FIFTH ANNUAL GREATER KANSAS CITY FORUM ON CHARITABLE TAX STRATEGIES CHARITABLE TAX PLANNING TECHNIQU

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FIFTH ANNUAL GREATER KANSAS CITYFORUM ON
CHARITABLE TAX STRATEGIESCHARITABLE TAX
PLANNING TECHNIQUES IN BUSINESS SUCCESSION PLANS
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CHARITABLE REMAINDER TRUST

• Irrevocable trust benefiting non-charitable and
  charitable beneficiaries
• Pays no income tax
• Pays to non-charitable beneficiary for its term
• Pays remainder to charitable beneficiary at end
  of term
• Income, gift, estate and generation-skipping
  transfer tax charitable deduction

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CHARITABLE REMAINDER UNITRUST

• FLIP/NIMCRUT - combines annual payment of lesser
  fixed percentage CRUT assets, valued annually, or
  income and annual payment of fixed percentage
  CRUT assets, valued annually.
• Until FLIP, payment lesser of percentage or
  income
• First year after FLIP, payment fixed percentage
• Unitrust term 20 years or life of living
  individual

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IRREVOCABLE LIFE INSURANCE TRUST

• PURPOSES
• Exclude life insurance proceeds from taxable
  estate
• Provide liquidity for estate taxes
• Replace assets given to charity
• FUNDING
• Normally Annual Exclusion gifts used to pay
  premiums

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IRREVOCABLE LIFE INSURANCE TRUST (CONTINUED)

• ATTRIBUTES
• Irrevocable
• Not subject to generation skipping transfer tax
  if exemption applied to trust

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CASE STUDY EXAMPLE NO. 1
Creative Use of Charitable Remainder Trust and
Irrevocable Life Insurance Trust in Business
Succession/Wealth Migration and Charitable Gift
Planning
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CASE STUDY EXAMPLE NO. 1

• During the Lives of James Founder and Sally
  Founder

Gift of ABC Stock
Income Tax Deduction
Fund With Income Tax Savings and Unitrust
Distributions
Cash
ABC
FLIP/NIMCRUT 8
Stock
Irrevocable Life Insurance Trust
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CASE STUDY EXAMPLE NO. 1 (CONTINUED)

• Upon Death of Survivor of James Founder and Sally
  Founder

Charitable Remainder Unitrust
Irrevocable Life Insurance Trust Cash
Allocated Among Trusts for Three Children
and Their Descendants
Termination of Trust and Distribution of Assets
Charity
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FAMILY LIMITED PARTNERSHIP

• Planning tool to own and transfer family
  businesses, real estate interests and investment
  assets from one generation to succeeding
  generations in custom designed manner

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CHARITABLE LEAD TRUST

• Irrevocable trust benefiting charitable and
  non-charitable beneficiaries
• Pays to charitable beneficiary for its term
• Pays remainder to children at end of term

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CHARITABLE LEAD TRUST (CONTINUED)

• Grantor receives gift or estate tax charitable
  deduction
• Grantor receives income tax charitable deduction
  upon creation if grantor charitable lead trust
• Grantor not receive income tax charitable
  deduction upon creation if non-grantor
  charitable lead trust

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CHARITABLE LEAD TRUST (CONTINUED)

• Trust pays income tax during trust term if
  non-grantor charitable lead trust, with annual
  income tax charitable deduction
• Grantor pays income tax during trust term if
  grantor charitable lead trust, without annual
  income tax charitable deduction

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CHARITABLE LEAD ANNUITY TRUST

• Charitable lead trust
• Pays fixed percentage initial value trust assets
  to charitable beneficiary - annuity amount

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PRIVATE FOUNDATION

• Non-profit corporation or irrevocable trust
• Receives charitable contributions
• Donor receives income tax charitable deduction
• Limited to 20 donors Adjusted Gross Income for
  gift of appreciated publicly traded stock
  attributed to value
• Limited to 20 donors Adjusted Gross Income for
  gift attributed to basis
• Donor to receive full estate, gift and GST tax
  charitable deduction

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INTENTIONALLY DEFECTIVE GRANTOR TRUST (IDGT)

• Irrevocable trust
• Grantor (or in certain cases beneficiary) is
  owner of trust for income tax purposes
• Grantor not owner of trust for gift, estate or
  GST tax purposes

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CASE STUDY EXAMPLE NO. 3
Creative Use of Family Limited Partnership,
Non-Grantor Charitable Lead Annuity Trust,
Intentionally Defective Grantor Trust and Private
Foundation in Business Succession/Wealth
Migration and Charitable Gift Planning
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CASE STUDY EXAMPLE NO. 3
Founder Children
James Sally Founder
Non-Grantor Charitable Lead Annuity Trust 1.875M
187,500 a year
Ten Year Term
Cash 17,588
1.875M
Limited Partnership Interests (99.5)
Cash 3.125M
Remainder Interest 506K
Membership Interest
375K
Founder Children
1.875M Founder Family Foundation
LLC
Founder Family Investments, L.P. Assets
3.517M Commercial Rental Real Estate
GP (.5)
506K
506K
Note
Remainder Interest
9M Separate Childrens GST Trusts (Grantor
Trusts to the Children)
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CASE STUDY EXAMPLE NO. 4

• Creative Use of Family Limited Partnership,
  Grantor Charitable Lead Annuity Trust,
  Intentionally Defective Grantor Trust, Private
  Foundation in Business Succession/Wealth
  Migration and Charitable Gift Planning

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CASE STUDY EXAMPLE NO. 4
Founder Children
James Sally Founder
Grantor Charitable Lead Annuity Trust 2.1875M
218,750 a year
1.597M Income Tax Deduction
Ten Year Term
Cash 17,588
2.1875M
Limited Partnership Interests
Cash 3.125M
Remainder Interest 590.6K
Membership Interest
375K
Founder Children
2.1875M Founder Family Foundation
LLC
Founder Family Investments, L.P. Assets
3.517M Commercial Rental Real Estate
GP (.5)
590.6K
590.6K
Note
Remainder Interest
6M Separate Childrens GST Trusts (Grantor
Trusts to James and Sally Founder)