Planned Giving Frank M Jacobs,CLU, ChFC James M Gambaccini, CFP Acorn Financial Services, Inc Chain Bridge Road Fairfax, Va

Disclosure This material is designed only for training purposes and is not intended to be used with the general public. Nothing in this presentation represents a legal or tax opinion or conclusion. This material contains references to concepts that have significant legal, accounting, and tax implications. It is not intended as legal, accounting or tax advice. Agents and clients should always consult their own attorney and/or tax advisor for advice regarding application of these concepts to their particular situation. To ensure compliance with requirements imposed by the IRS, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

Forms of Planned Giving  WILL BEQUEST  LIFE INSURANCE  REMAINDER TRUSTS  CHARITABLE LEAD TRUSTS

Will Bequests  IRS PROVIDES AN ESTATE TAX DEDUCTION FOR ALL “BEQUESTS, LEGACIES, OR TRANSFERS” TO CERTAIN CHARITABLE ORGANIZATIONS.  THE ESTATE TAX DEDUCTION IS UNLIMITED EXCEPT IT CANNOT EXCEED THE VALUE OF THE PROPERTY TRANSFERRED TO THE CHARITY THAT IS REQUIRED TO BE INCLUDED IN THE ESTATE.

Life Insurance  SMALL DONORS BECOME LARGE DONORS  ANNUAL DONATION INSURES SIZABLE FUTURE GIFTS  LEAVES OTHER ASSETS INTACT FOR HEIRS

 DONATION OF EXISTING POLICY  NAMING A CHARITY BENEFICIARY  HELP YOUR CHARITY PURCHASE A LIFE INSURANCE POLICY Methods of Gifting Life Insurance

 Some Advantages Current income tax deduction for policy value Creates a substantial deferred endowment fund Potential for larger gift Substantial gift without depleting family assets DONATION OF EXISTING LIFE INSURANCE TO CHARITY

 Some Disadvantages Lose control Charity needs to pay premiums, if any DONATION OF EXISTING LIFE INSURANCE TO CHARITY

NAMING A CHARITY BENEFICIARY  Some Advantages Simple Can be changed Estate tax deduction Potential for larger gift

NAMING A CHARITY BENEFICIARY  Some Disadvantages No current income tax deduction Uncertainty for charity

HELP YOUR CHARITY PURCHASE A LIFE INSURANCE POLICY  Some Advantages Current income tax deduction for premium Creates a substantial deferred endowment fund Potential for larger gift Substantial gift without depleting family assets

HELP YOUR CHARITY PURCHASE A LIFE INSURANCE POLICY  Some Disadvantages Insurable interest qualification Uncertainty for charity

WEALTH REPLACEMENT TRUST  Some Advantages Proceeds generally income tax free to beneficiaries May replace value of contribution to charity If properly structured, policy proceeds will not be included in your estate

How Charitable Remainder Trusts Work  Help support your favorite charity  Transfer assets without incurring capital gains tax  Achieve a substantial income tax deduction  Receive an income stream for life or a set period of years  Avoid the estate tax that would have resulted at your death if you retained these rapidly appreciating assets.

WITH A CHARITABLE REMAINDER TRUST YOU CAN : A Charitable Remainder Trust (CRT) is a form of split-interest trust.  You create a CRT by transferring cash or other assets to an irrevocable trust.  The trust agreement provides that you or a specified beneficiary are to receive payments from the trust for a term of years or life.  At the termination of this income interest, the assets in the trust are transferred to the charity or charities you have named in the trust agreement.

QUESTIONS AND ANSWERS Q Can I change my mind about which charity receives the reminder interest in my CRT? A With certain restrictions, you can retain the power to change, substitute or designate a new charity after the creation of a CRT. Q Can any charity be named the remainder beneficiary of the CRT? A The charity must be “qualified” under the Internal Revenue Code or the donation may not be tax deductible. Donors can use the IRS web site and Publication 78 to check whether an organization is qualified.

QUESTIONS AND ANSWERS Q Is there a time limit for the income term of a CRT? A The term of a CRT can be for a set duration not to exceed 20 years or an individual(s) life. QAre income beneficiaries taxed on the income they receive? ADistributions are taxed to the income beneficiaries under a “four-tier” priority system with the highest taxed income paid out first. QCan I name anyone as an income beneficiary? AYes, but If the income stream is paid to someone else other than the donor or the donor’s spouse, gift taxes and generation skipping transfer taxes may be incurred.

WHAT IS A CLT?  The Charitable Lead Trust (CLT) is a trust arrangement under which:  An annual income from the trust is paid to a qualified charitable organization for a specified period of years.  Afterwards, the trust terminates and the principal of the trust passes to non-charitable beneficiaries (generally children or grandchildren of the donor.)  The lead trust can be thought of as a method for making a temporary gift of income to a charitable institution and eventually passing the property to individual beneficiaries.  Irrevocable lifetime or testamentary trust

WHAT IS A CLT?  The Charitable Lead Trust (CLT) is a trust arrangement under which:  An annual income from the trust is paid to a qualified charitable organization for a specified period of years.  Afterwards, the trust terminates and the principal of the trust passes to non-charitable beneficiaries (generally children or grandchildren of the donor.)  The lead trust can be thought of as a method for making a temporary gift of income to a charitable institution and eventually passing the property to individual beneficiaries.  Irrevocable lifetime or testamentary trust

Questions ?