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13. Overview14. Types(2) <strong>The</strong> donor seeks to avoid the startup and ongoing administration expenseof a charitable remainder unitrust(3) <strong>The</strong> donor lacks investment acumen to manage a charitable remainderunitrust and desires the professional investment management of thepooled-income funda. Charitable remainder trust(1) Donor gifts cash or assets(2) Do deduction for present value of remainder interest(3) Income (fixed for CRAT; variable for CRUT) paid back to donor(4) Remainder to charity at end of the trust termb. Charitable gift annuity(1) Donor gifts cash or assets(2) Often used for gifts of $50,000 or even less(3) Charity itself is the payer; no trust involved(4) Deduction is for remainder interest(5) Income paid to donor is first treated as ordinary income or capital gain;balance is tax-free return of principal during donor’s life expectancyc. Pooled-income fund(1) Donor gifts cash or assets into commingled fund with assets from otherdonors(2) Donor paid her pro rata share of income like a mutual fund owner(3) Receives deduction for the present value of remainder interest(4) Income retains its character as dividends or interest(5) Income may never be tax-free; may not accept tax-exempt bonds(6) Remainder of fund passes to charity sponsoring the PIFa. Charitable remainder trust(1) Charitable remainder annuity trust (CRAT)(2) Standard charitable remainder unitrust (STAN-CRUT)(3) Variations of the standard charitable unitrust (STAN-CRUT)b. Charitable gift annuity(a) Net income charitable remainder unitrust (NICRUT)(b) Net income with makeup charitable remainder unitrust (NIMCRUT)(c) Flip unitrust (FLIP-CRUT)(1) Immediate payment(2) Deferred — for at least one year or a deferral period certain(3) Flexible — deferral for at least year with an election period permittingdetermination of commencement of paymentsc. Pooled-income fund4.31
15. Taxation of payments(1) High income fund for income-oriented donors less interested in maximizingthe tax deduction(2) Balanced fund aims more for preservation of principal of gift; larger taxdeduction than high income fund(3) Growth fund for younger donors seeking largest deduction with theprospect of more income paid over timea. Charitable remainder trust(1) Reported as income as trust per “tier accounting” rules(2) Sequencing of the tier accounting rulesb. Charitable gift annuity(a) Ordinary income (first)(b) Capital gains income (second)(c) “Other income” (tax-exempt income) (third)(d) Any tax-free distribution of principal (fourth)(1) Portion reportable as ordinary income or capital gain by beneficiary(2) Balance is tax-free return of principal during life expectancy(3) Fully taxable as ordinary income if annuitant exceeds life expectancy atfunding of the charitable gift annuityc. Pooled-income fund(1) Distributions entirely ordinary income16. Amount of income deductiona. Never the full fair market value of the gift since donor will be receiving an incomestreamb. Deduction is the present value of the charitable remainder interest(1) FMV gift less present value of income stream to recipient(2) Software (PG Calc, Crescendo) exist17. Who bears the investment risk?a. CRAT shifts investment risk to remainder beneficiary, which may receive nothingb. Income beneficiary sues trustee for breach of fiduciary duty if insufficient trustassetsc. Unitrusts distribute market risk more evenly between income and remainderbeneficiaries though both have riskd. By limiting income payout to DNI in the NICRUT or NIMCRUT, net incomeunitrusts, especially NICRUTs, shift market growth to charitable remainderbeneficiarye. Charitable gift annuity(1) Charity must fulfill promise even if contributed asset has become worthless(2) Reinsurance can mitigate charity’s risk, but still must repay if reinsurer isunable to so do(3) Donor recourse is lawsuit against charityf. Pooled-income fund4.32
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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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carve out the nondeductible contrib
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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
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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 112 and 113: (2) Beneficiary designation of bene
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
Page 162 and 163: (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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