Understanding how to use the planning tool described in this video is critical.
Now, I can illustrate a number of ways for you to increase your income by selling or repositioning an asset. I’ll even show you how to sell without paying a capital gains tax. I can show you how to get an income tax reduction so large that it may take you six years to use it up and pay no income tax during those six years. And I can show you how to do all these things and leave a significant gift to your church. But if realizing these benefits also involves disinheriting your kids, you’re likely tell me they go fly a kite or what if you are at church? What would be your chances of getting a major gift if the donor’s children were going to be disinherited in the process? And if you were a minister, pastor, or church leader and you want any hope at all of attracting major gifts you need to be able to show the donor how they can give it a way and still keep it. That is without disinheriting your children.
Let me give you a common example with the solutions comes into play. Let’s say that you are a person who owns a highly appreciated asset that produces little or no income. It could be a piece of vacant land or a growth stock that you bought many years ago, that doesn’t pay dividends. You’re 65 and just retired, you like to sell and reinvest in something that we pay you an income for the rest of your life. However, you’re hesitant to sell because there is a large capital gains tax to pay on the different stream once you paid for it in the current value.
Let me give you a quick example. You have announced that producers no current income. A long time ago, you paid $20,000.00 for it and now it’s worth $500,000.00. If you were to sell it, the amount sent you to capital gains tax would be $480,000.00 and the tax itself would be $72,000.00 or what if I could show you a plan with the outcome of the sale would look like this, you pay no capital gains tax. The asset is converted into a $30,000.00 per year lifetime income. So, over your 21-year like expectancy, you’re likely to drop $630,000.00.
It will also create that $207,000.00 income tax reduction and provide a $500,000.00 gift to your church. Well, I think you would say that my plan look pretty good. However, when I went on to say that my plan had a catch to it and that is it should be required to leave your asset to the church when you died. Well, that very well might put a monkey range to the plan when you realize that my plan would disinherit your children. But what if I could show you later reposition the asset, increase your income and provide the benefit to your church without disinheriting your children. Let me outline this plan by breaking it up into a series of steps.
The first step is to place the asset into a special charitable trust. The trust can sell the asset without paying a capital gains tax and reinvest the full value into something that will pay you an income for life. Then at your death, the asset will be given to your church. Step two involves having an attorney to open a radical life insurance trust, commonly referred to as an islet. And you all make gifts under this trust each year from the increased income that you’re enjoying.
And then in step three, the trust applies for a life insurance policy in your life equal to the value of the asset that you put in the charitable trust in step one. And then finally in step four, at your death the insurance company pays the life insurance proceeds tax free to the islet and the islet distributes the money to your children. And then the charitable trust distributes the money in its trust to your church.
This is Bob Cavanaugh with the Smart Giver. And if you’re a minister or a pastor and you want to substantially increase your chances of giving major gifts, make sure that the members in your congregation know about the techniques advanced in this video.
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