Model Generosity ~ Church of the Nazarene Foundation for Saturday, 15 February 2014

Model Generosity ~ Church of the Nazarene Foundation for Saturday, 15 February 2014
"For God so loved the world that he gave his one and only Son, that whoever believes in him shall not perish but have eternal life".~John 3:16 (NIV)
The Foundation Staff and I wish you a Happy Valentine's Day! We hope that you are able to share Christ's love with family and friends this weekend.
For more information on how to spread the His love by supporting your favorite ministry, please reply to this email or contact us by phone at (913) 577-2983.
Blessings,
Kenneth R. Roney, J.D.
President
PERSONAL PLANNER
Irrevocable Life Insurance Trust (ILIT)
Protection With a Less-Than-Perfect Family. Susan and Steve had been talking to their tax attorney, Elizabeth, about plans for their family. Susan is very concerned about their family.
Susan: "I wish that we had a perfect family, but we must admit we don't. We have three children. Our first child is out on his own, has a good job and is doing fine. But our second child has had substance abuse problems and recently was released from rehabilitation. He now seems fine but he has had relapses before. Our third child is a very sweet young woman who unfortunately has been married, divorced and is now remarried. But she is now going through some real rough spots in her new marriage. How can we protect our three children with so many risks?"
Steve: "We've been very fortunate and our business has grown quite large. We have an offer for the business and have been told that we could sell it tax free through a special charitable trust. That sounds like a great idea, but we need to set up an inheritance for the children and it must be done in a way that protects them. How can we do this? What's the best way to sell our business tax free and replace the inheritance for the children?"
Elizabeth: "We have a great plan that achieves all of those goals. You will be able to sell your business tax free and set up a special trust that holds an insurance policy for the benefit of your children. After both of you pass away, the trust will receive the insurance proceeds income and estate tax free. The full amount can be invested to provide new taxable income for the lives of your children."
When to Use a Life Insurance Trust
A very beneficial estate planning strategy to protect your "less-than-perfect" family is to create a trust that owns life insurance. To gain the maximum benefit from this trust, it is irrevocable after it is created. Your advisor will usually call this an irrevocable life insurance trust (ILIT).
Benefits of an ILIT
Management. If you have a substantial estate and plan to pass a significant inheritance to children, a trust enables you to select the child or the financial institution that will be best qualified to manage significant assets.
Income Rather Than Principal. Many parents are faced with Steve and Susan's problem. They have one or more children who will act in harmful ways with a substantial amount of principal. So the best solution is to provide income to everyone for a term of years or for life. A trust is an excellent method for this purpose. The trustee can also have discretion to distribute principal, or at an age you select the trust property can be given to your children.
Tax Savings. If your estate is more than the federal exemption, it may in future years be subject to taxes at a very high rate. For individuals who support charity, a great plan is to create a trust or make charitable gifts with the majority of the estate and replace the gifted property with an insurance trust. Steve and Susan can create a two-life charitable remainder trust and benefit from a tax-free sale and life income for themselves. After they pass away, their children will benefit from the insurance proceeds in the ILIT.
How Does the ILIT Work?
ILIT Goals. If you have a large estate, a very important goal is to make sure the ILIT is not subject to estate tax. In order to protect the ILIT from taxes, Steve and Susan cannot retain specific powers over the trust or the life insurance. Specifically, they cannot have the right to cash in the policy, to borrow against it, or even to designate the beneficiaries. The policy is purchased with the trust as the beneficiary and will not be changed after it is first acquired by the trust.
Gift of Premiums. Steve and Susan will need to make annual gifts to the ILIT to pay the insurance premiums. Because they can use their annual exclusion, they are able to fund a very substantial policy ($14,000 for each parent times three children equals as much as $84,000 per year in 2014—with indexing of the annual exclusion, it may be more in future years). When they transfer the premium amount to the trustee, their children each receive a special right known as a "Crummey" power, named after the first person to use this concept. Under their Crummey power, the children have 30 days to spend the money. With appropriate parental guidance, the children do not spend the money and it may then be used for payment of insurance premiums. Because the 2014 annual exclusion gift of $14,000 requires the child to be able to spend the money for a short period of time, the Crummey power is an essential part of the ILIT.
ILIT Insurance Policies. There are two ways for the insurance policy to be transferred to the ILIT. The first and preferred method is for the ILIT to actually purchase a new policy. However, if you or your spouse are not insurable, in some cases an existing policy is given to the ILIT. If you give an existing policy to the ILIT, in order for the ILIT to be estate tax free you must survive for at least three years.
Trustee
Child as Trustee. Many parents will select one of the children as trustee, preferably one with good financial skills. The child frequently serves for a reduced fee or no fee. The disadvantage for the child serving as trustee is that he or she may have conflicts with other siblings.
Financial Institution as Trustee. The second option is for a bank or trust company to serve as trustee. If the insurance trust is quite large, the objective nature of the bank or trust institution may make this a good option. In considering a bank or financial institution as trustee, Steve and Susan should understand the costs for the investment and administration services of the bank after the insurance proceeds have been received and the trust is funded.
ILIT Options
Income. After the demise of Steve and Susan, the trustee will invest the insurance proceeds and pay income to the beneficiaries. Some trusts last until the beneficiary has reached a specific age, or the trust may last for their lifetimes. With the concern about protecting a child with a substance abuse problem and the marital relationship problems of their daughter, Steve and Susan decided to continue the income stream for the lives of their children. The primary goal of many parents is to provide an additional level of economic security for the children. This income stream will provide payouts for the rest of their lifetimes.
Ability to Distribute Principal. The trustee may be given permission to distribute principal. This could be based upon such standards as health, education, maintenance and support, or may be discretionary with the trustee. Steve and Susan permitted their trustee to make distributions for medical care but not for enhanced lifestyle. Steve asked, "What is likely to be the result if two of our children receive principal?" Based on the belief that principal distributions will be used for unneeded and perhaps unhealthy purposes, their trust will pay income and, if required, medical expenses.
Income Taxes on New Trust Income. While the insurance proceeds are tax free to the trust as long as there has been no violation of the insurance guidelines, the new income that is earned and distributed to the children will be taxable. If the income were retained in the trust, the trust would pay the tax. However, because most income would be distributed to the children, they will pay the ordinary income or capital gains tax on their trust distributions.
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SAVVY LIVING
How to Tell if You Have Pre-diabetes
My 62-year-old sister was recently diagnosed with type 2 diabetes. She was surprised when the doctor said that it is likely she has had diabetes or pre-diabetes for years without her knowledge. What are the symptoms of pre-diabetes and the criteria for a diagnosis?
Underlying today's growing type 2 diabetes epidemic is a much larger pre-diabetes epidemic. Pre-diabetes occurs when a person's blood sugar levels are elevated, but are not high enough to be considered diabetes.
The National Institutes of Health estimates that as many as 79 million Americans today have pre-diabetes. Left untreated, it almost always turns into type 2 diabetes within 10 years. Also, the long-term damage pre-diabetes can cause to your heart and circulatory system begins well before a type 2 diabetes diagnosis.
The good news is that having pre-diabetes doesn't necessarily mean that you are destined to develop type 2 diabetes. Pre-diabetes can actually be reversed and diabetes prevented by making some simple lifestyle changes. These simple changes include losing weight, exercising, eating a healthy diet and cutting back on carbohydrates. If these lifestyle changes are not enough then oral medications may be an option.
Get Checked
Typically, pre-diabetes does not cause any outward symptoms. As a result, most people that have pre-diabetes don't realize it. The only way to know for sure is to get a blood test.
Everyone age 45 years or older should consider getting tested for pre-diabetes, especially those who are overweight with a body mass index (BMI) above 25. See cdc.gov/bmi to calculate your BMI.
In addition, if you are younger than 45 but are overweight, have high blood pressure, have a family history of diabetes or belong to an ethnic group at high risk for diabetes (Latino, Asian, African or Native American) then you too should get checked.
To help you determine your risk of diabetes, the American Diabetes Association has a quick online quiz you can take for free at diabetes.org/are-you-at-risk.
Diabetes Tests
There are several tests your doctor can give you to determine whether you have pre-diabetes. Two tests that require an eight-hour fast are the "fasting blood glucose test" and the "oral glucose tolerance test." A third test is the "hemoglobin A1C test," which does not require fasting beforehand.
If you're reluctant to visit your doctor to get tested then you may test yourself. To do that, you'll need to purchase an A1C home test kit that measures your average blood glucose over the past two to three months.
The ReliOn A1c Test sold at Walmart (or walmart.com) for $9 is a popular option. With this test kit, you provide a small blood sample (about a drop) and send it to the lab in a postage-paid return mailer for analysis. The results are usually sent back within a week.
A1C tests measure the percentage of glucose in the bloodstream. A reading of 5.7% to 6.4% is considered pre-diabetes. A reading of 6.5% or greater is diabetes.
If you find that you are pre-diabetic or diabetic, you need to see your doctor to develop a plan to get it under control.
For more information on pre-diabetes and diabetes visit the American Diabetes Association at diabetes.org. You can also visit the National Diabetes Education Program at ndep.nih.gov. They offer dozens of free publications you can order online or by calling 888-693-6337.
Savvy Living is written by Jim Miller, a regular contributor to the NBC Today Show and author of "The Savvy Senior" book. The articles are offered as a helpful and informative service to our friends and may not always reflect this organization's official position on some topics. Jim invites you to send your senior questions to: Savvy Senior, P.O. Box 5443, Norman, OK 73070.
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YOUR PLAN
Charitable Gift Annuity
God had been so good to Charles and Gladys Prescott, that when it came time to plan for retirement, they wanted to make sure they gave back a portion of God's blessings to Him. Little did they know that God would once again bless them through a Charitable Gift Annuity that provided a return far above what they could earn on a CD.
A Charitable Gift Annuity allowed them to take money that would otherwise bring very little interest in the bank and invest it in God's kingdom while providing a high level of income at the same time. Charles and Gladys receive a regular income at a guaranteed rate for the rest of their lives. A portion of what they receive is tax deductible, and when they established their Charitable Gift Annuity, they received an income tax deduction.
Beyond the security of receiving regular income for life, the Prescott's most appreciate being able to designate how the remaining funds will be used after they go home to Heaven.
Charles and Gladys were so pleased with their first charitable gift annuity, that they have established several more over the years and they have designated several different Nazarene ministries to receive the remaining funds after their death.
Through Charitable Gift Annuities, the Prescott's have planned well for their financial security and income needs. They have established a legacy of faithful stewardship that will continue to bless others, long after their death. They are wonderful examples of what God can do when His faithful servants team up with the Church of the Nazarene Foundation.
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WASHINGTON NEWS
IRS Commissioner Koskinen on YouTube
As the tax filing season for 2013 enters a very busy time period, the IRS reports that it is receiving very heavy call volume. Early filers who are desiring tax refunds quite often use the President's Day holiday period to complete their tax returns.
IRS Commissioner John Koskinen stated, "The entire week of the President's holiday marks a peak time in the number of calls to the IRS, and we encourage taxpayers to visit www.irs.gov as the best place to get quick help."
There are six specific common questions that taxpayers have for the IRS.
1. Where is my Refund – The "Where is my refund?" tool on www.irs.gov or the IRS2Go smartphone application provide up-to-date information.
2. No W-2 – Employers are required to send out IRS Form W-2 by January 31. If employees do not have the form by mid-February, they should contact their employer. In some cases, the IRS will send the employer a letter requesting a W-2.
3. Need Prior Tax Return – If there is a requirement to obtain a lost tax return, then a taxpayer may order that on the website with Form 4506-T. That also can be ordered on the IRS2Go smartphone app.
4. Tax Question – The search function on www.irs.gov may be helpful. Recorded answers are also available on TeleTax at 1-800-829-4477.
5. Unable to Pay – There is an Online Payment Agreement on www.irs.gov. For major tax obligations, there also is an Offer in Compromise Pre-Qualifier.
6. Need Additional Help – The 13,000 Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) centers are listed on www.irs.gov.
IRS Commissioner Koskinen has also prepared a three minute video that is available on the IRS website or on the IRS YouTube channel. In the video, Koskinen states, "We want to provide you with the assistance you need to get your taxes filed accurately and on time. And we will work hard to issue refunds quickly while increasing our efforts to stop tax fraud and identity thieves."
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FINANCES
Stocks - PepsiCo's Quarter Fails to Impress
PepsiCo, Inc. (PEP) announced its fourth quarter and full-year results on Thursday, February 13. The company had a solid quarter reporting revenue close to expectations with positive net income growth.
Pepsi reported fourth quarter revenue of $20.1 billion, a 1% increase over the same period last year, and full-year revenue of $66.4 billion. Pepsi's fourth quarter revenue missed market estimates that it would be $20.2 billion.
Net income for the quarter was $1.7 billion and full-year net income was $6.7 billion. These figures were increases of 5% and 9%, respectively, over the comparable periods last year.
Pepsi Chairman and CEO Indra Nooyi had this to say about the results, "We are pleased to report that PepsiCo achieved its financial goals for 2013, despite continued challenging and volatile macroeconomic conditions around the globe. We met or exceeded our organic revenue, cash flow, productivity, and core operating margin, constant currency EPS, and net ROIC targets and, at the same time, continued to invest in our brands, innovation and execution to strengthen the long-term health of our business."
During the earnings announcement, Pepsi announced its intention to return $8.7 billion to shareholders in 2014. This is an increase from previous years. In a show of confidence, Pepsi rejected a suggestion from activist investor Nelson Peltz that the company separate its beverage and snack divisions. The company also announced that it expects 7% earnings per share growth in 2014. Even though Pepsi showcased some positive news this quarter, the stock fell 3% after the earnings announcement.
PepsiCo, Inc. (PEP) shares ended the week of 2/10 at $78.09.
Fossil Investors Watch Its Success
Fossil Group, Inc. (FOSL) announced its fourth quarter results on Thursday, February 13. The company's results exceeded expectations and resulted in a rise in the company's stock price. Much of this success was attributed to the company's watch segment.
Revenue for the fourth quarter was $1.06 billion, a 12.1% increase over the same period last year. Fossil saw sales grow in all of its regions as its revenue beat an estimate of $1.02 billion.
Fossil's net income for the quarter was $148.5 million compared to $151.1 million reported during the same period last year. However, on a diluted earnings per share basis, earnings grew 7% to $2.68 from $2.51 per share.
"We're very pleased with our fourth quarter results, which exceeded our expectations and concluded a successful year where we made significant progress on many of our strategic initiatives," said Kosta Kartsotis, Fossil CEO. "In 2014, our priorities are focused on building on the positive momentum in our business, as we continue to invest in and grow our brands."
Fossil's 12.1% increase in revenue during the quarter was the result of strong double digit sales increases in North America and Europe. Furthermore, direct-to-consumer sales increased 8.7%. A strong driver of this growth was the company's watch segment that increased 14.3% to $833.8 million. Fossil's strong results this past quarter resulted in shares moving higher following the announcement.
Fossil (FOSL) shares ended the week of 2/10 at $120.82.
Goodyear Tire Sees Fortunes Rise
Goodyear Tire & Rubber Company (GT) reported its 2013 fourth quarter and full-year results on Thursday, February 13. With strong sales in North America during the fourth quarter, the company experienced a significant boost to net income.
Goodyear announced that fourth quarter sales were $4.8 billion, 5% lower than the same period last year. Fourth quarter sales also missed the estimate of $4.98 billion. Full-year sales were $19.5 billion, slightly lower than last year's $20.9 billion.
Net income for the fourth quarter was $228 million, or $0.84 per share, a fourth quarter record. For the full-year net income was $600 million, or $2.28 per share, up from 2012's $183 million, or $0.74 per share.
"Our outstanding fourth quarter and full-year earnings confirm that our strategy is working and demonstrate Goodyear's ability to deliver sustainable earnings growth and strong free cash flow," said Richard J. Kramer, Chairman and CEO. "Our North America business achieved record earnings in all four quarters of 2013."
Mr. Kramer went on to explain that the company's strong performance in 2013 provided Goodyear with the opportunity to fully fund its hourly U.S. pension fund so that it has an available balance of $1.15 billion. Mr. Kramer said he believes resolving the pension standoff will allow Goodyear to "devote 100% of our efforts to creating competitive advantage." Following the earnings announcement, Goodyear shares rose 11% to $26.75.
Goodyear Tire & Rubber Company (GT) shares ended the week of 2/10 at $26.76.
The Dow started the week of 2/10 at 15,794 and closed at 16,154 on 2/14. The S&P 500 started the week at 1,796 and closed at 1,839. The NASDAQ started the week at 4,125 and closed at 4,244.
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Bonds - Treasuries Decline on Negative News
Treasury prices rose and then fell Friday on a pair of differing reports regarding the health of the economy. Uncertainty has once again descended upon the Treasury market as investors try to predict whether the Fed will stay committed to its reduction in bond purchases.
Early Friday the Federal Reserve announced that industrial production fell 0.3% in January, a surprise to forecasters who predicted a gain of 0.2%. The largest contributing factor to the decline in industrial production was the cold weather blanketing much of the eastern United States. Specifically, manufacturing output fell 0.8% and mining output fell 0.9%. This early news caused Treasury prices to rise.
Just as Treasury prices began to rise, however, the Thomson Reuters/University of Michigan index of consumer sentiment caused prices to fall. The index remained unchanged during the month of February at 81.2, which was good news as forecasters expected a lower reading of 80.
Fortunately, there was positive news on Thursday, February 13 when Congress passed a 13-month extension in the U.S. government's debt ceiling. While the debate surrounding the debt-ceiling has been continuous for the past year, this latest Congressional move provides some much needed stability for the next year.
The past couple months have seen continually mixed to negative data concerning the U.S. economy, raising questions about whether the Federal Reserve will adhere to its planned reduction in bond purchases. Earlier this week, however, new Fed Chairman Janet Yellen announced that only a "notable change" in the economy would result in a change in fiscal policy.
Justin Lederer, an Interest-Rate Strategist at Cantor Fitzgerald in New York, believes the Federal Reserve will stick to its tapering course. "A lot of the data has been affected by the weather. A lot of people are not focusing on them so much quite yet. They will be looking toward March or April to get a better read," he said.
The 10-year Treasury note yield finished the week of 2/10 at 2.75% while the 30-year Treasury note yield finished the week at 3.7%.
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CDs and Mortgages - Interest Rates Remain Constant
Freddie Mac released the results of its weekly Primary Mortgage Market Survey on Thursday, February 13. With few economic reports this week to affect rates, the report showed average fixed mortgage rates remaining relatively unchanged from last week.
This week, the 15-year fixed rate mortgage averaged 3.33%, unchanged from last week. One year ago, the 15-year fixed rate mortgage averaged 2.77%.
The 30-year fixed rate mortgage averaged 4.28% this week, an increase from last week when it averaged 4.23%. Last year at this time, the 30-year fixed rate mortgage averaged 3.53%.
Frank Nothaft, Vice President and Chief Economist at Freddie Mac, commented on this week's rates. "Mortgage rates were little changed amid a week of light economic reports. Of the few releases, the economy added 113,000 jobs in January, which was below the market consensus forecast and followed a slight upward revision of 1,000 jobs in December. Meanwhile, the unemployment rate fell to 6.6%, which makes thirteen consecutive months without an increase."
The money market fund finished the week of 2/10 at 0.4%. The 1-year CD finished at 0.7%.
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Church of the Nazarene Foundation
17001 Prairie Star Parkway, Suite 200
Lenexa, KS 66220 United States
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