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Estate Planning

Planning for Family SWE & Future. Estate Planning. Family, SWE & Future. Why an Estate Plan? Best use of assets while living Avoid unnecessary taxes Distribute property at death. Family, SWE & Future. What if you die without a will? State divides your estate

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Estate Planning

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  1. Planning for Family SWE & Future Estate Planning

  2. Family, SWE & Future Why an Estate Plan? • Best use of assets while living • Avoid unnecessary taxes • Distribute property at death

  3. Family, SWE & Future What if you die without a will? • State divides your estate • Court appoints administrator • Settlement of estate is prolonged • Higher taxes likely • You have no control of disposition

  4. Family, SWE & Future Will • Distributes your property • Names guardian for children • Names a personal representative as Executor

  5. Family, SWE & Future Durable Power of Attorney • Name agent to manage estate if you are disabled • Name agent for health care decisions (Health Care Surrogate)

  6. Family, SWE & Future Living Will • Your wishes regarding termination of life support • Compare to Durable Power of Attorney

  7. Family, SWE & Future Making a will with an attorney • What You Need: • Family data • Important estate documents • Your agents • Property and health care plans

  8. Family, SWE & Future Trust • Legal entity into which you transfer designated property • Trust owns & manages property • Income goes to your designee • Distributes property

  9. Family, SWE & Future Living Trust vs. Will • Wills less expensive to set up • Trusts avoid probate • Trusts more confidential • Trusts can be more complicated to manage while living

  10. Family, SWE & Future Death and Taxes • Estate tax is progressive • Marginal rate • $10K estate = 18% • $250K estate =34% • $3M estate = 55%

  11. Family, SWE & Future Taxable Estate Deductions • Administration and funeral expenses • Claims against the estate • Obligations against property • Casualty and theft losses • Marital deduction • Charitable deductions

  12. Family, SWE & Future Marital deduction • Permits one spouse to transfer property to other tax-free • Defers tax to survivor’s death

  13. Family, SWE & Future Lifetime Unified Credit • Lifetime amount of money you can give away tax-free - either before or after death • Unified Credit = Lifetime Exemption • 2000: $675,000 • 2006: $1,000,000

  14. Family, SWE & Future Estate Taxes • Reduce taxes by reducing estate before death • Gifts to family ($10K/person/yr limit) • Gifts to charity

  15. Family, SWE & Future Charitable deductions • Contributions to charity reduce the taxable estate • Limited to 50% of Annual Income • 30% of Annual Income for Property • Planned giving

  16. Family, SWE & Future Charitable Estate Planning

  17. Family, SWE & Future What is Planned Giving? • Charitable gifts • Assets • Careful planning • SWE and donor benefit

  18. Family, SWE & Future Social Capital • Involuntary Philanthropy • Voluntary Philanthropy

  19. Family, SWE & Future Charitable giving in the U.S. • About 70% give during lifetime • 19% with taxable estates make charitable bequests • 3-6% of all wills contain charitable bequests • Bequest giving exceeds lifetime giving • Charitable bequests average 8% of wealth

  20. Family, SWE & Future Charitable estate planning • Tax benefits • Reduce current taxes • Avoid capital gains taxes • Minimize estate taxes

  21. Family, SWE & Future Gifts of Appreciated Assets • Income tax deduction at fair market value • Avoidance of capital gains taxes

  22. Comparison of Donations

  23. Family, SWE & Future $100K bequest after estate taxes • To family = $45,000 bequest and $55,000 tax @55%* = $66,000 bequest and $34,000 tax @34%* OR • To charity = $100,000 gift and $0 tax • May be additonal state taxes as well * 55% Tax rate for estate > $3M after deductions 34% Tax rate for estate $250K-$500K after deductions

  24. Family, SWE & Future Planned Gifts • Bequests • Charitable Trusts • Beneficiary Designations • Charitable Gift Annuities • Life estate

  25. Family, SWE & Future Bequests • Specific bequest • Dollar amount or percentage • Residuary bequest • Contingent bequest

  26. Family, SWE & Future Charitable Trusts • Assets in trust for time period • Income from trust paid to designated beneficiary • Trust assets distributed to beneficiary at maturation

  27. Family, SWE & Future Charitable Trusts • Set up during lifetime or by will • Irrevocable trusts involve tax deduction during lifetime • Revocable trusts will generate tax advantages at death

  28. Family, SWE & Future Charitable Trusts • Lead Trust • Remainder Trust • Unitrust • Annuity Trust

  29. Family, SWE & Future Beneficiary designations • Life insurance • Other life insurance gifting options • Retirement plans

  30. Family, SWE & Future Retirement Plan • Your Tax is deferred while participating • Distributions (before or after death) subject to income tax • Balance in plan at death subject to estate tax

  31. Family, SWE & Future

  32. Family, SWE & Future Gift of Retirement Plan • Charitable gift of $1000 would avoid all tax. • Gifts of retirement plan proceeds require beneficiary designation.

  33. Family, SWE & Future Life estate • Donor donates personal residence to charity but retains right to live there • Donor gets tax deduction • Charity gets home at death

  34. Family, SWE & Future What about family? • Charitable planning can minimize estate tax liability that falls on heirs • Life insurance trust

  35. Family, SWE & Future Wealth Replacement Trust • $100K gift to charity • Purchase $100K life insurance with tax savings and income • $100K out of estate • $100K goes to heirs tax-free

  36. Family, SWE & Future Supporting SWE with Your Estate

  37. Family, SWE & Future Where to give • Scholarship Funds • Contingency Reserve Fund • HQ Fund • Operating Budget • Program Development Grant Fund • Publications Fund • Other

  38. Family, SWE & Future How SWE can accept gifts • Cash • Securities • Other

  39. Family, SWE & Future Gift opportunities • Unrestricted - no specific use indicated • Restricted - specific use designated

  40. Family, SWE & Future Restricted gifts • Scholarships • Named funds • Existing special funds Unrestricted gifts • Up to $25K goes into current operating budget • Remainder over $25K goes into Contingency Reserve

  41. Family, SWE & Future Consult a legal or financial advisor when making planned gifts to ensure you receive appropriate benefits. SWE can assist to ensure your funds are used the way you choose.

  42. Family, SWE & Future Planned gifts are personal decisions • Planned gifts reflect your deepest convictions in a permanent way • Recognition of your convictions

  43. Family, SWE & Future Acknowledging a planned gift • Private • Unannounced • Recognition “Circles”

  44. Family, SWE & Future SWE Giving Circles • Platinum Halo Circle >$1000 • Golden Gear Circle >$500 • Silver Cog Circle >$100

  45. Family, SWE & Future Leaving a Legacy • Providing long term support to meet SWE’s goals • You have spent a good deal of effort in supporting SWE goals, why not continue the good work!

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