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Charitable Giving Strategies

Charitable Giving Strategies. Presented by: INSERT AGENT NAME/DESIGNATION(S) The Ohio National Life Insurance Company Ohio National Life Assurance Corporation.

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Charitable Giving Strategies

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  1. Charitable Giving Strategies Presented by: INSERT AGENT NAME/DESIGNATION(S) The Ohio National Life Insurance Company Ohio National Life Assurance Corporation

  2. The Ohio National Life Insurance Company and Ohio National Life Assurance Corporation issue a variety of life insurance and annuity products. Product availability varies by state. Guarantees are based upon the claims-paying ability of the issuer.

  3. Please Be Advised: All specific legal and tax questions should be referred to your legaland tax advisers

  4. Charitable Giving Ensure That Your Gifts Do The Most Good

  5. Consider This. . . If you had a million dollars to give to charity, where would you donate it?

  6. Is There a Charity You Feel Strongly About? • Your Church or Temple • A Hospital • The Environment • Scientific Research • Your Alma Mater • A Museum • A Library • The Symphony or Ballet In 2000, approximately 83.9 million Americans volunteered 15.5 billion hours to charity - Independent Sector

  7. Annual Contributions to Charities ($Billions) Source: Giving USA Foundation 2007

  8. 2003 Charitable Contributions: By Source Individuals 76% Source: Giving USA Foundation

  9. Charities Relyon Donations Competition from other charities Increased need from society Charity State/federal funding cuts Tax law changes

  10. Achieve Your Goals When you invest back into your community and society, you will enhance your quality of life – financially and socially. 89% of American households contribute to charities annually. The average annual contribution is $1,620 (3.1% of household income) - Independent Sector (2001)

  11. Charitable Givingas a Tax Strategy • Income tax deductions • Avoidance of capital gains taxes • Estate-tax savings • Gift-tax avoidance

  12. Income Tax Deduction Tax Advantages: • Donation must be made to a qualified charitable organization such as: • Religious • Scientific • Literary • Educational • Governmental • Veteran’s organizations To obtain a tax deduction, contributions must be made to a charitable organization that qualifies under I.R.C. Section 501(c)(3).

  13. Income Tax Deduction Tax Advantages: Adjusted Gross Income (AGI) Limitations Contributions exceeding the annual deduction limit may be carried forward for up to five additional years.

  14. Capital Gains Tax Tax Advantages: • Charitable gifts avoid capital gains taxes. • Tax-free for donor • Tax-free for charity • You get a tax-free conversion. Focus on highly appreciated stock or real estate that has no sentimental value to you or your family.

  15. Estate Tax Tax Advantages: • Estate receives an estate tax deduction for any bequest to a charitable organization. • Includes all property as long as theproperty is part of the donor’s estate. Charitable bequests are made at death and are included in a donor’s will.

  16. Gift Tax Tax Advantages: NONE! Gifts to charitable organizations are not subject to gift taxes.

  17. Don’t Forget Your Receipt Contributions of $250 or more must be documented, in writing, at the timeof the donation by the charity. 70% of Americans contributed to a 9/11 relief fund – Independent Sector (2001)

  18. Gifts of Life Insurance Life Insurance Can Be Vital To a Charity’s Long-Term Success

  19. Gifts of Life Insurance • How it benefits you: • Personal satisfaction • Magnified gift • Self-completing • Prompt and hassle-free • Conserves major assets for your family • Tax savings • Enables you to be both an annual giver and endowment creator

  20. Gifts of Life Insurance • How it benefits your charity: • Builds long-term endowments. • Creates long-term financial security. • Charity receives tax-free benefits. • Your charity has some control over the program. • Little or no administration. • Avoids delays associated with giving through trust or wills.

  21. Ways to Give Life Insurance

  22. Comparison: Outright Gifts vs. Gifts of Life Insurance

  23. Magnify Your Gift With Life Insurance Can create a charitable legacy tomorrow. A contribution of premiums today….

  24. Profile: Jerry Booster, age 55 Supports State University Wants to create a $500,000 university endowment fund Example: Jerry Booster

  25. Jerry’s Concerns • Wants to preserve his assets. • Prefers not to make a lump sum donation. • Wants to complete the gift by age 65. • Is interested in tax-savings opportunities.

  26. Solution: Life Insurance Step One: Jerry purchases a $500,000 life insurance policy and pays the first of 10 annual premiums. Step Two: The policy is donated to the university. Jerry receives an income tax deduction equal to the premium. Step Three: For the next nine years, Jerry makes annual tax deductible premium contributions to the university. University Receives: $500,000 in the future & access to policy cash values • Jerry Receives: • Personal satisfaction • Annual income tax deductions • A completed commitmentby age 65 • Gift magnification Gift of Policy

  27. Gifts of Appreciated Assets Charitable Giving Opportunities

  28. Options With Existing Assets One: Keep the asset until death • Heirs may be forced to sell asset to pay taxes. Two: Sell the asset • The asset’s value will be diminished by taxes. Three: Donate the asset to charity • Tax savings • Lifetime income stream

  29. Charitable Remainder Trust (CRT) Gifts of Partial Interests

  30. What is a Charitable Remainder Trust? • An irrevocable trust • Created to benefit a charity • Trust is tax exempt • Can last for one life, two lives or for a specific term not to exceed 20 years

  31. How a CRT Works 1. Trust is Funded Tax deduction Trust 2. Income Stream 3. Balance to Charity Donor Charity

  32. Comparison of CRTs Most Common

  33. CRTs Provide: Financial Advantages • Income tax deduction • Asset diversification • Improved rate of return on investments • Professional investment management Retirement Advantages • Guaranteed lifetime income • Supplements retirement plan savings • Increased standard of living

  34. What About Your Heirs? Is there anything you can do to ensure that your heirs receive the full value of your estate?

  35. Solution: Wealth Replacement Trust Tying it All Together For Your Heirs

  36. Wealth Replacement Trust Planning Steps Step One: Donor contributes property to a charitable remainder trust (CRT). Step Two: The CRT sells the property and invests proceeds into income producing assets. Step Three: The CRT pays donor income payments for life. Step Four: Donor gifts a portion of the CRT income payments to a wealth replacement trust. • Trust purchases a life insurance policy on donor’s life. Step Five: At donor’s death, charity receives the remaining CRT assets and heirs receive life insurance death benefit.

  37. How it Works Donor(s) STEP 3 STEP 4 Gift Premiums Income Steam STEP 1 Donate Assets STEP 2 Assets Third Party Buyer Wealth Replacement Trust Charitable Remainder Trust $$ Remaining Assets Insurance Proceeds STEP 5 At Donor’s Death Charity Heirs

  38. Wealth Replacement Trust Benefits • The CRT income stream can be used to pay all or part of the insurance premium. • Insurance proceeds are not part of your taxable estate. • Provided you qualify for coverage, your heirs may inherit the full value of your donated assets, or more – in cash.

  39. Example: Karl & Barbara Karl & Barbara, age 60 They own a metal fabrication business worth $1 million Their children are not active in the business, but a competitor wants to buy it They support the Humane Society

  40. Karl & Barbara’s Concerns: • They want to retire. • They want to maintain their current standard of living. • They support the Humane Society. • They face an estate-tax problem. • They want their children to receive the full value of their business. • The sale of their business would trigger substantial capital gains taxes.

  41. Solution: Wealth Replacement Trust Step One:Contribute the business to a CRT. • The CRT benefits the Humane Society • Karl and Barbara receive an income tax deduction. Step Two:The CRT sells the business and invests the proceeds. Step Three:Karl and Barbara receive a lifetime income stream from the CRT.

  42. Step Four:Karl and Barbara use a portion of their income stream to fund a wealth replacement trust. • The trust purchases a $1 million second-to-die policy. Step Five:At the death of the second spouse, the Humane Society receives the remaining CRT assets and Karl and Barbara’s heirs receive $1 million - estate and income-tax free.

  43. How it Works Karl & Barbara Tax Deduction & Lifetime Income Stream Gift Premiums Business Wealth Replacement Trust $1,000,000 Charitable Remainder Trust $1,000,000 Third Party Buyer Business $$ CRT Remainder $1,000,000 Tax-Free After Deaths of Karl & Barbara Humane Society Heirs

  44. A charitable giving plan funded with life insurance allows you to achieve philanthropic and estate-planning goals while preserving assets for your heirs. How Will You Be Remembered?

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