Legacy Living Newsletter Planned Giving AG Financial Solutions Spring | Summer 2012
Is It Time to Transition Out of Your Appreciated Assets? If you are nearing retirement or looking for a dependable income stream, you may want to consider transitioning out of your appreciated assets.
Regardless of economic conditions, there have always been assets that have performed exceptionally well for a period, such as technology stocks in the 90's and the housing market prior to 2007. Even in today’s tough economy, there are assets pushing growth records that may indicate now is a good time to transition out of the asset. If you are fortunate to have an asset that has appreciated over time, you may be faced with the challenge of how to best take advantage of selling the asset while the value is high. The potential tax liability is often a concern. You may want to consider planned giving to transition out of the asset while unlocking the potential income that could help you meet your financial goals. Using planned giving to unlock appreciated assets • You can deduct the current fair market value of the asset depending on the asset used and your giving strategy. • You may avoid paying the upfront capital gains tax on the appreciated value of the asset when it sells. • You can often transition to an income producing asset for you and possibly your children. • You can bless the ministries of your choice.
Knowing when to transition, how to transition, and what to sell can be difficult. That’s why you need a financial partner who understands the market—and who shares your heart for ministry. Contact your AG Financial Solutions Planned Giving consultant at 866.561.8860 to discuss options that could create opportunities to generate tax savings and income while allowing you to bless ministries for a lifetime. Assets that may have a strong market value today • Farm & Ranch Land. These property values are at an all-time high due to commodity prices. An example of this is the increase of corn prices due in part to the growing corn-ethanol industry. • Gold. In the face of a tough global financial market, mint-issued gold bullion, coins, and bars have greatly appreciated over the past few years. • Oil and Gas Rights. Mineral rights found on property can generate royalties for the property owner. With ongoing pressure from oil prices, companies are exploring new technologies, and opportunities abound.
Reaching your goals
What will be your legacy? Planned giving helps you make wise stewardship and financial decisions to manage your wealth. Through the marriage of proper financial and stewardship planning, it allows you to reach your goals for yourself, family, and ministry. $285 million has been dispersed to ministries and churches through the Assemblies of God Foundation and the wise stewardship of donors.
Legacy Living
Property turns into revenue and a gift to ministry
Lifetime of ministry, lifetime of income
Loyd and Rebecca Middleton have devoted a lifetime to ministry. After being evangelists for 23 years, they moved to Independence, Missouri, where they served as pastors for 27 years. Four years ago, the Middleton’s began working with AG Financial Solutions. They wanted to create a customized plan that would provide a steady income stream, while also blessing the ministries God had laid on their heart. Here is their legacy of stewardship.
“We wanted to be good stewards of the money God had blessed us with. The farm had increased so much in value that we couldn’t believe it. At the same time, we wanted to bless the Assemblies of God, because the Assemblies of God had really been good to us.”
More than 20 years ago, they had purchased land in Northwest Missouri. “My wife and I were not particularly looking for a land investment,” Loyd reflects. “We bought the land when the price of land was down. The Lord just seemed to make it available to us… so there it was, and we bought it.” The Middleton’s placed their appreciated asset into a Charitable Remainder Trust (CRT). There were several considerations that led to their decision, including immediate tax advantages and lifetime income from the CRT. But most importantly, they wanted to help further God’s kingdom.
Loyd is very positive about his experience with AG Financial Solutions. “Everyone I worked with was so professional and knew exactly how to handle everything. They made me feel very comfortable. They knew exactly where they were going and how to do it. They were able to answer every question I had to my total satisfaction.” If you would like to know more about the lifetime benefits of a Charitable Remainder Trust, please talk to your AG Financial Solutions Planned Giving consultant.
Scenario: How a Charitable Remainder Trust may work for you Donor places property in CRT with possibility of a charitable deduction.
Property is sold, avoiding upfront payment of capital gains.
Ministry receives remaining amount when the end of the CRT term is reached.
Asset value
100,000
$
Donor establishes a desired lifetime income of at least 5% annually. Trust could also potentially pay income to family for 20 years.
100,000
$
Asset is sold
78,711
$
Lifetime income benefit. (Annual payments of $5,000 for lifetime)
107,733
$
Approximate gift to ministry
*This example is based on a hypothetical fact scenario and is intended for illustration purposes only. The terms, tax benefits, expected income and expected ministry benefit are dependent on several variables that are different in each situation, including age(s) of the donor(s), tax bracket of the donor(s), term of the trust, type of asset(s) used to fund the trust, type of Charitable Remainder Trust used, and investment of the trust assets. Consult your tax advisor for more information that is specific to your situation.
Spring | Summer 2012
Understanding the Bush Tax Cuts
Tax provisions impacting many Americans expire in 2012 The provisions of the IRS code known as the “Bush tax cuts” were designed to reduce individual income and estate tax liabilities between the years 2002 and 2010. Under the Obama administration, those tax cuts were extended through 2012, but will expire at the end of the year if Congress doesn't act. The Bush tax cuts set to expire include: • Reduced taxes on long-term capital gains and dividends. • Reduced and repealed income limitations on personal exemptions and itemized deductions. • Expanded tax credits (including the earned income tax credit, the child tax credit, the adoption tax credit, and the dependent care tax credit). • Reduced marriage penalties. • Modified education-related tax incentives, including the student loan interest deduction. Estate tax liability was also reduced under the Bush tax cuts. In 2010, the estate tax exemption level was raised to $5 million per individual and the top estate tax rate was set at 35%. Those estate tax changes are set to expire at the end of 2012 as well. And if those provisions are allowed to expire, the estate tax exemption is set to drop to $1 million per individual while the top estate tax rate will jump back to 55%. As if these weren’t enough, the payroll tax cut is once again set to expire. In that event, the individual’s share of Social Security taxes paid will shift from 4.2% back to 6.2% for employees, and from 10.4% to 12.4% for the self-employed. In addition, the expiration of a temporary fix to the Alternative Minimum Tax (AMT) provisions of the IRS code could subject more taxpayers to that tax.
Lastly, several tax provisions affecting individuals, businesses, and charitable contributions either ended in 2011 or will expire at the end of 2012. This includes the deduction for state and local taxes paid, the deduction for qualified tuition, deduction of mortgage insurance premiums as qualified interest, the expansion of adoption credits, and others. Tax provisions that affect a large number of Americans are set to expire at the end of 2012. Many of these provisions were implemented and extended over the past decade in an attempt to stimulate the economy and help support the middle class. Unfortunately, the year 2012 was set as the deadline on all of these provisions, and a deadlocked Congress in a presidential election year may not be able to muster enough momentum to make any changes before these tax breaks expire. 3 Actions to consider before December 31, 2012
• Implementing gift strategies to family or heirs. This may be the time to utilize the higher lifetime gift exclusion amount. • Transitioning out of appreciated assets. Utilize the current lower capital gains rate. • Reviewing your current estate plan. With the possible changing tax laws, this may be a good time to review your overall plan. If you would like assistance in understanding how these changes can impact your short- and long-term financial planning, please contact your planned giving consultant.
To receive confidential, objective advice, please contact your planned giving consultant. 866.561.8860 | plannedgiving@agfinancial.org | agfinancial.org
All of these tax provisions are set to expire at the end of the year if Congress doesn’t act.
3900 S Overland Avenue Springfield, Missouri 65807 866.561.8860 agfinancial.org
Planned Giving
Legacy Living Newsletter A heart for giving. A mind for smart planning. Yes, you can do it all. Whether you’re approaching retirement or already have a giving plan in place, it’s crucial to stay informed about changes in tax and estate laws. Plus, new options are continually arising. This biannual newsletter delivers helpful information and solutions for your giving and retirement plans. Contact our team of experts today to get started.
Larry Lister
Jason Lister
Lee Watson
Mike Wynn, JD
417.861.1391 llister@agfinancial.org
417.872.9595 jlister@agfinancial.org
417.848.1586 lwatson@agfinancial.org
417.576.4395 mwynn@agfinancial.org