Wealth Planning and Mgt alternatives

Can someone post a nice littel summary of the various options(GRAT,GST,Charitable trust etc). CFA material is too long and a bit confusing and on top of all this, it really does not stick. I thought I would check here to see if someone has prepared some sort of nice little summary that everybody could use. thanks in advance

I am sorry, I would like to make coffee for you and serve cake and pastries, but just don’t have the time :wink: Are you kidding? That stuff is the one of the brain numbing, long, excessively wordy part of the curriculum and you want someone to summarize it for you here! P.S. my daily morning panic attack…

CFAAtlanta, great to see you again. Can I have cake and pastries too? No coffee though, I’ve had my fill for today. :wink:

I do like how the curriculum would have you believe you are better off donating all of your money to charity rather than pay taxes…Unreal

Mr.Good.Guy Wrote: ------------------------------------------------------- > I do like how the curriculum would have you > believe you are better off donating all of your > money to charity rather than pay taxes…Unreal I have never understood this concept - every year someone is screaming asking you to donate $1 to save $0.35 on taxes.

think of it this way, you have a $100 worth of stock with cost basis of $0, and you are in 35% tax bracket; the economical value to you is only $65. Now, you donate that $100 to charity and deduct that $100 against your other income and get tax benefit of $35. Your whole economic loss, after donating to charity is -$65 + $35 = $30. Granted you are no better off strictly in economic terms after donating. However, the higher your tax bracket the more sense it makes (i.e. if your tax bracket is 50%, then using this logic, your economic loss is $0). And if the tax rate is more than 50% than it will start making economic sense. Say, you have $1,000,000 income and tax bracket of 60%. If you just pay your tax bill, you end up with $400,000. Now if you donate $500,000 to charity, your taxable income drops to $500,000 and than its further reduced to $0, through charitable deduction and you end up with $500,000. Now, such high tax bracket assumption is unrealistic for most US investors and investors around the world. However, the higher it is the more it makes sense to utilize charitable donations. Now, there are non-monetary benefits to charity. You can support a cause that is near and dear to you, get good publicity if you are a corporation or as an individual. In my first example (with $100), you are able to donate $100 that only cost you $30. But in the second example (with $1,000,000), not only you are doing good for your cause, getting publicity, but also getting economic benefit, donating $500,000 and gaining $100,000. At the end it all comes to this. Would you give your money to the goverment, which more than likely waistfully spend it, or would you want to choose who gets your money and how it will be spend, and in the process get all of the benefits (monetary and non-monetary) for doing charity. Also, if you utilize trusts, there are more estate planning benefits for doing charity, but that’s another topic.

Thanks volkovv, I’d always suspected that there were ways to make this more sensible, but no one had ever quite run the numbers this way.