Today I'd like to tell you about Charitable Gift Annuities, a type of planned gift that is a life income gift.
When establishing a CGA, you transfer assets now, receiving a charitable deduction for a portion of the transfer, and you or a beneficiary receive a fixed income for the rest of your life or a predetermined period of time.
Upon the passing of the last surviving beneficiary, the Foundation will use any remaining annuity assets to support the ministry you designated when you established the CGA. Both you and ministries can benefit from a CGA.
I invite you to contact us to learn more about charitable gift annuities. You can reach us at913.577.2983 or info@nazarenefoundation.org. To read more about our services, visitwww.NazareneFoundation.org.
Blessings,
Kenneth R. Roney, J.D.
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PERSONAL PLANNER
'Give It Twice' Trust
A very popular option for a parent with children is called the "Give It Twice" trust. This is a trust funded when the surviving parent passes away. Part of the estate is transferred outright to children. The balance is placed in a special "Give It Twice" trust.
 The trust pays income to children for a term of years—usually 20 years. The income can be divided equally among the children for that period of time. Following the selected term of years, the trust principal is then transferred to charity.
In effect, the property has been used twice—once to benefit children with income and the second time to help charity at the end of the trust.
Cindy is a surviving spouse. Her spouse, Michael passed away four years ago. She is doing fine and combined both IRAs into one. Cindy's estate is now approximately $800,000. Her home, CDs and other property are valued at $400,000, and the combination of IRAs is also about $400,000.
She was reading online about the "Give It Twice" trust. Because Cindy is debt free and has Social Security plus pension income, she thinks that her estate, when she passes away, is likely to be fairly close to its current value. Cindy sat down with her attorney David, to discuss the possibility of creating a trust.
Cindy: "David, I was reading an article online about this special "Give It Twice" trust. It sounds like you can give an asset once to children through the income stream and then transfer the trust property to charity."
Attorney: "Yes, Cindy, that can be done."
Cindy: "Before Michael passed away, we talked about this. We agreed to treat each of our four children equally and also provide a benefit to our favorite charity."
Attorney: "With your estate of $800,000, you have the ability to do something pretty significant for both your family and favorite charity."
Cindy: "Yes, but there is one big problem. Our three older children—Bill, Sue and Pete—do fine. They are quite financially responsible. But our youngest son Ted is very creative. He spends money like water. If we gave him one-fourth of the estate or $200,000, I am afraid he would spend that very quickly. We need to figure out a way to protect at least part of his inheritance."
Attorney: "That 'Give It Twice' plan could be very helpful. You can benefit all four children equally with an initial amount. For example, you could transfer the $400,000 to them when you pass away. That would be $100,000 per child. The other $400,000 could go to the trust. They would each receive one-fourth of that income for 20 years. That would give Ted a chance to learn to save and invest. In addition, if you transfer the IRA into that trust, you can save all that income tax because the special trust is tax-exempt."
Cindy: "This sounds like a great plan. When I pass away, I could transfer my IRA into the "Give it Twice" trust and benefit my four children and my favorite charity. But how do I do that?"
Attorney: "I can write a trust that you sign. It's called an unfunded trust because there are no assets at present. Then we will contact your IRA custodian and select this charitable remainder trust as the designated beneficiary for your IRA. When you pass away, the IRA balance will be transferred to the trustee of your 'Give It Twice' trust."
Cindy: "This is very exciting. It is going to be great for my family and we will also be able to help our favorite charity after the term of years. I especially like the way that this will help Ted to learn to save and invest. Let's move forward as quickly as possible."
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SAVVY LIVING
What Medicare Doesn’t Cover
 I’m about to sign up for Medicare Part A and B and would like to find out what they don’t cover so I can avoid any unexpected costs down the road.
Medicare covers a variety of health care services, but it certainly does not cover everything. If you need or want certain services that are not covered, you’ll have to pay for them yourself unless you have other insurance or you’re in a Medicare Advantage health plan, which may cover some of these services. Here’s a rundown of what original Medicare generally does not cover.
Alternative Medicine: This includes acupuncture or chiropractic services (except to fix subluxation of the spine) and other types of alternative or complementary care.
Cosmetic Surgery: Elective cosmetic procedures are not covered; however, certain surgeries may be if necessary to fix a malformation. For example, breast prostheses are covered if you had a mastectomy due to breast cancer.
Long-Term Care: This includes nursing home care, the costs of assisted living facilities and adult day care. Medicare does, however, help pay up to 100 days of skilled nursing or rehabilitation care immediately following a three-day inpatient hospital stay.
Personal Care: The cost of hiring help for bathing, toileting and dressing is not covered unless you are homebound and are also receiving skilled nursing care. Housekeeping services, such as shopping, meal preparation and cleaning, are not covered either unless you are receiving hospice care.
Routine Dental and Vision Care: Medicare will not cover routine dental checkups, cleanings, fillings or dentures. Nor do they cover routine vision care like eye exams, eye refractions, contact lenses or eyeglasses – except when following cataract surgery.
Hearing: Routine hearing exams and hearing aids are not covered either, although some hearing implants to treat severe hearing loss may be covered.
Foot Care: Medicare does not cover most routine foot care, like the cutting or removing of corns and calluses, nor does it pay for most orthopedic shoes or other foot supports (orthotics). Medicare will, however, cover foot injuries or diseases like hammertoes, bunion deformities and heel spurs, along with foot exams and treatments if you have diabetes-related nerve damage.
Non-Emergency Services: Medicare does not pay for copies of X-rays or most non-emergency transportation including ambulette services.
Overseas Coverage: In most cases, health care you receive outside of the United States is not covered.
The best way to find out if Medicare covers what you need is to talk to your doctor or other health care provider. Visit medicare.gov/coverage and type in your test, item or service, to get a breakdown of what is and isn’t covered.
Also keep in mind that even if Medicare covers a service or item, they don’t usually pay 100% of the cost. Unless you have supplemental insurance, you’ll have to pay monthly premiums as well as annual deductibles and copayments. Most preventive services, however, are covered by original Medicare with no copays or deductibles.
For more information on what original Medicare does and doesn’t cover, see the “Medicare and You” 2015 booklet that you should receive in the mail a few months before you turn 65 or you can see it online atmedicare.gov/pubs/pdf/10050.pdf.
You can also get help over the phone by calling Medicare at 800-633-4227 or contact your State Health Insurance Assistance Program (SHIP) that provides free one-on-one Medicare counseling in person or over the phone. To find a local SHIP counselor visit shiptalk.org or call the eldercare locator at 800-677-1116. If you enroll in a Medicare Advantage plan, you’ll need to contact your plan administrator for details.
Savvy Living is written by Jim Miller, a regular contributor to the NBC Today Show and author of "The Savvy Living” book. Any links in this article are offered as a service and there is no endorsement of any product. These 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 Living, P.O. Box 5443, Norman, OK 73070.
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YOUR PLAN
The Egg Endowment
 Let me tell you about a big egg business. Coming out of the military service at the close of the Korean war, Randall decided to put his agriculture degree to work, so he went into the chicken business. Randall and his wife, Janet, put it all on the line. For several years they struggled to make ends meet and finally, during one real desperate business cycle, they decided to turn their chicken business over to God. Janet said they prayed, "Lord, this is your business, do what you will with it."
God heard their prayers. Over the years, He prospered their labor. They eventually built a very large chicken business with over 16 million chickens housed in various states. They continued to honor God's faithfulness by becoming generous givers and teaching the principles of generous giving to their four children. In 2007, Randall, Janet and some of their family established a substantial endowment fund with the Church of the Nazarene Foundation. This endowment fund will generate income to the local Church of the Nazarene for use in family and children's ministries. The pastor says, "This gift will enable our church to reach into the homes and lives of countless people without negatively impacting our daily operational needs."
The eggs they gathered over a lifetime will produce far more than a wonderful breakfast.
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WASHINGTON NEWS
White House Tax Proposals
 In the State of the Union Address on January 20, President Obama outlined several White House proposed tax reforms for 2015. The general plan includes several tax increases on upper-income persons and financial corporations. These will be combined with middle-income tax reductions.
Proposed Tax Increases
1. Capital Gains Tax – The current top 20% rate for upper-income persons would be increased to 28%. Because the 3.8% Medicare tax also applies to capital gains, the current top 23.8% rate would be increased to 31.8%. Many states also tax capital gains. In some states, the proposed combined capital gains rate could be 35% to 38%.
2. Estate Appreciated Property – Under existing law, appreciated property owned by an estate generally is not subject to tax at death. Because most property receives an increase in basis to fair market value, the children or other heirs may receive the property and sell with little or no capital gains tax. The White House proposal is to tax the estate appreciated property. The difference between the cost of the property and the fair market value at death, if it exceeds $100,000 per person, would be taxed at 28%. There would be a separate exclusion for a personal residence of $250,000 per person. Clothes, furniture and most other personal items would be excluded from the tax.
3. Large Bank Tax – Banks with assets over $50 billion would pay a tax each year of 0.07% on their liabilities. This tax would discourage banks from large amounts of borrowing that could create financial risk if there is an economic downturn.
Proposed Tax Reductions
1. Second Earner Credit – For couples with incomes below $120,000, there would be a $500 spousal credit. The credit would be 5% of the first $10,000 in earnings for the lower-paid spouse.
2. Child Care Credits – The credit for 50% of qualified child care expenses up to $6,000 would potentially save $3,000 in tax. With the increase in the child care credit, the child care flexible spending accounts would no longer be permitted.
3. College Credit – The American Opportunity Tax Credit (AOTC) would be increased to $2,500 per year for up to five years. $1,500 of the AOTC would be refundable. A non-traditional student could qualify for one half of these amounts under a new AOTC provision.
Editor’s Note: The White House proposals are quite different from the strategies recommended by the House and Senate taxwriters. The Republican response to the State of the Union Address was given by Sen. Joni Ernst (R-IA). She suggested that the preferred plan will be to lower tax rates in order to increase employment. She also urged the President to cooperate with the House and Senate to pass tax reform in 2015.
Congress Responds to White House Tax Proposals
Following the State of the Union Address, the leaders of the Senate Finance Committee and the House Ways and Means Committee commented on the White House tax proposals.
Sen. Orrin Hatch (R-UT) is chairman of the Senate Finance Committee. He commented, “Tonight, the President missed a real opportunity to put forward a bold economic vision that meets the demands of the American people and puts an aggressive jobs agenda center stage. Rather than outlining pro-growth policies that would provide more opportunity for hard-working families and job creators that have been left behind in the Obama economy, the President slipped back into the role of Campaigner-In-Chief.”
The Ranking Member of the Senate Finance Committee is Sen. Ron Wyden (D-OR). He emphasized the importance of increasing middle-class wages in his statement. Wyden stated, “On taxes and trade, education and energy, the proposals the President outlined tonight should be seen as good and serious starting points. My hope is these can be a catalyst for bipartisan, common-sense discussion that move us ahead in solving the country’s challenging problems.”
House Ways and Means Chairman Paul Ryan (R-WI) indicated that it will be necessary for the President and Congress to find “common ground” in order to move forward. Ryan commented, “At the same time, I found the President’s tax proposals to be misguided. A $320 billion tax hike is the last thing we need. What we really need is to make our tax code simpler, flatter, and fairer, so we can create more jobs.”
The Ranking Member of the House Ways and Means Committee is Sander Levin (D-MI). He responded, “The President’s tax proposals focus right where we need to – creating opportunity for middle-class families and those struggling to join the middle-class. By seeking to address economic inefficiencies, including in our capital gains structure, and targeting these revenues toward investment in education and support for working parents, the President’s proposals would address the key issue of wage stagnation for most families and strengthen our nation’s road to recovery.”
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 FINANCES
Stocks - Netflix Posts Huge GainsNetflix, Inc. (NFLX) reported its fourth quarter results on Tuesday, January 20. The company’s share price surged 17% on membership gains and increased revenues.
Netflix reported quarterly revenue of $1.305 billion, which was an increase from $962 million during the same period last year. Net member additions of 4.33 million contributed to the quarterly revenue increase.
In a letter to shareholders, Netflix CEO Reed Hastings said, “Internet TV is growing globally and Netflix is leading the charge.”
Net income during the quarter was $83 million or $1.35 per share. During the comparable period last year, net income was $48 million or $0.79 per share.
Netflix has been a Wall Street darling for several years now. Investors are excited about the company’s success with Internet TV and believe consumers will continue to flock to its appeal. Interestingly, investors’ confidence in Netflix was unshaken even after Amazon announced plans this week to make original movies. An area of concern for Netflix has been the costs to produce original content of its own. In his letter to shareholders, Netflix CEO Reed Hastings revealed that last year the company’s original content cost less money than its licensed content. Such a trend bodes well for Netlifx’s future profitability.
Netflix, Inc. (NFLX) shares ended the week at $437.46.
Starbucks Reports Quarterly Results
Starbucks Corporation (SBUX) announced its first quarter results on Thursday, January 22. Revenue, comparable-store sales and earnings per share all soared during the Christmas holiday quarter.
Revenue during the quarter increased 13% to $4.8 billion. Starbucks said the revenue increase was driven by a 5% increase in comparable-store sales and the addition of 1,612 new stores over the past twelve months.
“Starbucks record Q1 fiscal 2015 financial and operating performance was exceptional by every metric and standard,” said Starbucks Chairman, President and CEO Howard Schultz. “Our reimagined in-store holiday experience that included a vastly expanded assortment of Starbucks Cards, new holiday food, beverage and merchandise offerings and the opportunity to win ‘Starbucks for Life’ resonated powerfully with our customers and drove both increased traffic and tremendous excitement in our stores and around the Starbucks brand.”
Earnings per share during the quarter increased 83% to $1.30. This was in line with analysts’ expectations.
Starbucks continues to be a juggernaut in the beverage and food industry as evidenced in its first quarter gains. The company revealed that one in seven Americans received a Starbucks gift card during the quarter. This was higher than the one in eight figure from the prior year. On its conference call, Starbucks announced plans to introduce two distinct delivery methods for its products, which could boost company revenue. Starbucks’ share price surged 4% in after-hours trading to $86.01 following the earnings release.
Starbucks Corporation (SBUX) shares ended the week at $88.22.
Alaska Airlines’ Earnings Soar
Alaska Air Group, Inc. (ALK) reported its fourth quarter results on Thursday, January 22. The results surpassed expectations and drove the company’s stock price higher.
Revenue during the quarter was $1.306 billion. This was an increase of 8% from $1.21 billion during the same quarter last year.
“Record earnings and the number one airline ranking in The Wall Street Journal for the second year in a row are proof that our 13,000 employees continue to do a great job serving our customers and running a reliable operation,” said Alaska Air Group CEO Brad Tilden. “The substantial increase in the dividend underscores our commitment to shareholders and our confidence in the future.”
The company reported net income during the quarter of $125 million or $0.94 per share. This beat estimates calling for earnings per share of $0.91.
Alaska Airlines’ reputation in the industry has grown over the past several years. The airline has received numerous accolades for customer satisfaction and has been ranked the best airline two years in a row byThe Wall Street Journal. Alaska Airlines continues to expand, entering 16 new markets in 2014. Investors have been happy to tag along for the ride, pushing the share price to $68. The airline’s stock price had been as low as $36.31 during the past twelve months.
Alaska Air Group, Inc. (ALK) shares ended the week at $68.65.
The Dow started the week of 1/19 at 17,517 and closed at 17,673 on 1/23. The S&P 500 started the week at 2,021 and closed at 2,052. The NASDAQ started the week at 4,656 and closed at 4,758.Bonds - Treasuries Rise on Eurozone BuyingTreasury prices rose this week, pushing yields down, as the European Central Bank (ECB) announced plans for its own form of quantitative easing. Additionally, declining Treasury yields are causing investors to contemplate putting their money elsewhere.
On Thursday, January 22, the ECB announced plans to purchase €1.1 billion ($1.24 billion) in government bonds. This will equate to €60 million a month. The ECB hopes its form of quantitative easing will boost European economies and stave off recession.
The ECB’s announcement coincided with the fall of bond yields around the world. Germany and Italy’s 10-year note yields reached new lows on Friday, January 23. As of early Friday morning, the 10-year Treasury yield had fallen 5 basis points to 1.82%.
“The yield declines are all the more gasp-inducing,” said Jim Vogel, Head of Agency-Debt Research at FTN Financial. “Treasuries still lag the global rally. You’ll see people re-evaluating their portfolio objectives the longer yields continue to shrink.”
Investors continue to buy Treasury bonds even as yields fall, though that trend may slow if the Fed plans to raise interest rates in the near future. The Fed has stated no plans to raise interest rates before the end of April, but there is an even chance it does so by the time of its October meeting.
The 10-year Treasury note yield finished the week of 1/19 at 1.82% while the 30-year Treasury note yield finished the week at 2.39%.CDs and Mortgages - Interest Rates Decline AgainFreddie Mac released the results of its latest Primary Mortgage Market Survey (PMMS) on Thursday, January 22. The results show mortgage rates falling again this week amid declining oil prices and bond yields.
The 30-year fixed rate mortgage averaged 3.63% this week. This was down from last week when it averaged 3.66%.
This week, the 15-year fixed rate mortgage averaged 2.93%. This number was a decrease from last week when it averaged 2.98%.
“Mortgage rates continued to fall, albeit at a slower pace, with the 30-year fixed rate mortgage averaging 3.63% this week,” said Frank Nothaft, Vice President and Chief Economist at Freddie Mac. “Housing starts picked up in December coming in at a seasonally adjusted 1.089 million unit pace and beating market expectations. Meanwhile, the drop in energy prices pushed the Producer Price Index down 0.3% for December and the Consumer Price Index fell 0.4%.”
The money market fund finished the week of 1/19 at 0.4%. The 1-year CD finished at 0.7%. |
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Are you a Nazarene Legacy Partner (NLP)? The answer is “YES” if you have designated any gift to a Nazarene ministry in your will, bequest, or estate plan. This could be a tithe on your estate, an insurance beneficiary designation to your local church, college, global mission, or any other Nazarene ministry you support.
Send us your name and contact information by reply email and indicate “I am a Nazarene Legacy Partner” and we will add your name to our NLP honor roll. To model generosity inspires others to do the same. Thank you for your interest in gift planning. To access any of this updated financial and gift planning information, please select our website. |
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