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Preserving Preserving Your Financial Your Financial
Resources Resources
Development Office800 West Jefferson StreetKirksville, Missouri 63501
Phone: 1-866-626-2878, ext. 2180
Kirksville College of Osteopathic MedicineA College of A.T. Still University
Presented by:Presented by: Randy Rogers, CFP®
Associate Vice President of Institutional Advancement
04/10/23 copyright www.brainybetty.com 2006
All Rights Reserved
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This seminar is for informational purposes only and is not intended as legal or tax advice. Please consult your legal, financial, or tax advisors for information of this nature and how any desired change may impact your particular situation.
See Your Advisors See Your Advisors
Questions to be Answered
1. How do I get out of debt and accumulate assets to build wealth?
2. Why are knowledgeable advisors important to me?
3. Why should I be concerned about income, dividend, and capital gain tax rates?
4. How does the time value of money concept apply to my retirement funds?
5. If I own real estate in two states, will I have probate costs in both states?
6. What are estate taxes?
7. Can I avoid estate taxes by giving all my assets to heirs before I die?
8.How can I supplement my/spouse’s retirement income & make a gift to charity?
The Life Cycle ofDebt and Assets
• Debt Accumulation
• Debt Reduction
• Asset Accumulation
• Asset Distribution
Why Plan for Why Plan for Income and Estate Taxes? Income and Estate Taxes?
•To give you more disposable income fromreduced income tax rates
•To take advantage of reduced dividend and capital gain tax rates
•To reduce or avoid estate taxes for the benefit of heirs
Federal Income Tax Federal Income Tax RatesRates
2007 Rates (Single Individual)
35% ($349,701+)
33% ($160,851 - $349,700)
28% ($77,101 - $160,850)
25% ($31,851 - $77,100)
15% ($7,826 - $31,850)
10% (0 - $7,825)
Capital Gain Tax RatesCapital Gain Tax Rates
2008 Rate (long-term)
• 2008 – 2010 ~ No capital gain taxes on 10 & 15% tax brackets)
• 15% for all higher brackets
• Short term gains (one year or less) are taxed at the taxpayers highest ordinary income tax rate
Four Time Tested Ways Four Time Tested Ways to Reduce Your Income to Reduce Your Income
TaxTax
Deduct (itemized deductions, tax credits)
Convert (tax-free or less taxed securities)
Divert (income to child - lower tax rate)
Defer ( contribute to retirement plan)
Estate Planning is Estate Planning is Necessary…Necessary…
To make sure assets are distributed in accordance with one’s wishes.
To make sure probate is avoided.
To make sure estate taxes are avoided or reduced.
To make sure your wishes concerning life support issues are respected.
Federal Estate and Gift TaxFederal Estate and Gift Tax
Gross estate includes all asset values
at date of death
Unlimited marital deduction
Estate tax credit
Annual gift tax exclusion
Charitable contributions
Gross Estate Includes All Gross Estate Includes All Assets Valued at Date of Assets Valued at Date of
DeathDeath• Cash, CDs, money market funds, US Treasuries
• Stock, bonds, mutual funds
• Life insurance
• Personal residence, vacation home
• Other real estate
• Retirement Funds (subject to possible double-taxation)
• All other assets owned by the decedent
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Unlimited Marital Unlimited Marital DeductionDeduction
at Death of First Spouse at Death of First Spouse
Surviving Spouse has no estate tax liability at that time;
but, WATCH OUT LATER!
Estate Tax Credit for Every Estate Tax Credit for Every IndividualIndividual
ESTATE TAX EXEMPTIONS AND RATES2008-2011
Year Rate Credit Exempt Amount Top Tax
2008 $780,800 $2,000,000 45%
2009 $1,455,800 $3,500,000 45%
2010 One year repeal of estate tax
2011 $345,800 $1,000,000 55%
Annual Gift Tax ExclusionAnnual Gift Tax Exclusion
• Annual gift tax exclusion amount of $12,000 per recipient to an unlimited number of recipients. (Inflation indexed)
• Married couples may elect to split gifts i.e., $24,000 per couple.
• Direct payments of medical expenses and qualified tuition costs are excluded from Federal Gift Tax.
Estate Planning ToolsEstate Planning Tools
Estate Owner
WillLiving will anddurable power of attorney
Trusts
The WillThe Will(with pour-over provisions)(with pour-over provisions)
If you have no plan, your state has one for you (State Testate Laws)
Probate Process
Avoid Probate by Title, Contract, or Trust
Living Will and Living Will and Durable Power of Durable Power of
AttorneyAttorney
Living Will Living Will (Health Care Directive)(Health Care Directive)
To determine the course of health care including:
Withholding of artificially supported
nutrition and hydration.
Use of medications to relieve pain without regard to other consequences.
General Durable Power of General Durable Power of AttorneyAttorney
Appoints an agent to act in one’s behalf in the event of incapacity.
TrustsTrusts
Revocable Living Trust ~ (to avoid probate)
By-Pass Trust ~ (to maximize estate tax savings)
The Revocable Living The Revocable Living Trust Allows You To:Trust Allows You To:
Own, control, change, and/or revoke
Be the trustee
Have complete control during your lifetime
Avoid probate (and ancillary probate)
Dr. Joe Dr. Joe and and Mary’s Mary’s Estate Estate AnalysiAnalysiss
Estate (Joe’s Death)$2,500,000
Costs (8%)$200,000
Remainder$2,300,000
No Estate Tax(at death of first spouse)
Mary Receives$2,300,000
Costs (8%)$184,000
Federal Estate Tax of$52,200
Children Receive$2,063,800
Sheltered by Marital Deduction
Mary’s Death Depleted by Costs and Estate Tax
Without PlanningWithout Planning
17.5% Shrinkage17.5% Shrinkage
Dr. Joe and Mary with Bypass (B) TrustMaximizing Unified Tax Credit Amounts
Estate (Joe’s Death)$2,500,000
Costs (8%)$200,000
Amount Remaining$2,300,000
No Estate Tax
Mary Owns$300,000
Costs (8%)$24,000
B-Trust for Mary$2,000,000
Estate Tax-0-
Children Receive$2,276,000
9% Shrinkage
Life Income PlanLife Income PlanCharitable Gift AnnuityCharitable Gift Annuity
Simple one-page contract
Transfer cash, stock, bonds
Guaranteed fixed payments for one or two-lives
Payout percentage based on age of income recipients
Tax benefits – deduction & income
Future gift to charity in donor’s name
CharitableCharitable Gift Annuity Gift Annuity One & Two-Life Payout One & Two-Life Payout RatesRatesSample One - Life
RatesSample Two - Life Rates
Age 55 5.5% Both Age 55 5.0%
Age 60 5.7% Both Age 60 5.4%
Age 65 6.0% Both Age 65 5.6%
Age 70 6.5% Both Age 70 5.9%
Age 75 7.1% Both Age 75 6.3%
Age 80 8.0% Both Age 80 6.9%
Age 85 9.5% Both Age 85 7.9%
* Rates effective July 1, 2003
You Have a Choice…
Choose Action
√ to reduce your income taxes
√ to maximize your assets before and after retirement
√ to plan your estate more efficiently√ to pass your assets on to heirs and
charities of your choice