Rethinking Charitable Giving

Transcription

1 Rethinking Charitable Giving The Benefits of Charitable Gift Annuities when used in Conjunction with Universal Life Insurance with a Long Term Care Rider

2 Important disclosures This presentation is designed to provide accurate and authoritative information regarding the subject matter covered. You should understand that Wells Fargo Advisors is not engaged in rendering legal, accounting or tax-preparation services. If tax or legal advice is required, you should seek the services of an appropriate, competent professional. Wells Fargo Advisors view is that investment decisions should be based on investment merit, not solely on tax considerations. However, the effects of taxes are a critical factor in achieving a desired after-tax return on your investment. The information provided is based on internal and external sources that are considered reliable; however, the accuracy of the information is not guaranteed. You should direct specific questions on taxes, as they relate to your situation, to your tax advisor.

3 How it Works A Hypothetical Example 1 Client Age 65 II. From CGA Income, Client Purchases UL UTC Insurance $5800 Tax Deduction of $52,347 Charitable Gift Annuity 1 $200,000 Universal Life Long Term Care 2 No capital gains on appreciated stock $7050 in Income for Life -- $3,271 of which is tax-free ($1,635 is subject to capital gains tax and $2,143 is subject to ordinary income tax) While Living: Monthly LTC Benefit if needed Upon Passing: Heirs receive Death Benefit Tax-Free 1. All Gift Annuity Figures are from the American Council on Gift Annuity (ACGA) and the IRS. 2. Insurance Premium Rate and Policy are for a $200k Universal Life Insurance Policy with LTC Rider from Nationwide Insurance Company. The hypothetical rate is for a 65 YO Male in the Preferred Risk Class. Actual rates and coverage will vary based on underwriting.

4 Who might Benefit from a Gift Annuity? Immediate Gift Annuity Clients who are fiscally conservative Clients seeking additional income Clients who wish to give cash or appreciated stock Clients with stock who are seeking ongoing income for long-term care or wealth replacement insurance premiums. Deferred Gift Annuity Clients who want a charitable taxdeduction now but have no need for additional income until retirement People who want to establish a supplemental retirement plan Clients who wish to give cash or appreciated stock Clients who have maxed out qualified retirement plan contributions, but still need additional retirement income

5 Tax and Financial Benefits of a Gift Annuity Client s Benefits Income The annuitant receives fixed payments for life (backed by the Issuer). A portion of each gift annuity payment is usually tax-free Deductions The donor receives a charitable income tax deduction in the year of the gift. For gifts of cash, the annual deduction limit is 50% of the donor s AGI. For gifts of long-term appreciated securities, the annual deduction limit is 30% of the donor s AGI. Unused charitable deductions may be carried over an additional 5 years. The donor bypasses a portion of capital gains on gifts of appreciated securities; any capital gain is recognized over the lifetime of the annuitant.

6 Sample Gift Annuity Rates for Single Life THE RATES BELOW ARE INDICATIVE OF LTC INSURANCE WITH: 1 The annuity payment is based on the annuitant's age the day the gift is made and the amount of your gift. The annuity is paid annually, semi-annually, quarterly, or monthly, as you choose. Your Age % Rate of Annual Income EXAMPLE OF A GIFT ANNUITY As a donor, age 80 you give $150,000 for a charitable gift annuity. The annuity rated based on your age is 6.8%. You will receive $10,200 annually, $8,595 of which will be tax-free for 9.4 years. In addition, you potentially can claim a charitable deduction of $69,090 for your gift. 1. Gift Annuity Rates tax deduction and income tax rates are set by the IRS and modified by IRS guidelines. The American Council on Gift Annuities (ACGA) provides guidance on the rates of return for Charitable Gift Annuities.

7 Example of Long Term Care Insurance Rates The rates below are indicative of UL LTC Insurance 1 with: $200,000 LTC No Lapse Guaranteed Universal Life with Long Term Care Life Pay and Guarantees Male Female Ages Standard Preferred 55 $4014 $ $5197 $ $6931 $ $9522 $ $13381 $11284 Ages Standard Preferred 55 $3286 $ $4248 $ $5483 $ $7520 $ $10595 $ $200,000 Universal Life Insurance with Long Term Care Rider, no lapse guaranteed, life pay and guarantees from Nationwide Insurance Company. Rates are hypothetical in nature for individuals who have not yet gone underwriting. Actual rates may vary.

8 How it Works A Hypothetical Example 1 Client Age 65 II. From CGA Income, Client Purchases UL UTC Insurance $5800 Tax Deduction of $52,347 Charitable Gift Annuity 1 $200,000 Universal Life Long Term Care 2 No capital gains on appreciated stock $7050 in Income for Life -- $3,271 of which is tax-free ($1,635 is subject to capital gains tax and $2,143 is subject to ordinary income tax) While Living: Monthly LTC Benefit if needed Upon Passing: Heirs receive Death Benefit Tax-Free 1. All Gift Annuity Figures are from the American Council on Gift Annuity (ACGA) and the IRS. 2. Insurance Premium Rate and Policy are for a $200k Universal Life Insurance Policy with LTC Rider from Nationwide Insurance Company. The hypothetical rate is for a 65 YO Male in the Preferred Risk Class. Actual rates and coverage will vary based on underwriting.

9 The Benefits Client Tax Deduction Can be carried over 5 years Guaranteed Income from Charitable Gift Annuity A portion of which is income-tax free Avoid Capital Gains on Appreciated Stock Long-Term Care Insurance Rider If needed, the client has LTC Insurance Coverage Children Receive Universal Life Insurance Death Benefit Death Benefit is tax-free to heirs Charity Receive balance of death benefit if portion of LTC coverage is used Receives a charitable donation they might not have been given with traditional fundraising methods

10 Pinkerton Wealth Management Group P: (941) TF: (866)