for educational purposes only copyright the financial engineering alliance, llc 2002. all rights...

For Educational Purposes OnlyCopyright The Financial Engineering Alliance, LLC 2002. All Rights Reserved

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Welcome!

LBL6471


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CharityLincSM

A Gift Annuity ProgramFor Charitable Organizations

CharitableCapitalSM Design Center, a division of The Financial Engineering Alliance, LLC and Lincoln Benefit Life do not provide legal or tax advice, and nothing herein should be construed to be legal or tax advice. There is no direct affiliation between The Financial Engineering Alliance, LLC and Lincoln Benefit Life. A charitable gift annuity is not guaranteed by any government agency. A charitable gift annuity is subject to limited regulation in most states, and is not issued by an insurance company.

The content of this presentation is for educational purposes only.

The CharitableCapitalSM Design Center

A DIVISION OF THE FINANCIAL ENGINERING ALLIANCE, LLC

Present

LBL6471


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What Is a Gift Annuity?

A contractual arrangement between your donor and your charity

Your donor makes an irrevocable gift of cash or securities


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In exchange your donor receives guaranteed payments for life with the remaining values benefiting your charity


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Your charity:

Issues the gift annuity agreement,

Sells, if necessary, the assets gifted, and,

Places the assets into a separate gift annuity account.


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Your charity then:

Manages the investments, audits the account and makes the payments to your donor and/or another annuitant, whom your donor selects, for life.


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It generates a lifetime payout to the annuitant based upon an attractive payment schedule using specific rates issued by the American Council of Gift Annuities (ACGA)


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It can be funded with as little as $10,000

Payments are calculated and paid at a fixed rate and made continually for the rest of your donor’s or annuitant’s life


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Why is CharityLinc Unique?

Reinsurance!Reinsurance!

It provides your charity the opportunity to reinsure their payout obligation so that the remainder of your donor’s gift, net of the reinsurance premium, can be used by your charity immediately.


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Why is CharityLinc Unique?

The payment obligation is reinsured for your organization with a single premium immediate annuity (SPIA) issued by Lincoln Benefit Life (LBL).

Your organization receives periodic annuity payments from LBL and then makes the stipulated payments directly to your donor


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What is “Reinsurance”?

The purchase of a SPIA by your charity from LBL.

The SPIA guarantees that the lifetime periodic payments which your charity has obligated itself through a charitable gift annuity (CGA) agreement will be paid directly to your charity on the same periodic basis as the obligated payments to the CGA annuitant until the annuitant’s death.


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What is “Reinsurance”?

The remainder of your donor’s gift – the difference between the total gift amount and the SPIA premium – can be used immediately for charitable purposes or invested for future use.


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Why Reinsure?

Regulations require a charitable organization which self insures a CGA to reserve 100% of the risk – effectively delaying the use of the “remainder” of the original amount contributed until the death of the annuitant.


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Why Reinsure?

However, should 100% of the CGA risk be reinsured with an authorized insurance company – no reserves are required!The balance of the gift (net of the reinsurance premium) is available for use immediately!


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A Lifetime Payout

Annuitant

Age

Payout

Rate 1

Tax-Free

Portion 2

Effective Payout Rate3

65 6.0% 54.98% 6.61%

70 6.5% 57.98% 7.35%

75 7.1% 67.55% 8.25%

80 8.0% 72.54% 9.55%

- Tax Advantaged -- Tax Advantaged -

1 Based on single annuitant charitable gift annuity and ACGA rates effective 7/1/2003. Subject to change.2 Based on 4.2% Federal Mid-Term Rate (subject to change monthly), annuity exclusion ratio and annual payments. Once the donor’s basis has been recovered, further annuity payments are fully taxable.3 Assumes a 27% tax bracket.


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Gift Annuity Benefits

SecureSecure

Your donor will receive guaranteed payments for life, which will not change regardless of future interest rate, or stock market fluctuations.

Your charity can reinsure your client’s payout guarantee with a SPIA provided by LBL.


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High Payout RateHigh Payout Rate

The gift annuity payments may be considerably more than the income your donor is presently receiving from CDs or other investments.


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Tax AdvantagedTax Advantaged

Your donor will receive an income tax deduction in the year of the gift. Part of your donor’s annual payout may be tax-free.

A gift of appreciated property will avoid capital gain taxation on the gift portion of the contribution with the remaining capital gain tax spread over the life expectancy of the annuitant(s).*

* If donor is not the annuitant, the capital gain tax cannot be spread out over the donor’s life expectancy.


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Can Provide for OthersCan Provide for Others

A gift annuity can be designed to make payments to either one or two individuals for life. Your donor may wish to include their spouse, special needs child, a parent or special friend.

Most of the tax benefits belong to the donor even if someone else is named to receive the lifetime payments.*

* Payout may be subject to a gift tax but will qualify for annual gift tax exclusion as a gift of present interest at time of distribution.


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Supplemental Income Payments

Beth, age 75, is frustrated by the renewal rates of her bank CDs. Beth uses $100,000 of her maturing CDs to establish an immediate gift annuity with a charity.

In doing so, Beth will generate an annual lifetime payout of $7,1001, (over $4,7002 will be tax-free) as well as an income tax deduction of over $42,0003.

1,2,3 Footnotes are on next slide.


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Your charity can reinsure her payout guarantee, allowing the remainder of her gift to be used by your charity immediately.

1 Based on a single annuitant charitable gift annuity and ACGA rates effective 7/1/2003. Subject to change.2 Assumes a 27% tax bracket. Annuity exclusion ratio. Annuity payments are part return of principal (non-taxable), part capital gain, if any and part ordinary income. Once principal is recovered and/or capital gains are paid, remaining annuity payments then become fully taxable as ordinary income.3 This deduction may be spread over more than one year. Any amount exceeding 30% (50% if cash) of donor’s AGI per year must be carried forward (for a maximum of 5 years). Assumes a 4.2% Federal Mid-Term rate (subject to change monthly) and annual payments.


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Gift Amount $100,000

Annuity Payout Rate 1 7.1%

Tax-Free Payments 2 $4,796

Effective Payout Rate 2 8.25%

Total Annual Payments 1 $7,100

Tax Deduction 3 $42,445

Income Tax Savings 2,3 $11,460 1 Based on a single annuitant charitable gift annuity and ACGA rates effective 7/1/2003. Subject to change.2 Assumes a 27% tax bracket. Annuity exclusion ratio. Annuity payments are part return of principal (non-taxable), part capital gain, if any and part ordinary income. Once principal is recovered and/or capital gains are paid, remaining annuity payments then become fully taxable as ordinary income.3 This deduction may be spread over more than one year. Any amount exceeding 30% (50% if cash) of donor’s AGI per year must be carried forward (for a maximum of 5 years). Assumes a 4.2% Federal Mid-Term rate (subject to change monthly) and annual payments.


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Contributing Appreciated Assets

Joe, age 75, purchased $75,000 worth of publicly traded stock in 1989. Over time the stock value has increased to $100,000 but generates less than 3% annually in dividends.

Joe is frustrated with this but feels trapped by the $12,0004 in capital gain taxes he would owe if he liquidated the stock.

However, Joe can contribute his stock into a gift annuity with your charity . . . .


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Contributing Appreciated Assets

. . . In doing so, Joe will reduce his capital gain tax liability to $6,9124 spreading that amount over the next 12 years4 ($576 per year), while generating a tax deduction of over $42,0003 as well as an annual lifetime payout of $7,1001, 2

1 Based on a single annuitant charitable gift annuity and ACGA rates effective 7/1/2003. Subject to change.2 Assumes a 27% tax bracket. Annuity exclusion ratio. Annuity payments are part return of principal (non-taxable), part capital gain, if any and part ordinary income. Once principal is recovered and/or capital gains are paid, remaining annuity payments then become fully taxable as ordinary income.3 This deduction may be spread over more than one year. Any amount exceeding 30% (50% if cash) of donor’s AGI per year must be carried forward (for a maximum of 5 years). Assumes a 4.2% Federal Mid-Term rate (subject to change monthly) and annual payments.4 Assumes 15% long term capital gain rate. Capital gain may be spread over the time period the annuity is expected to be received based on the life expectancy of annuitant age 75 (12 years). If donor is not the annuitant, the capital gain tax cannot be spread out over the donor’s life expectancy.


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Contributing Appreciated Assets (Summary)

Gift Amount $100,000

Cost Basis $20,000

Lifetime Payout Rate1 7.1%

Total Annual Payments2 $7,100

Tax-Free $959

Taxable as Ordinary Income $2,304

Taxable as LT Capital Gain4 $3,837

Tax Deduction3 $42,445

Capital Gain Tax Savings2, 4 $5,0881 Based on a single annuitant charitable gift annuity and ACGA rates effective 7/1/2003. Subject to change.2 Assumes a 27% tax bracket. Annuity exclusion ratio. Annuity payments are part return of principal (non-taxable), part capital gain, if any and part ordinary income. Once principal is recovered and/or capital gains are paid, remaining annuity payments then become fully taxable as ordinary income.3 This deduction may be spread over more than one year. Any amount exceeding 30% (50% if cash) of donor’s AGI per year must be carried forward (for a maximum of 5 years). Assumes a 4.2% Federal Mid-Term rate (subject to change monthly) and annual payments.4 Assumes 15% long term capital gain rate. Capital gain may be spread over the time period the annuity is expected to be received based on the life expectancy of annuitant age 75 (12 years). If donor is not the annuitant, the capital gain tax cannot be spread out over the donor’s life expectancy.


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Supplemental IncomeExamplesDonor: Joan, Age 65 Joe, Age 60

Gift Amount $100,000 $100,000

Annuity Rate1 6.0% 5.7%

Tax-Free Payments3 $3,479 $3,088

Total Annual Payments $6,000 $5,700

Effective Payout Rate3 6.61% 6.14%

Tax Deduction2 $32,160 $26,804

Income Tax Savings2,3 $8,683 $7,237

Est. Reinsurance Outlay4 $90,000 $89,000

Net Cash to Charity $10,000 $11,0001 Based on a single annuitant charitable gift annuity and ACGA rates effective 7/1/2003. Subject to change.2 This deduction may be spread over more than one year. Any amount exceeding 30% (50% if cash) of donor’s AGI per year must be carried forward (for a maximum of 5 years). Assumes a 4.2% Federal Mid-Term rate (subject to change monthly) and annual payments. 3 Assumes a 27% tax bracket. Annuity exclusion ratio. Annuity payments are part return of principal (non-taxable), part capital gain, if any and part ordinary income. Once principal is recovered and/or capital gains are paid, remaining annuity payments then become fully taxable as ordinary income.4 The amount varies by age, sex and current interest rates. Subject to change.


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Supplemental IncomeExamplesDonor: Betty, Age 75 John, Age 70

Gift Amount $100,000 $100,000








Net Cash to Charity $25,000 $30,0001 Based on a single annuitant charitable gift annuity and ACGA rates effective 7/1/2003. Subject to change.2 This deduction may be spread over more than one year. Any amount exceeding 30% (50% if cash) of donor’s AGI per year must be carried forward (for a maximum of 5 years). Assumes a 4.2% Federal Mid-Term rate (subject to change monthly) and annual payments. 3 Assumes a 27% tax bracket. Annuity exclusion ratio. Annuity payments are part return of principal (non-taxable), part capital gain, if any and part ordinary income. Once principal is recovered and/or capital gains are paid, remaining annuity payments then become fully taxable as ordinary income.4 The amount varies by age, sex and current interest rates. Subject to change.


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Supplemental IncomeJoint Life Examples

Donor: Sue/Dan, Age 75 Jan/Tim-Age 70

Gift Amount $100,000 $100,000








Net Cash to Charity $6,000 $10,0001 Based on a joint annuitant charitable gift annuity and ACGA rates effective 7/1/2003. Subject to change.2 This deduction may be spread over more than one year. Any amount exceeding 30% (50% if cash) of donor’s AGI per year must be carried forward (for a maximum of 5 years). Assumes a 4.2% Federal Mid-Term rate (subject to change monthly) and annual payments. 3 Assumes a 27% tax bracket. Annuity exclusion ratio. Annuity payments are part return of principal (non-taxable), part capital gain, if any and part ordinary income. Once principal is recovered and/or capital gains are paid, remaining annuity payments then become fully taxable as ordinary income.4 The amount varies by age, sex and current interest rates. Subject to change.


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A CD AlternativeDonor, Age 75, $100,000 Cash Contribution

Certificate of DepositCertificate of Deposit Gift AnnuityGift AnnuityNo Income Tax Deduction Substantial income tax

deduction of $42,4452

All interest income is 100% taxable as ordinary Income

A large portion of the annual payment is tax-free: 67.55% ($4,796)1,3

The interest is relatively low The payout is relatively high: 7.1% ($7,100)1

Sale of a capital asset to purchase the CD may generate capital gain taxation

Sale by the charity of a donated capital asset can minimize capital gain taxation obligation of the donor4

Footnotes on the next slide


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A CD AlternativeDonor, Age 75, $100,000 Cash Contribution

Certificate of DepositCertificate of Deposit Gift AnnuityGift AnnuityNo charitable intent is satisfied. Charitable desires can be

satisfied.

FDIC Insured. Not FDIC Insured.

Principal may be available for use.

Access to the value of the gift is no longer possible.

At death, heirs may receive the principal

At death, heirs do not receive the principal.

1 Based on a single annuitant charitable gift annuity and ACGA rates effective 7/1/2003. Subject to change.2 This deduction may be spread over more than one year. Any amount exceeding 30% (50% if cash) of donor’s AGI per year must be carried forward (for a maximum of 5 years). Assumes a 4.2% Federal Mid-Term rate (subject to change monthly) and annual payments.3 Assumes a 27% tax bracket. Annuity exclusion ratio. Annuity payments are part return of principal (non-taxable), part capital gain, if any and part ordinary income. Once principal is recovered and/or capital gains are paid, remaining annuity payments then become fully taxable as ordinary income.4 Assumes 15% long term capital gain rate. Capital gain may be spread over the time period the annuity is expected to be received based on the life expectancy of annuitant age 75 (12 years). If donor is not the annuitant, the capital gain tax cannot be spread out over the donor’s life expectancy.


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Please select only one of the following two slides (32 or 33)

applicable to the type of organization being presented to.

Slide 32 is more applicable to community foundations agreeable to

assisting other charitable organizations.


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An ExampleMale Age 75, $100,000 Cash Donation

Charitable OrganizationThe Charity accepts the donation and makes a single premium immediate annuity payment of $65,0004 to LBL.The Charity retains $35,000 which can be used for charitable purposes immediately! The Charity receives annuity payments from LBL and then makes the stipulated annual payments to the annuitant.

The Donor/AnnuitantMakes a cash contribution to the Charity.Receives an annual payout of $7,100 (of which 67.55%1,3 is tax-free) for life.Receives a substantial income tax deduction of $42,4452. (Can be used to offset other income over a five year period of time.)Can purchase life insurance to “replace” the asset at death.

Cash $100,000

Donation

Payments

Total Annual Payment of $7,100 (7.1%)1

Equals effective payout rate of 8.25%1,3

Lincoln Benefit LifeReceives a single premium immediate annuity payment of $65,0004 (reinsurance cost). Stipulated payments are then made to the Charity for the annuitant’s lifetime

Beneficial Charities

Remainder


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Charitable OrganizationThe Charity accepts the donation and makes a single premium immediate annuity payment of $65,0004 to LBL.The Charity retains $35,000 which can be used for charitable purposes immediately! The Charity receives annuity payments from LBL and then makes the stipulated annual payments to the annuitant.

The Donor/AnnuitantMakes a cash contribution to the Charity.Receives an annual payout of $7,100 (of which 67.55%1,3 is tax-free) for life.Receives a substantial income tax deduction of $42,4452. (Can be used to offset other income over a five year period of time.)Can purchase life insurance to “replace” the asset at death.

Cash $100,000

Donation

Payments

Total Annual Payment of $7,100 (7.1%)1

Equals effective payout rate of 8.25%1,3

Lincoln Benefit LifeReceives a single premium immediate annuity payment of $65,0004 (reinsurance cost). Stipulated payments are then made to the Charity for the annuitant’s lifetime


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Footnotes1 Based on a single annuitant charitable gift annuity and ACGA rates effective 7/1/2003.

Subject to change.2 This deduction may be spread over more than one year. Any amount exceeding 30%

(50% if cash) of donor’s AGI per year must be carried forward (for a maximum of 5 years). Assumes a 4.2% Federal Mid-Term rate (subject to change monthly) and annual payments.

3 Assumes a 27% tax bracket. Annuity exclusion ratio. Annuity payments are part return of principal (non-taxable), part capital gain, if any and part ordinary income. Once principal is recovered and/or capital gains are paid, remaining annuity payments then become fully taxable as ordinary income.

4 Assumes 15% long term capital gain rate. Capital gain may be spread over the time period the annuity is expected to be received based on the life expectancy of annuitant age 75 (12 years). If donor is not the annuitant, the capital gain tax cannot be spread out over the donor’s life expectancy.


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CharityLincSM

Safe . . . Simple . . . FlexibleSafe . . . Simple . . . FlexiblePartially Tax-Free Payments

Capital Gain Tax Advantaged

Generates An Income Tax Deduction

No Legal Fees

No Market Risk

Fixed Payments for Life


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CharityLincSM

In a Single TransactionIn a Single TransactionTransform low-yielding assets

Reduce income taxation

Make a charitable gift

Offset taxation on other income


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CharityLincSM

Why Charitable Organizations Why Charitable Organizations ReinsureReinsure

“Harnessing the Planned Giving Power of Financial Services Professionals”

Generates planned giving through financial services professionalsNew funds are made available immediatelyNo cash reserves are requiredMinimal administration costs


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CharityLincSM

Why Charitable Organizations Reinsure

“Harnessing the Planned Giving Power

of Financial Services Professionals”

Untapped donor opportunities

Establish new “advisor” relationship

No trust documents needed

The financial strength of Lincoln Benefit Life


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CharityLincSM

Tier I Outright planned giving while living

Tier IIPlanned giving upon death, CRTs, bequests by will or trust or life insurance, etc.

Tier IIIA combination of giving both currently and upon death; donor advised funds, private foundations, etc.

Tier IV

“A Lifetime of Receiving Through Givingsm” on a tax advantaged basis while providing charitable organizations with the immediate use of the “remainder”.

Providing a New “Tier” of Planned GivingProviding a New “Tier” of Planned Giving


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“A dynamic planned giving resource providing linkage between charitable

organizations, their contributors, advisors and financial services professionals”

The CharitableCapitalSM Design CenterA DIVISION OF THE FINANCIAL ENGINERING ALLIANCE, LLC


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Who is The CharitableCapitalSM Design Center?

CharityLinc is LBL’s marketing name for The CharitableCapitalSM Gift Annuity Program developed and administered on behalf of LBL by The CharitableCapitalSM Design Center, a division of the Financial Engineering Alliance, LLC


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Services ProvidedServices ProvidedTraining and support of Financial Services Professionals

Illustrations and detailed proposals

Technical design support

Website for processing, illustrations, etc.


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The CharityLincSM Program

Our Network of

Community Foundation

“Facilitators”

Your Organization’s Existing Donor

Base

Annuitant Payouts

Donations

Your Organization asBeneficial Charity

Remainder

Lincoln Benefit

Life

Lump Sum Premium Payments

Stipulated Payouts

The CharitableCapitalSM

Design Center

Financial Services Professionals


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The CharityLincSM Program

Your Organization’s Existing Donor Base

Annuity Payments Your Organization Immediate Use of Remainder

Lincoln Benefit Life

Single Premium Annuity Payments

CGA ANNUITANT PAYOUTS


Design Center

Planned Giving Through Financial Services Professionals

DONA TIONS

Develop a

ReinsuredCGA

Program


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The CharityLincSM ProgramDonor Selected Beneficial Charities

Immediate use of the Remainder byCharitable Organizations within Your Community

Annuity Payments

Your Community FoundationA “Facilitator”

Lincoln Benefit Life

Single Premium Annuity Payments

CGA ANNUITANT PAYOUTS


Design Center

Planned Giving Through Financial Services

Professionals

DONATIONS

Develop A Reinsured

CGA Program for use by

Charities in yourCommunity

REMAINDER

Donor/AnnuitantsOf Charities within

your Community


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Thank You!

CharityLincSM

A Gift Annuity ProgramFor Charitable Organizations

for educational purposes only copyright the financial engineering alliance, llc 2002. all rights...

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