Basic Estate Planning - Class 5 - Advanced Trust Planning | George Brown | Skillshare

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Basic Estate Planning - Class 5 - Advanced Trust Planning

teacher avatar George Brown, Take the Pain out of Estate Planning

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Taught by industry leaders & working professionals
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Watch this class and thousands more

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Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Lessons in This Class

7 Lessons (57m)
    • 1. Class 5 01 Introduction

    • 2. Class 5 02 Project Report

    • 3. Class 5 03 Special Needs and Spendthrift Trusts

    • 4. Class 5 04 APT's and Dynasty Trusts

    • 5. Class 5 05 QTIP and Medicaid Trusts

    • 6. Class 5 06 ILIT's

    • 7. Class 5 07 Charitable Trusts

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About This Class


George P. Brown PhD

There are a number of commonly used trusts.  Many of these trusts can be incorporated in a Last Will and Testament or in a Revocable Living Trust.  They can be set to be funded either immediately or upon some event in the future.  They can also be created as completely stant-alone documents, not related to any Will or Living Trust.

These Advanced Trusts serve very specific purposes.  Each one will be described in general terms for educational purposes.  Since this entire class is devoted to basic estate planning, which includes Last Wills and Testaments and Revocable Living Trusts, you will need to read other materials that completely describe these advanced trusts.

Nevertheless, what you will learn here will give you a firm understanding of the application of each of these trusts, and you will know more than 95% of most of the financial advisors and insurance agents out there.

Meet Your Teacher

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George Brown

Take the Pain out of Estate Planning


40 Years in Banking and Trust & Estates; Author and Teacher in Estate Planning; Mentor to successful professionals.

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1. Class 5 01 Introduction: this is less than five a discussion of the most common trust. In addition to the revokable living trust, which is by far the must use most utilized trust out there The revokable living trust, you might say, uh, that, um, In addition, the testamentary trusts of wills is, uh is also extremely common. Uh, many. Many wills will have a provisioned for a trust to be established at the death of the test eight. Or that's that would be you if it's your if your if it's your last will and testament. But that's a trust. It's not in existence immediately. It only comes into existence when you when you die. And and as a result of that, um, many of those testamentary trusts are not as complete as you would like them to be. My experience we've seen them just stated that a trust shall be established, but there are no directions given to the individual. So so you really want to make sure that when if you do create, they trust under your well that it is clear what the trustee who may not be the executor sometimes it will be the executive to the executors. The one who precludes the trust I've been living will goes through probate and distributes everything, but but the executor may be appointed of the trustee of a trust that you make under your well. But that's not the subject here. What, what we're going to be talking about, Oh, our special needs trust, spendthrift trusts, asset protection trusts, dynasty trusts, qualified terminal interest, property trusts, Medicaid, qualifying trusts, life insurance trusts, charitable trusts and charitable remainder trust. And I'll be grouping them together so that in some cases there will be a couple of trust disgusting in one future session. But with time being, let's just keep in mind that we will be talking about nine different trusts that are not uncommon. But not everybody will have the need or desire toe have one of these trusts. 2. Class 5 02 Project Report: this, uh, is that project that we want you to conduct for yourself to help you to determine where you see yourself relative to the various types of trusts, perhaps the relative markets for each of the kinds of trust that the special markets may have keep in mind that the revocable living trusts is is a very general market that people of almost any adult age can. Any circumstances could benefit from either certainly a will, but but in particular from a living to us if they have accumulated in the assets. But these other types of trusts are, um they have very special applications, and they require different disciplines in different understandings. Eso uh so you may want to become a specialist in one or two types of these trusts, or you could be a generalised and all types of the trust, and you may decide that you have a specific kind of clientele that you would I like to serve. Or, as in every other part of this course, it just may be that you want to have a general knowledge about these that might help you and whatever business or profession you're already in, you may choose to serve certain markets that it takes a while to understand the needs of families with impaired Children or families with spendthrift Children. Families with largest states are going toe have special needs for special requirement for some of the trust that we're about to discuss in a little bit. Families with elderly parent's or grandparent's may have needs for Medicaid qualifying trusts, which is general generalized estate planning. Clearly, if there's a second marriage and their Children from either one or both of the husband and wife in the second marriage that requires some definite estate planning business owners have a need for succession. Planning and trust can play a role there, and then a charitable planning or felon topic. Planning applies to any families interested in seriously interested in helping the charities that they support. So so these are the choices. Now we do have a document that you can download, which is is simply entitled Project, uh, number five and and it it's a checklist of the markets or the special types of trust that you like you like the most. Just feed that back to us and give us an indication of what you see as the opportunity for you, if anything or if there's something. In addition, you can elaborate further on that sheet. But it's simply for me to help understand where your interests may lie and for future guidance or for discussions that you and I may have in helping you to formulate a plan to serve these people or to serve to use these particular trusts in any service that you may want to provide. 3. Class 5 03 Special Needs and Spendthrift Trusts: I I've group these to trust together because in a sense, they are similar on that similarity. Is that the the individual who is the beneficiary or there may be more than one. But those who are beneficiaries of these trusts, uh, are often not able to make decisions or manage assets on their own for either health reasons or some other impairment or because they simply don't know how to handle the assets . But But that may be the only similarity because special needs trusts, for example, are aimed at people who are beneficiaries who may have a shortened life expectancy. But more important, they may be receiving some sort of government assistance that could be public assistance on under Medicaid. Could be S S I s s d I we thought that one of the reasons important reasons for such a special needs trust for for people like that with down syndrome, autism, M s where they're getting government benefits, uh, is to not make these assets available, uh, on demand by the beneficiary or anyone else for the support, maintenance and well being of this beneficiary that it's a unique kind of trust because it is a on irrevocable trust. It's aimed at providing for the supplemental needs of the beneficiary and not for the, uh, health, education, maintenance and support type needs a G m s, is they? That group is often referred to hems. It's not for that on, but clearly states that it's not for that. So that if at the government or anyone else seeking the funds there, um, we're looking for it, the trust is totally independent. It's irrevocable. It's for the special needs or supplemental needs of the individual who's the beneficiary. And it has to be properly drafted so that it cannot and should not be paying for any of the h. E. M s needs of of the beneficiary. Now that is at the discretion. It's a fully discretionary trust trustee, And that means it at someone you trust or corporate trustee that I was familiar with special needs trust company, for example, that they are that they are not obligated to pay for the health, education, maintenance and support of the child. Now that doesn't mean that they can't and they will do that if there are no government benefits available. But if there are then the trusty cannot be expected to either supplemental support for those needs on Lee because it has, it's designed to not interfere with any government benefits or not preclude any government benefits that might be gotten so so special. Care has to be done taken when you're creating this and understanding how it works. It's usually funded with some immediate cash if necessary, because you want to demonstrate that this trust is something that is active in providing the special needs for the child. For sun or whoever it is doesn't have to it. You could set one up for anyone, but you want to demonstrate that he might have bought baseball tickets or a special sports jacket or something like that and have a check book that shows that you never bought anything that would have anything to do with the A. G. M. S. To maintain a stint with the living of the individual. Uh, so elder care his is another matter. Special needs to us. We will talk about that later. That was a really referred to his Medicaid qualifying trust, which we'll get to now that this spendthrift trust is pretty clear. That person is probably someone who is unaccountable for what they do, or they may have addictive behaviors. Or they may be vulnerable to others to try to get whatever it is they have. What they may just be irresponsible. There are no government benefits typically involved here and spent three. Trustee is still independent and and it is a discretionary trust, and it could be used for any purpose at all. Usually it is being used for the health, education and maintenance and support of the individual. But not always. It depends on how much that individual was able to provide for themselves, and that's it purely at the judgment and discretion of the trustee. So you can see this some some distinction and some similarity here. There are many regulations involved in special needs trust. They're not very many regulations involved in spendthrift trust. However, there are certain states that have very strong spendthrift trust laws, some stronger than others, so that in certain states it's almost impossible to penetrate a spender of trust to get to the assets. On the other hand, there are some states that well, so you want to be careful about that and report to the site of service of the state, but that means the jurisdiction or the location. Which state laws are you going to be using for these spendthrift trust laws are different in a special needs. Trust laws were different in each state as well. So that's why you need to have state specific documentation. But but the similarities or there both irrevocable trust they both. Any distributions use of the funds of totally at the at the discretion of the trustee, So let's get on to the next set. 4. Class 5 04 APT's and Dynasty Trusts: Now these next two trusts are grouped together because they have similar intention. They both trusts, are created in order to protect assets for the use of the beneficiaries. That's that's the principle purpose. Both trusts are irrevocable to us, and both threats are essentially discretionary trusts. That means that the trustee of the trust has full discretion as to whether or not to make any distributions, whether or not to make any investments or whether or not to otherwise employ assets, all of which have to be use for the ultimate benefit benefit of the beneficiaries. So that's that's where they were both similar. Now the asset protection trusts are peculiar to perhaps half a dozen different states around the country that have created special regulations and special legislation. Dealing with this type of trust, and the technical definition of these asset protection trusts is that they are self settled spendthrift trusts. In other words, they get their protection from the spendthrift laws of the particular states, and some of these states are Nevada, South Dakota, Alaska, Delaware, Ohio, New Hampshire, maybe a few others. Tennessee. I'll have past certain regulations with certain legislation that gives particular protections for uh, spendthrift trust, especially those that are self settled Now. What that means is that the person who creates the trust is also going to be the beneficiary of the trust. And that sounds kind of peculiar by itself that someone is trying to protect their assets. And yet, and they can, on their very own, create a trust to do this. There's certain rules that they have to abide by, or the trust has to buy buy, and that one of the most important one is the, uh, fraudulent conveyance act relative to the state. And what what is the statute of limitations for, uh, the completion of a gift before it can be challenged? So, for example, most states have a four year statute of limitations in regard to fraudulent conveyance, which means that the settle or who transfers the assets to the trust should have known or could have known or or did know that he had some outstanding creditors. And if he makes a transfer for the intention of entering, delaying or defrauding a creditor, then that transfer can be reversed and there might be penalties that could be serious penalties, including fellow for doing that not only for the subtle or the person who does it, but anyone else who helps him to do so. So you don't want to be a bunkmate with somebody who's creating a trust like this on doing it fraudulently. So how does this work if if you can settle your own trust and protect assets and let's presume that people are doing it honestly and that they're a professional business owner or whoever, they just have someone who doesn't want to have a particular asset exposed to litigation or divorce. Whatever the reason is, um, that they're doing it honestly and their long term, and there's no foreseeable event that that they could see. They can't not predicting that they going to go through a divorce or or get sued by anybody , but they may. People in a business or situation is vulnerable to that, so they create this trust and transfer the assets to the trust. Of course, since they're the beneficiary is it's it's really not. It's sort of a gift to yourself, so there's no gifting issues here, Um, and you wanna have you have to have not just want, but you have to have an independent trustee someone that you do not control s so that they can exercise absolute discretion. And in order to safeguard Dad and put a moat around that decision, you can have a trust protector who is got certain authorities. You may also have something called an independent trustee for distributions that could be the same person as the trust protector or at a different person. And you may have an independent trustee for investment purposes, although you, if you're this settle or you can actually manage the assets in the trust as long as you cannot make any distributions to yourself from the assets in the trust, you can manage the investment choices. Or you could manage the choice of the investment manager if you wish. Or you can let an independent trusty performed those functions. One of the things you retain is the right to fire the trust protector and any independent trustees if you wish. One of the principal rights that the trust protector has is to fire the independent trustee . So what does that mean? It means that you can fire the trust protector if he doesn't fire the independent trustee and replace him with a trust protector that, well, well, fire the independent trustee. You pretty much have control over what's going on with this. You can. You can fire independent trustees. You can actually be. You can have family members be family trustees. There's a wide array of choices, but the best, most important thing is that you ultimately can create a secure nest for assets, that it will not be subject to, uh, litigation, not be subject to divorce lawsuits. Lots of other things. Now there are certain rules in regard to bankruptcy that are different in with regard to this type of trust on those you need to discuss with that bankruptcy attorney. But but nevertheless, this type of this type of trust can be also depending on the circumstances outside of that . But I wouldn't render an opinion. I can't render a legal opinion anyway. I'm not an attorney, but it's it's type of trusted is becoming mawr more common, and especially even if you live in the mid Atlantic area or the South or wherever you live in the country, you can use the jurisdiction of your choice you can use in Nevada, South Dakota. Alaska used to be a lot of people would go offshore to the islands or the Cayman Islands or to Nassau to the Isle of Man, many different places. In fact, I've done my fair share of trust in those jurisdictions. But now, with the kinds of laws that we have today, you don't need to worry about that. You can. You can pick the states here. You don't have to go to, um, to the Cook Islands in the middle of the Pacific South Pacific. Not a bad place to go by the way. But, um, you don't need to now that I'm not saying that you shouldn't because that is the ultimate protection that that could be very, very strong. So that's That's what the asset protection trusts are. Their self settled. A radical bull spendthrift trusts dynasty trust. It is. Essentially, it has all the same protective benefits, but it is settled by someone else, usually an older relative, usually parent grand parent. I want uncle for your benefit or for someone's benefit. And in this case, the assets that transferred to the trust are often sold directly to the trust. In exchange for a a note, usually a long term note whatever the federal interest rate is. So so that's the typical way of turning touring assets into a dynasty trust. If, for example, you had business that you wanted to say as a real estate, you wanted a transfer into a dynasty trust or some securities you that say it's worth $100,000 so you would sell it to the trust in exchange for $100,000.30 year Note that, let's say, 2.5% interest. Whatever the interest rate has to be at the time on, it could be an interest only note, and that interest could be paid out or it could be accumulated. These trust also have trust protectors. They have independent trustees. They're very, very often used as the family bank to lend money to all the members of the family who are all named beneficiaries s so that they can when they borrow the money from the trust, they pay it back at the typical interest rates, and then they go buy a car or they buy a home where they or they borrow money for school or whatever. The reason is that the family will establish their own management team to manage the lending that's going on with the family back, and they'll fund the bank with their own money with the trust money and this way all of money that would have otherwise been paid out as interest to banks, credit card companies and finance company. All of that interest that would have gone outside the family can now be concentrated inside the family. But this is this is an amazing concept. More and more people are doing this kind of thing. Some families have studied this concept and found out that before they did it, as much as 33% of the money that they made out in payments went to outsiders, never to be retrieved again. So I went to the banks. It's a huge, huge loss of income that could be conserved for the family so that that's one of the significant benefits. The other significant benefit of a dynasty trust is that if you choose the right side us, you can have the trust go on and on and on. For multiple generations, some of the shorter jurist jurisdictions have long that long statutes, for against the rule of opportunities used to be that in almost every state, a trust could only stand existence for the lifetimes of the creators or beneficiaries of the trust on a plus some period of time, like 20 years or 21 years. So so ordinarily, we used to think back in my day when I first started in banking that we used to think that a trust could only stay in existence for maybe 100 years. Then then that has to be dissolved Onda, and that was the end of it. Now, in jurisdictions like Nevada, Florida, other places you have at least 365 years, that's that's about 10 or 12 generations. That trust could go on. I remember that George Washington was our president about 237 years ago. So 365 years is a pretty nice period of time toe. Have a trust, stay on and on. So what's the big deal about something like that? Well, the big deal is that each generation, once the trust is set up and funded every time one generation dies, there is no federal estate tax or don't state inheritance tax. So 40% of the money that might have been taken in federal estate tax is not gonna be taken Each generation. It just keeps on growing and had managed by the primary beneficiaries, in essence, for the benefit of the entire family. These air wonderful, wonderful tools. The amazing thing is that we have in built into the living trust package that we offer this trust can be created to be a dynasty trust. It's just to me. It's one of the best tools in estate planning that you could ever have on. A lot of time could be spent on these. Even though you have an independent trustee typically that trusted, you can be fired by the trust protector or by the primary beneficiaries. That huge amount of control and one of the amazing things that you'll see in some of these trusts, uh, crafted properly if the choices were made, is that while we say that they're irrevocable, can't be changed, you can have a provision in that that is irrevocable. That gives the people the possibility of amending or changing the trust, and that provision is irrevocable, so it sounds like a contradiction. But that's that's the fact that so It's an amazing thing. I I always get very excited about dynasty trusts. Try to make sure that every client that I have that wants to preserve assets if they have any significant assets on with the limitations where you can pass right now 10 million over $10 million without federal estate tax, Everybody should be considering the use of this type of trust for future, uh, beneficiaries many generations down the line. So those are the two to trust. I should point out the similarities between them. The type of jurisdiction is important on both of these. So places like Nevada, South Dakota, New Hampshire, Alaska, Delaware, place like that are good jurisdictions. Even though you may live in Pennsylvania or Carolina, wherever you might live, choose the jurisdiction. That's appropriate for what you're trying to do with these two types of trusts. 5. Class 5 05 QTIP and Medicaid Trusts: these next two trusts have, uh, similar objectives as all trust due to protect and preserve assets. Eso uh, so that the similarities here not quite so close. The qualified terminal interest property trust is almost always used in a second marriage situation, For example, um, a man marries, uh, a man had it may be, is a widower and has 23 Children from his first marriage. And now he president would work for quite few years and meet someone and decides to marry a very nice lady, uh, whom he loves and and and that she may have Children of her own. But But this the purpose of this trust is, is to make sure that assets are available for the new spouse while she's living. But then ultimately, the property that's left in the trust that is going to be created would be, um, going to the man's Children, which is his ultimate purpose. But before, after he dies, his isn't new. Second wife would enjoy the benefits and use of the assets based on the terms of the trust until she's gone, and then the trustee would turn the assets over to the surviving heirs of the man so and works equally as well. If the Web, the woman is the one who is setting this up poor the husband who may not have sufficient assets. So these trusts are often created inside of a living trust or some other irrevocable trust . So you will see when you did the living trust, you would have seen on opportunity to create a trust at the death of one spouse for the benefit of the, um, the surviving spouse. Now the reason why it's called qualified terminal interest property is because you probably know any transfer from husband to wife, her wife to husband upon death, the first of them to die. That qualifies un toothy, unlimited marital deduction to have no federal estate tax. Eso so that the funding of this trust at the death of the Let's say the husband dies first . Funding this trusted his death does qualify for the marital deduction. We're not having to pay the transfer tax, but the terminal interest meaning at the end of the term of the trust the property in the trust will go to, in this case, the husbands, Children and, as it indicates, here usually is down a second marriage, and it's funded upon the death of a spot of a spouse with most of the assets. But it doesn't matter. You specify what assets are going to be. What percentage of the estate as an alternative might go into the Q tip trust and is, it says the assets are used to produce income for the surviving spouse or for the surviving spouse to enjoy. For example, it could be the home where she could live in the home or in a second home that one needs to be sold. But that second home or third home would be owned by the trust ins on the terminal. Interest would pass to the heirs of the first spouse to pass at the death of the second. So that's that's the objective is to do not deprive the smiles of the use of those assets, and it doesn't have to be all of the assets. It just has to be determined in each case. How much would be appropriate to put it on this note? No specific figure. It's just what you decide to design into the system. So another type of trust. It also is available as part of the living trust is or can be, stand alone, just like the Q tip. Trust can be a standalone trust on fund or could be a testamentary trusts created under a well, as can Medicaid qualifying trust created under. Well, we like a living trust better for this purpose because we avoid the probate process of fun and having to go through that in order to fund the trust. It's automatic if it's part of a living trust. The Medicaid qualifying trust who generally established, if it could be for the settlers or creators of of their own living tussle looking way down the road to having this possibility that wanted both of them. May husband White may be qualifying for need to qualify for Medicaid. Essentially, that means that they don't have any assets of any significance at that at the time that they apply for Medicaid. And they repeat this a whole special area of the law elder law on helping people to qualify in there many, many techniques, uh, that are available. This is one of the principal tools that is used for this type of planning, and it's designed so that the principle in the income is not subject to the claims of Medicaid. In a sense, it's kind of like a special needs trust, and the principal principal on income would only be used if Medicaid is insufficient, I recall it. There's a five year look back period on money transfers to such a trust on that can be modified with proper structuring of assets and proper purchasing of different kinds of assets that they're not qualified letter that are not included in the formula for determining what assets are available to Medicaid for public assistance. Whoever the agency is, it's providing it so good planning, very important, very, very often used, very often provided for either as a standalone or as part of a living trust package. So keep these two in mind. You'll see them a lot, and the reason they're here is because they are an option in the living trust package. 6. Class 5 06 ILIT's: life insurance can be owned by individuals by one person, can be a could be owned by the insured by the spouse of the insured. It could be owned by parents on a child lots of ways that life insurance can be owned. But the that person or entity that owns it will determine how it is treated for tax purposes. So life insurance it's meant to be part of an estate. Or it is to be used for the purpose of of helping to pay federal state taxes or provide liquidity to the estate. Uh, or I have some additional benefits, like providing for the family that typically life insurance for that purpose, who typically might be owned by an irrevocable life insurance trust. That means the reason it's a radical bullets because you want to keep it out of the estate . So so you want the death, Benefit it but say it's a $1,000,000 death benefit. Well, you don't really want that death benefit when the when the insured passes away to be included in the insurance of state for either state inheritance taxes or federal state tax purposes, you just There's no reason at all to have that happen because it couldn't be diminished significantly depending on the size of total estate by as much as 40% on a federal level. So $1,000,000 could could actually result in $400,000 of tax going to the government and 600,000 remaining through, whatever the purpose, Waas. Why not just have it all remained? And that's with the benefit of the irrevocable life insurance trust. So uh, not to make it work. Uh, the gifts that are used to pay the premiums, money that's used, that it has to be to qualify under the gift rules or it has Teoh It could be alone or there other ways to finance the premiums on on such policies. But the key issue is to get the trust assets out of the estate, and the only way to do that is to make an irrevocable transfer of the money for the premiums. You do not ever buy an insurance policy on your life and then transfer it into a trust because there are lots of rules that apply to that and it doesn't work well. You have to have trust, apply for the policy on you on the insurance life and not not on, then trust with a on the policy immediately upon its issues on DSO That that's that's just the way it is. And you have to. You have to abide by the rules or that death benefits could be brought back into the estate and or there could be some gift tax rules gift taxes that could result as well. So a certain rules that, like there's something called a crummy letter C are you MME. Wide Mr Crummy. When he made the gift to the to the trust on the money, he sent letters to each of the beneficiary, saying, if they wished they could withdraw the money, and that made it a completed gift because they could have gotten that money out of the trust. If they wish, they wouldn't and shouldn't. But they could have. Because of that. I'm given 30 days or so to make to determine that they they went ahead and make the gift, then sent the crummy letters out, giving them the opportunity. So business insurance is essentially the same. Replicable life insurance trust for business can be established. You can purpose might be for and sharing a key man. If that person in the business dies, you want to have enough money to go out of my pay a replacement for him, because that replacement probably will need to be paid well, Andi, it may not be productive right off of that. So so you needed for that? He also, whenever there's more people involved in a business than just one sole proprietor, there's partners or other corporate shareholders closely in the closely held business. You need to have some kind of an agreement in order to in order to buy out the interests from a person who dies, Let's say three owners. Jack dies. Jack's wife inherits the shares of stock from Jack. Now she's 1/3 partner well to other partners. Don't really want to be in business with Jack's wife for many reasons, perhaps, but that they just don't want that. So they have insurance. It would buy out the stock from Jack's wife. Usually, the premiums were funded by the company. Company pays for those premiums, and ordinarily there's a trust that owns it, and a corporate trustee may be in place, not necessarily, but there has to be a trustee of every trust that could be a corporate board members. Ordinarily, corporate trustees are chosen. So Carol, apparently simple, very, very common. The irrevocable life insurance trust is it is among those commonly used trust that you're gonna run into from time to time. It also is possible toe have a revocable trust. Own life insurance, just like your revokable living trust may own some of the policies on your life. As long as your estate is not going to be taxed for federal state tax purposes, then you you can do that on day. So I do recommend that a living, even even sometimes a living, a special living trust might be set up just for the purpose of only life insurance on various family members. Onda. It's very typical when we talk about establishing a separate trust, even if it's a revocable living trusts for the purposes of creating a family back enterprise. And the family bags are almost always funded with cash value life insurance because their nontaxable for income tax purposes and a wonderful vehicle for building in the state and being the cash storage place for for the loans that are going to be made where you could take money from the policy, lend it out, have it paid back and continue to build up that family back. 7. Class 5 07 Charitable Trusts: Now we're going to be talking about one of my favorite topics, which is charitable planning, uh, big universities, hospitals, all the major national charities and many of the small ones. The church is the, uh, Boy Scout troops. All kinds of local charitable organizations use these instruments on a few others To raise money, they used charitable trust. They used charitable remainder trusts. The whole area of charitable planning on especially charitable state planning is usually referred to as planned giving. And there are just thousands of people who are out there working for charities. Just in this area of charitable trusts and charitable remainder trusts. Some of the other tools that are used besides charitable remainder trusts are charitable gift annuities, pulled income funds on, uh, and charitable installment bargain sales chargeable limited liability companies. Just This is on area that I have devoted a huge portion of my time to, uh, and I'm one of the leading proponents. I like to say expert, but that's in the eyes of the beholder. But I do know this business really well, and all by itself, it's a tremendous opportunity. Help local charities, churches, organizations, raise money for them for the operations and to build their endowments. So I'm just going to dress two issues here. And then, for those of you who would like to pursue it further, let me know and we can talk all about the other kinds of things. I probably will create a class all by itself just on charitable planning. Essentially, uh, there are the two things on the page here, a charitable trust, which in essence, are the equivalent of private foundations. People can neither establish a charitable trust or a private foundation has a company or as a not for profit company. And that could be in the form of a C corporation or with but without shareholders. It could be in the form of a limited liability company again, with the only shareholder being the charity or a charity. But the point here is that, uh, this type of charitable trust raises money, usually from the family that sets it up and probably doesn't go out and about looking for additional money because they could fall into the range of being a public charity if they start to receive at least 25% of their donations from the public. But we're just going to limit this to a family who might want to set up a foundation or charitable trust. They have to follow the private foundation rules of giving away at least 5% of the value of their assets for charitable purposes each year. Uh, because the family is operating it, they can pass the control off the foundation over to their heirs. And as I indicated, that the I. R s private foundation rules apply to the operation. So, for example, you can make a gift of cash or, in kind gifts of cars, boats, airplanes, whatever you want to give clothing on, get a tax deduction. You're limited to some extent by, uh, being a private foundation as a pope, as opposed to a public foundation. For example, if you give highly appreciated property too, the charitable trust you you will get a charitable deduction for up to 30% of your adjusted gross income, whereas if it were a public charity and you gave highly appreciated property or assets to the charitable trust, you would get a tax deduction. You would get the same amount of tax deduction, but you would be limited to 50% of your adjusted gross income, so you could give MAWR to public charities than you can to private private charities or private foundations. That's okay because most people don't give that much, anyway, must they're extraordinarily wealthy. But the idea is that the charitable trust serves the local community, or it could service. A special charity could know many different ways to set these up on, and we can consult with you on how to help you to do that. The charitable remainder trust is is totally different, because it is what is known as a split interest gift or split interest trust and the split in the way that in the fact that while the don't or who donates assets to the charitable remainder trust uh, who will receive income during their lifetime, the charity would would not get any benefit out of it until they die. And then the remaining interests and the assets goes to the designated charity, which they will name in the trust, usually with the right to change the charity. Unless, unless it's trust that's being sponsored by the charity and then, of course they don't want you to change. But the donor or in many of the charitable remainder. Trust that we set up can be the trustee of the trust or they can have a corporate trustee. Depends on their particular inclination. The donor, and perhaps it's spouse or her spouse can receive income during their lifetimes, and the remaining principle goes to the charity at the death of the final beneficiary to die. And generally there are just two beneficiaries that can beam, or but generally it's usually a husband and wife, and there are many types of these trust. But let me say that if you were to give a charitable give to a charitable remainder trust, let's say $100,000 you would get a tax deduction. But it would only be for the current value of the future gift that charity is going to receive. So that tax deduction could be somewhere in the range of 20 to 40% of the value that you've given them, or somewhere perhaps between $20,000 and $40,000. And that's because you're going to get an income back for the rest of your life, where lives and that's going to take a long time. Hopefully before the charity gets anything now with the charitable trusts above. If you give $100,000 to the foundation of the charitable trust, you will get a tax deduction for $100,000 a full right off, because it's a completed gift to a charity. And whether it's a private foundation of public foundation, you still get $100,000 deduction unless that $100,000 is ISMM or than 30% of your income. Or if it's an in kind gift, 20%. So so we. So there are limitations there. Where is with a charitable remainder trusts. You still have the same limitations, but you're not less not like likely to run into the limitations or based on your income. So, uh, I'll throw out a couple of things our terms verbally to you about charitable remainder trust because they're essentially two kinds. One is the charitable a charitable remainder annuity trust on on. That means that you're going to get paid a percentage of the original gift. So, for example, the minimum that you can have in the way of a payout is 5%. So let's supposing you give $100,000 to the charitable remainder trust. And let's just say you get a $25,000 tax deduction reporting for the gift and you get $5000 of income at 5%. And that would go on that $5000 would continue on to you as long as you live as long as there's money in the trust to pay. So as long as you're earning 5% or more on the on the income, you'll get paid that for life and maturity may wind up getting $100,000. Now there's another kind called a, uh, unit trust a charitable remainder unit trusts. And with that type of trust, uh, you, uh, you based your payout rate, which may be 5% on the on the current value each year, so that if they if you gave $100,000 to the Charitable Remainder Unit Trust and he chose a 5% payout, which has to be at least that, then you would get $5000 the first year. But let's supposing that you earned you invested wisely and value of the of the principle in the trust grew to, let's say, 110,000. Well, then, the following year, you would receive a payout of 5% of $110,000 which would be $5500. So you would have gotten with a 10% raise because the value of the trust grew 10%. Of course, the value of a trust could go down as well, in which case you might have a reduction in income. Uh, there are different kinds of Unitas, and some of them are what we call a charitable remainder net income unit trusts. Which means that you would either get 5% or you would get the net income. The net income was more than 5%. You get more. It was less he would get less. So if there's another one called a charitable remainder, uh, that income with makeup provision unit trust so that if you don't, if the trust continues to grow in value, but it doesn't it grows in capital appreciation rather than income. Then, at some point in the future, you will be able to take out more money if the income exceeds the amounts that you should have gotten so that it has a makeup account, and it's pretty complicated bookkeeping. We could go into that at some point in the future. It's a great tool, though, for creating a retirement plan for business owners, professionals, anybody who wants to have the advantage of tax free growth on get a tax deduction and, eventually benefit of charity. These compare very favourably to things like IRA accounts for one K's and some others because of the nature of the structure. So they put the two classifications a charitable trust. It both charitable trusts and charitable remainder. Tots are aimed at benefiting a charity. The 1st 1 benefits charities right away. The charitable remainder test will benefit charity at some point in the future. Now they're certain provisions that could be made so that the charity can benefit to a small degree during the lifetime of the charitable remainder trust income beneficiaries. That's subject to the design of the of the of the program. And it's something I love to do and work with work, and I could help you to learn how to work with charities to design these to help the charities raise lots and lots of money. It's a big opportunity to help people raise money. So, uh, what what I'd like to do is have you consider what we've learned about these various kinds of trust and tried to familiarize yourself with all of these trusts and then explore how they applied. And there's a lot of information online about these things. And then, if you wish to seek out a mentor, somebody who knows about these things mentor many people, I'd be happy to help you in any of these. Feels, uh, to determine just what opportunities you would like to take advantage of. And we will explore some of the business opportunities with the various trusts in the next class. So thanks for sticking with me and hang around for that next class.