Planning These Days?
• The Nation is Aging Rapidly
• Overall Taxation Remains High
• Strength of Financial Markets
• Four Affluent Generations Alive Simultaneously
• Huge Transfer of Wealth Occurring
• 40% of Americans Have Retirement Plan
• Real Estate Values Have Risen Tremendously
A CASE ILLUSTRATION
REAL ESTATE SALE WITH A
CHARITABLE TWIST…
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
CASE PROFILE - cont.
•Nearing retirement - they want to
travel more
•Don’t want to dramatically affect
children’s inheritance - close family
CASE PROFILE - cont.
•They have a $1,365,000 estate:
•$200,000 life insurance on him
•$125,000 life insurance on her
•$328,000 his SEP-IRA
•$210,000 her 401(k) & IRAs from past employers
•$12,000 in ROTH IRAs
•$170,000 home paid off
•$320,000 rental properties (two homes)
A VISUAL LOOK AT THE
AUBURN’S ESTATE...
Life Insurance
His SEP IRA
Home
ROTHS
Her 401(k) & IRAs
Rental properties
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
Sale vs. Unitrust
I. Analysis of Increased Income
Continued…
Sale
vs.
CRT
• Taxable Value
$297,600
$297,600
• Or. Cost Basis
$ 88,000
N/A
• Cap. Gain Tax
($ 48,200)
$ -0-
• Dep. Cost Basis
$
N/A
• Cap. Gain Tax
($ 26,500)
5,000
$ -0-
Sale vs. Unitrust
I. Analysis of Increased Income
Continued…
Sale
• Legal/App. Fees
• Investable Funds
$ ?
vs.
CRT
($ 2,500)
$ 223,000
$ 297,600
$13,400
$ 17,900
• 31.1-YR Exp.
$795,000
$1,065,500
• PV of Income
$269,000
$ 365,500
• Pre-Tax Income
TRADITIONAL WEALTH
ACCUMULATION…
TODAY
31.1 years pass
2037 AD
NICE & BIG
PERSONAL ESTATE
Adding the Charitable Dimension...
TODAY
Rentals
CRT
2037 AD
………………………………………………………………………….
NICE & BIG
ESTATE
X
BIG CRT
=
Even
LARGER
Overall
Estate!
Charitable Retirement Planning
Through...
Gift Annuities
Low Interest Rate Environment
Continues…
• One-year CD rates under 3%
• Money market funds – 1%
• Ten-year Treasuries – 4%
• Thirty-year Treasuries – 4.5%
• Long-term Corporate Bonds – 4-5%
Challenge
In Light of the Low Interest Rate
Environment What Can You do?
Consider a Gift Annuity!
Definition:
“…A simple contract between an
individual(s) and a charity which
provides three favorable outcomes by
virtue of one financial transaction…”
Gift Annuity Rates…
Single Person
AGE
60
65
70
75
80
85
90+
Current Rates
5.7%
6.0%
6.5%
7.1%
8.0%
9.5%
11.3%
Reasons People Do Gift Annuities…
•Good Source of Retirement Income
•Replace Decreasing Bond or CD Income
•To Purchase Long-Term Care Insurance
•Supplemental Income for Parent or
Grandparent
Estate and Planned
Giving Services…
K. Gene Christian, BA, MEA
The Salem Nazarene Foundation
Services Include…
Free Will and Trust Planning Guide
Free Estate Inventory Form
Free Personal Planning Assistance
Questions
or
Comments?
Thank You for
Coming to Sunday School
Today!