Using the Tax Controlled Savings Plan to Leverage Your Legacy
Imagine knowing that your ReHirement is fully funded from your tax free bucket or through a combination of your currently taxable and tax free buckets.
Not only are you free from worries about future tax rate hikes and certain that you have enough in savings to fund your living expenses through death, you are also free to leverage your stewardship legacy by strategic giving from your before tax bucket.
The wise, patient application of BRS’s TCSP is how you get there.
There are a variety of different strategies for leveraging your legacy using before tax savings, and each depends on the client’s particular facts.
One strategy is to make current gifts from your before tax bucket and utilize distributions or Required Minimum Distributions (RMDs) to fund life a second to die life insurance policy on a husband and wife in an Irrevocable Life Insurance Trust (ILIT) for your heirs.
The proceeds from the policy in the ILIT will go to your heirs income and estate tax-free.
This allows you to do your “giving while you’re living so you’re knowing where it’s going” and at the same time know that you are replacing or even multiplying the wealth transferred to charity with the life insurance.
When you pass away, the remainder in your before tax bucket can be giving to charity. Those funds never incur any tax burden related to the Income with Respect to Decedent Tax (IRDT), gift, or estate tax (if you have a taxable estate).
Furthermore, you enjoy knowing that you have been a good steward by efficiently utilizing the tax code to allow you to take charitable contribution deductions using pre-tax money and at the same time the And the great thing about it is that the money has never paid tax (except for any RMDs or withdrawals used to fund the ILIT).
We at BRS believe stewardship is about relationships. Careers, reputation, financial stability, and personal goals are all important pursuits. However, none should come above our relationships with family, friends, and our community. Our relationships are the cornerstone by which we leave a positive impact and lasting legacy.
The Relationally-Driven Life Stewardship Process
This graphic depicts our planning process. It’s a comprehensive and fully integrated planning process. We expend considerable effort, energy, and time gathering and then analyzing all facts pertinent to your planning and goals. It’s integrated with your business or profession, with your age and the ages of your children, with your values and objectives.
We help you think about estate planning integrated with financial planning. We help you think about managing potential risks of loss associated with unnecessary taxes (whether estate, gift, income, or capitals gains), premature death or disability, unwise market risk, non-exempt asset classes, and inappropriate company or corporate structures that risk the loss of limited liability.
Point A represents when you have your first dollar to save. This is the first goal. It’s the starting point in the marathon to financial freedom, to becoming a generous steward and leaving a lasting legacy.
Point B is the goal, the end line of the marathon: ReHirement, Critical Stewardship Mass. It’s the point in time when you have converted enough earnings and gifts into savings sufficient to fund your living expenses through death. We calculate this number for you at regular, annual intervals along the way of your planning marathon.
Point C represents death. It’s what we call retirement. The final rest, the end of our labors as stewards. We view life as a gift to be stewarded faithfully. And we view death, although it is both alien to the original intent of being human and an enemy that has been defeated, also as something to be stewarded. What our clients discover through applying our trust-driven process is that there is meaning both to life and death. That they can impact the future through their legacy of faithful stewardship. Hope and peace are fruits of our process and perspective.
We call the phase of time from Point A to Point B the “stewardship savings phase.” We help our clients manage the safety, efficiency, and control of the process of converting their earnings and gifts to savings.
The period of time from Point B to Point C is the “stewardship distribution phase.” During this time period, we help our clients manage the safety, efficiency, and control of the process of converting their savings into spending on living expenses and joyful giving.
We at BRS believe stewardship is about relationships. Careers, reputation, financial stability, and personal goals are all important pursuits. However, none should come above our relationships with family, friends, and our community. Our relationships are the cornerstone by which we leave a positive impact and lasting legacy.
Think "ReHirement," Not Retirement.
We call the point in time when you have enough in savings to fund your living expenses through projected mortality Critical Stewardship Mass.
Note that it is not a net worth goal. Nor is it a goal to live on 90% or 80% or 75% of your highest income earning years for the rest of your life, as is so commonly heard in financial advice.
Instead, it’s a realistic goal to convert enough of your earnings and assets into savings that will meet your living expenses until you die. We calculate that number based on what you project your living expenses will be once you decide to retire.
And along the way of helping our clients reach Critical Stewardship Mass, we are helping them re-think their lives in terms of “ReHirement,” not retirement.
Once they have enough in savings to live on, all clients have gifts, talents, experience, and so much more to give to their family, friends, communities, young professionals or executives or in their fields, charities or other non-profit interests, and so forth. The opportunities to serve and give are virtually endless in a world where needs are endless.
Our planning process helps clients discover the deeper reasons and motivations why they want more wealth, success, net worth, possessions, or savings that far exceed what they need to live on until death.
In the process, they discover the ineffable value of relationships and discover their deeper selves and deeper meaning in life. In other words, we help them discover the inestimable value of relationships.
And in the process, we help our clients discover why they become so anxious and fearful over their perceived lack of money, security, wealth, or whatever it is they think will give them peace of mind about the future. We help them cultivate realistic perspectives and goals, and then develop practical plans to reach their goals.
To put it in a nutshell, we have the great privilege of helping our clients discover the joy of valuing their relationships with their loved ones, with their neighbors and communities, with themselves, and with the world of things more than they value the “things” themselves — that is, more than money, wealth, safety, security, acquiring, possessing, net worth, profit, you name it.
We at BRS believe stewardship is about relationships. Careers, reputation, financial stability, and personal goals are all important pursuits. However, none should come above our relationships with family, friends, and our community. Our relationships are the cornerstone by which we leave a positive impact and lasting legacy.
Five Core Stewardship Principles
Success in any discipline, craft, profession, vocation, sport, or any life skill requires knowledge, experience and practice of the fundamentals, or core principles, applicable to each. We summarize these core principles as follows:
Spend less than you earn.
The first step to stewardship freedom is a savings account. The first goal is to have one month of your after-tax living expenses in a savings account that is separate from your checking account. The second goal is three months. The next is six months. Some stop at three months of after-tax living expenses saved. That’s fine. The point is to save.
The good news is that saving can and should start at any time. Even if you are behind in your savings plan or haven’t started, you can start now.
Maintain liquidity for emergencies and unexpected opportunities. Once you reach your savings goal, you have enough funds in liquid savings to fund your living expenses without fret or debt. The excess can now be put to work with sound investing fundamentals, which we will talk about further below when we explain our Tax Control Savings Plan. Before getting there check out this video about saving:
Avoid the unproductive use of debt. Some debt is good, some debt is bad. Good debt can be for things like a home purchase, career, business opportunity, or leveraged savings or risk management. Examples of bad debt are credit cards that carry balances, new car debt, 100% financing of assets, or loans not backed by reasonably certain cash flow and an appropriate debt to income ratio.
Think long-term in your goals and investing. Patience is a virtue that must be cultivated, much like the gardener nurtures beautiful flowers to bloom and the grower cultivates the soil to bring forth luscious produce from the earth. Good things and good results take time. And time is your friend, if you are patient in your savings and investing goals. A systematic plan over a period of twenty years is usually sufficient to fund your living expenses needed in retirement. So think long-term in your savings and investing. Plod ahead steadily into the future in a trust-driven manner. Don’t swing for the fences in your investing. Maintain vision and prudence. You will find great reward in this kind of disciplined approach to building responsible stewardship.
Be a generous steward and leave a lasting legacy. Our trust-driven advisory process helps BRS clients experience a life driven by discovering the joy of giving. Our clients find that giving to others frees them from themselves and things in ways they never imagined. Even along the way of reaching their ReHirement savings goal, they realize that they are able to give more and more along the journey. And they also find that once they have converted enough earnings into savings to fully fund their living expenses through death, and thus reached Critical Stewardship Mass, they have excess savings that they can give to their heirs and favorite charities. These clients find that being a generous steward is a life practice, an ethic, that results in leaving a lasting legacy.
We at BRS believe stewardship is about relationships. Careers, reputation, financial stability, and personal goals are all important pursuits. However, none should come above our relationships with family, friends, and our community. Our relationships are the cornerstone by which we leave a positive impact and lasting legacy.