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(2) Beneficiary designation of benefits from a qualified retirement plan orIRA make for a smart way to give charitable contributions because thosedistributions would have been taxable to the client’s heirs.b. Advantages(1) <strong>The</strong> client who gives testamentary gifts will have full use of funds to meetlifetime expenses (both planned and unplanned).(2) Gifts at death are simple to establish and can be established at minimalcost.c. Disadvantages6. Improving cash flow(1) Enjoyment of seeing charitable goals fulfilled during lifetime not possible(2) No federal income tax deduction(3) Missed opportunity of improving cash flow through life-income giftsa. Assume donor seeks to improve cash flow during the retirement yearsb. By making an irrevocable life-time gift benefiting charity(ies) at deathc. Remainder of presentation assumes donor seeks retention of income from a“gifted” asset to meet need for greater cash flow obtained in a tax-efficient manner7. Financial challenge driving consideration of life-income givinga. Highly appreciated asset paying a relatively small dividendb. Incurring capital gains tax would leave less principal for reinvestmentc. Estate tax reduction less a considerationd. Client also has been philanthropic in the past and would like to continue8. Charitable legacy during lifetimea. Life-income gifts for philanthropic support9. CRTs, CGAs, and PIFs(1) Charitable gift annuity (CGA)(a) Immediate payment option(b) Deferred payment option(c) Flexible payment option(2) Charitable remainder trust options (CRT)(a) Annuity trust(b) Unitrust including NICRUT, NIMCRUT, FLIP(3) Pooled-income fund (PIF)a. Common elements to each technique(1) Requires donor to make an irrevocable transfer to either a trust or acharitable entity(2) Generates an income stream to the donor or an individual or individualsnamed by the donor(3) Contribution receives part charitable and part noncharitable treatment(4) Generates an income tax charitable deduction for the charitable portion ofthe gift4.29
10. Timing of funding(5) Gifted asset will not generate estate tax if structured correctlya. Testamentary funding of CRT, CGA or PIF is possible but lifetime funding ispreferable because of donor’s desire for lifetime income and an income taxdeductible charitable contribution.b. Remaining discussion emphasizes lifetime funding of these giving vehicles11. Common questions for each techniquea. Income: How are payments determined? Fixed or variable? For how long?Guaranteed or not guaranteed?b. Taxation of payments: How is that income taxed and at what rates? Ability tocustom-design income stream for tax minimization and investment goals?c. Reduction of income taxes: What is the income tax deduction?d. Financial risks: What is the donor’s exposure to inflation? What is the donor’sinvestment risk?e. Transactional costs: How is the gift documented and implemented?12. Profile of donors: Which technique makes sense for which individual?a. Charitable remainder trust(1) CRAT (charitable remainder annuity trust)(a) Generally older (65+) than donors to CRUTs(b) Likely more interested in higher payout and fixed income(c) Almost always funded with liquid appreciated assets(2) CRUT (Charitable remainder unitrust)(a) Generally younger (55+) than donors to CRATs and desiresvariable income(b) Desire considerable flexibility for fiduciary in investment ofportfolio to manage the tax character of distributions to the incomebeneficiary(c) Often funded with illiquid assets(3) For both CRTsb. Charitable gift annuity(a) Funding amounts of $500,000 (and often $1 million) typical(b) Seldom initially funded with less than $250,000(1) Usually single (though 2 measuring lives permitted).(2) Age 77(3) Median Amount is $57K(a) Minimum at most charities is $10K(4) Attractive alternative to certificates of deposit and treasury instruments(5) Immediate payment is the most popular option(6) Deferred and flexible payment also availablec. Pooled-income fund(1) <strong>The</strong> donor seeks immediate variable income4.30
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Huebner School SeriesHS 353 STUDY O
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THEAMERICANCOLLEGE.EDUThrough The A
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c. But it is more comprehensive bec
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(3) Work part-time during retiremen
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SECTION 2: UNDERSTANDING RETIREMENT
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d. Solutions(1) The model considers
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. Other sources of retirement incom
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c. Another option for solving cash
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(b) Net worth statements that ident
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d. Be ready to reengage with the cl
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(b) In financial planning(c) In inv
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j. Planning Point: Planners can use
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e. We also need them to have a bett
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Assignment 2IDENTIFY RETIREMENT INC
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(2) Income4. Determining risk toler
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collaborative experience which focu
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6. Asset allocation and risk tolera
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c. How long will the income last?d.
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. Durationc. Reliabilityd. Other6.
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c. Supplemental Security Income (SS
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. An unused emergency fund can supp
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5. Inflation(2) The expense method
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Assignment 3CHOOSE APPROPRIATE STRA
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. Save as a percentage of income an
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(1) Note that 38% of second income
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(4) The AARP website has a national
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4. Contributions to IRAs and Roth I
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Page 63 and 64: (2) Plus salary deferrals (for an i
Page 65 and 66: a. Example:(1) Save $10,000 in 25%
Page 67 and 68: (a) This requires knowing four fact
Page 69 and 70: . Solution(1) Li and Lin Lin are bo
Page 71 and 72: (1) The increase in dollar amounts
Page 73 and 74: 9. In some circumstances, an indivi
Page 75 and 76: 2. Reverse mortgage basicsa. Almost
Page 77 and 78: 5. Planning considerations(b) Keep
Page 79 and 80: (2) Some funds that are promoted as
Page 81 and 82: (1) Berstresser, Chalmers, and Tufa
Page 83 and 84: RESOURCES FOR COMPETENCY 3: CHOOSE
Page 85 and 86: (2) From the previous employer(s) p
Page 87 and 88: 8. IRA funded plans (IRAs, SEPs, SI
Page 89 and 90: . Does the distribution election fi
Page 91 and 92: 6. Net unrealized appreciation rule
Page 93 and 94: a. Tax-exempt plans include Roth IR
Page 96 and 97: 8. Calculating required distributio
Page 98 and 99: (2) Exception: If there are separat
Page 100 and 101: 5. Impactc. Tax rates are low in ea
Page 102 and 103: (7) Based on ordering rules, identi
Page 104 and 105: 7. A married couple who file jointl
Page 106 and 107: (1) Needed to provide the appropria
Page 108 and 109: 13. Transfers at deatha. Wills(2) A
Page 110 and 111: (1) The Retirement Equity Act manda
Page 114 and 115: 13. Overview14. Types(2) The donor
Page 116 and 117: (1) Charity needs only to payout in
Page 118 and 119: c. Access should be granted to an a
Page 120 and 121: nightmare of living probate might h
Page 122 and 123: (6) Powers to represent their princ
Page 124 and 125: c. If the policy is term coverage w
Page 126 and 127: e. Factoring personal and family he
Page 128 and 129: problem. On the other hand, we can
Page 130 and 131: d. Adding a cost of living adjustme
Page 132 and 133: g. Planning Point: Sometimes a high
Page 134 and 135: (2) Clients may not be able to “a
Page 136 and 137: c. Ensure that the client is receiv
Page 138 and 139: a. Example: Because of physical and
Page 140 and 141: options about where to get his/her
Page 142 and 143: (2) Facilities, monthly fees, and s
Page 144 and 145: 8. Other strategies that help to co
Page 146 and 147: standard deviations of the returns
Page 148 and 149: a collapse in the real estate marke
Page 150 and 151: a. In a later competency we will di
Page 152 and 153: years of service with the employer)
Page 154 and 155: a. Planning Point: Planners should
Page 156 and 157: (2) If you have locked in food, ren
Page 158 and 159: (4) Loss-of-spouse risk—Deferred
Page 160 and 161: (1) Excess withdrawal risk—The us
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(5) Frailty risk—Managing assets
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7. Practice good career management:
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Assignment 6CHOOSE APPROPRIATE STRA
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c. Example: Chuck and Sarah divide
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e. The bucket approach can be thoug
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3. Understanding systematic withdra
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(1) The time horizon used in the ca
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12. Four percent is not the number.
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markets have declined by a specifie
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(2) Annuities and long-term care an
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anticipates ramping down her activi
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c. Each of the three portfolios wil
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SECTION 4: THE ESSENTIAL VERSUS DIS
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d. Clients give up investment contr
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geared toward long-term growth. Thi
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. Trade-offs involve:(1) Irrevocabl
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(1) Rate at which banks lend to the
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. Dollar-denominated liabilities of
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(a) Dividend taxed in year paid out
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4. Taxationtheir return generating
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. Close ended(1) IPO style launch(2
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(3) Tax control17. Conversations in
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(3) Mutual funds provide lower cost
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way to obtain increasing payments t
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protection from the downside risk w
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6. Today’s annuitization rates ar
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h. Planning Point: Markets are very
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a. The client may not be clear abou
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a. Problems with implementation are
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c. Product solutions work together
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(1) A problem is that if the client
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(b) A traditional fund company(c) A
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d. Evelyn is in great health and he
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RESOURCES FOR COMPETENCY 7: INTEGRA
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