I wanted to point out in your sheet, you probably already saw it in your package, but we've
got a charitable giving handout that just goes over a lot of different options for you.
So I encourage you to take a look at that, on the back of it is my contact information
that you can contact me directly if you have any questions.
But it gives you, in a snapshot, just a paragraph about many different ways you can give.
So I encourage you to look over that.
Now, as we get going, one person one time referred to the Eichel Tower as the Empire State Building after taxes.
Now, anyone who understands taxes would understand that's pretty much true.
Now, lifetime gifts. During this presentation, I'm going to talk about some estate planning topics and charitable planning and how they can go together to accomplish your goals.
In this case, on this slide, lifetime gifts have a number of purposes, many times very
beneficial for both tax planning and educational purposes.
Every person in the country can give away $11,000 per year to any other individual without
filing a gift tax return or paying any income tax or paying any gift tax.
Now please note that this applies to gift tax, lifetime gift taxes and not to income
taxes.
Now, once in your lifetime, there's a million dollar lifetime gift exemption for you, for
each person.
Now this is in addition to your $11,000 annual gift tax exemption.
So if a person were to give $11,000 to each of their children during a given year, and
And if they give another $200,000 on top of that, that $200,000 would pull from your lifetime gift tax exclusion.
And then only a portion of your estate tax exclusion at death would be available to use.
Now there's good news for both transfers to spouses and to charities, like the Mises Institute.
We have unlimited transfers without gift or estate tax between U.S. citizen spouses, and there's an unlimited charitable exemption, so you can give it to Mises Institute or other good qualified charities and not have to worry about gift or estate taxes.
Now each of us here today are going to experience a number of events during our lifetimes that result in taxation.
For example, if we earn income this year, inside we're not going to be a tax protester, and then go to jail, and we'll surely pay income taxes.
Perhaps some of you here are invested in an asset, and that property's gone up in value over time.
If you sell that property, you're going to pay a substantial capital gains tax.
Some year you might decide to give property to a family member.
Gift taxes are very frequently not understood by many people.
Someone once commented to me, you mean I can pay income taxes when I earn something,
invest it and pay capital gains taxes when I sell it,
and then if I want to give it to my children, pay an additional tax on that same property?
Unfortunately, yes.
The property gifted in excess of $11,000 per year,
of the Year, which was intended to cover birthday gifts and other small gifts.
Any amount over that could be subject to a gift tax.
And finally, when we pass away, there could be a tax at death.
Estates over the exemption equivalent could pay a tax currently up to 48% of your estate.
In some cases, approximately one-half of the estate is lost to taxation.
Now, most of us here would feel that it's totally wrong for the government to assess
multiple taxes on the same property.
Well, unfortunately, the Supreme Court has ruled on that exact issue and has declared
that the government can indeed, in many cases, tax one, two or three times the same property.
They can take one, two, three bites out of the same apple, unfortunately.
This could be a 15% federal tax plus, in many states, a state tax on top of it.
The combined taxes could take approximately one-fifth of the asset when you sell it.
Now, if the owner later gifts property to children, there could be an additional estate
tax up to 48%.
Furthermore, if it transfers to grandchildren, there could be an additional tax of another
48% on top of that when you transfer to your grandchildren. Although there's exemptions
and exclusions that may minimize these taxes in part, it's very possible to lose a very
substantial amount of what you've worked hard for and go to Uncle Sam. Even worse, if the
The asset is sold during lifetime, subject to capital gains tax, and then bequeathed
or given by will to a grandchild.
They're going to be both an estate tax and a generation skipping tax at death, leaving
the heirs only initial asset.
Now I'm going to go through a few examples.
I've just given the ravages, the problems of taxation in America.
I'm going to go through a few examples and show some strategies that can be used to reduce
Some of these are more advanced than others, but I don't have a lot of time to go in much detail with them, but I'm going to go over them, and if you have any questions, come by and see me. I'll be here all day today, and we can talk over some of these circumstances.
Now some people own property that has increased over value over the years, perhaps stock or real estate that was purchased many years ago, and it's worth three, five or ten times the original purchase price.
Now these owners may wish to diversify, but they don't want to pay one-fifth of the asset value in tax.
They may have heard about charitable trust, but they're really wanting to give something to their children.
for Children. Now how might these people diversify, increase their income and still benefit their loved ones?
Several years ago, we'll use a hypothetical John Jones, purchasing property for $40,000.
Now this land increased in value and is worth today about $200,000.
Now since John's only received about 2% return on the property, he's been interested in exploring the possibility of selling the property to reinvest the asset in securities that would provide him greater return.
The problem is if he sells it, as I've just mentioned, he's got a big tax bite.
Now, he talked to a CPA about it, and the CPA said, the only alternative to paying taxes is debt.
Basically, you have to pay taxes on the assets you sell.
Now, if he were to transfer this property into a charitable remainder trust, he could set it up,
He could put it into the trust and the trust could sell it tax free.
The capital gains tax would be bypassed and would save him about $24,000 in taxes.
This $24,000 that would not be used to pay interest could be used to provide income for them for the rest of their lives.
Now, based on their ages, it's quite possible they could live 25 years or more.
After the property is transferred into the trust, it can be sold tax free and the full $200,000 reinvested without having to pay income taxes upfront.
This trust is a 6% trust that pays out 6% to John and Mary during their lifetimes.
The first year income would be approximately $12,000.
Now, since they were only earning 2% at the time, or $4,000 in this case, that's an increase of about $8,000 per year.
After the lives, after those two people have passed on, then the remainder, in this case, could go to the Mises Institute or another qualified charity.
Because the remainder is distributed to charity, when you fund this trust, there's an upfront charitable deduction that can reduce your taxes currently.
In this case, we're going to estimate about $51,000 could be deducted from their taxes, and that's based on their life expectancy.
Now let's go to another scenario that's a little more complex, but let's say they want to give something to their children.
They want to help Mises Institute, they want to help charities, but they also want to help their kids.
And their kids may expect it or want something out of the estate.
Now, you know, you may understand the benefits of this, but you say, man, I want to give something to my kids.
This option right here would help replace what you give to charity, would go to your kids tax-free.
Now assume that a mom and dad, parents have an estate of $3.2 million with an appreciated
asset in there worth $200,000.
They transfer that $200,000 into a charitable remainder trust.
The trust will pay 6% in this case for the two lives.
Now the $12,000 of income, they pay approximately $6,000 to the trust, to another trust, in
In this case, a life insurance trust for a period of eight years.
In essence, the income from the unit trust actually goes back into their estate and starts
replacing the $200,000 that was transferred from the charitable trust.
This is simply an irrevocable family trust that's used to purchase life insurance on
mom and dad.
Now this insurance trust has two major tax benefits.
First, the proceeds of the policy may be received without payment of income tax. If one premium is paid to mom and dad and they're tragically killed in a car accident, the $200,000 will be received by the family. So you have that assurance that you know you're going to be able to replace those assets given to charity. Second, because we have a completed gift using our gift tax exclusion, it'll pass without gift or estate tax. This trust is therefore a
are double tax-free, no income tax, no estate tax trust.
Given the increasing quality of investments and the double tax-free nature of this plan,
many people may wish to consider this, especially for larger estates.
I'm going to jump over this next one for the sake of time, but it's just another twist
on the same deal.
One other scenario I want to present.
Now some people may have property that produces income and has very good growth potential.
They wanted to pass it on to their children, but they're scared to death of the estate
taxes they may have to pay.
Now these friends would like to support the Mises Institute, and they're willing to give
up some income over a period of years.
In other words, they don't need the income off this asset to live comfortably.
Is it possible for them now to move an asset to children without paying any income or state
tax?
Well, I've got a scenario here that will help produce that.
Many families have property that's been a good investment and they believe will continue
to grow in value.
So for those with large estates that could be subject to gift or estate tax, there's
an excellent method to transferring property to family or loved ones.
This is referred to as a charitable lead trust.
You may have heard of this before.
In this illustration, we'll say mom and dad own a property valued at $500,000 and they
believe it's going to increase in value.
They transfer or gift that property into a charitable lead trust that will be distributed
to the Mises Institute for a period of 10 years.
It will produce income to the Mises Institute for that period of time.
Now this will be, we're going to use a 7% lead trust that pays $35,000 per year to the
of the Mises Institute for 12 years.
When the property is transferred to the trust, there's a gift tax deduction of $290,000.
So John and Mary, in this case, would only have to pay $209,000 or that amount would
be subject to gift taxes instead of the full $500,000.
Through this method, they're able to leverage their exemption equivalent and actually move
of a Much Larger Partial Property to Family Without Taxation.
Then the trust, during the 12 years,
the trust will make payments to the charity.
At the end of the 12 years, the family gets the property.
And hopefully if it's been increasing in value,
it's worth a whole lot more than half a million.
Maybe double that by that time.
Now I've presented a number of giving options this morning
And I don't expect you to go away as an expert with this, I just want to give you a sampling of some of the benefits of how charitable giving can help you in your estate planning.
And I hope you realize that there's a lot of plans available, a lot of options available to you to help keep all that you've worked for transferred to your loved ones, perpetuate your values, and keep the greedy hands of Uncle Sam out of your pockets.
Now, as I have up here on the screen, you know, Mark Twain was once quoted as saying that he never uses profanity except in discussing house rent and taxes.
Well, I think most of us who've experienced the problems of taxation would probably agree with him.
That's all of my presentation right now. I'm going to be around the rest of the day if any of you would like to talk about these options.
I just ran through real quickly through a few of these options and it's hard in 20 minutes to give a full picture of how this works.
But I'd be happy to sit down and talk with any one of you. I can, you know, explain this in a little more detail and we can run numbers yourself if you'd like. So, thank you very much.