High Income Earners

Key Idea: Get creative with income that exceeds your lifestyle needs.

Many high income earners pay taxes on dollars that are never used for lifestyle needs and will only be given away at their death.

Their income taxes should be proportional to their lifestyle. Those tax dollars can be redirected into the hands of charitable organizations now.

Many people with high incomes earn much more than they spend on annual lifestyle needs. In fact, it is not uncommon to pay more in taxes than is used to live on. If that is your situation, consider the reallocation of resources in the example below.

A Real Life Example   

Wayne and Laura have income that has grown substantially over the last few years allowing them to secure their financial future. They plan to work for about 10 more years, then spend their time volunteering for Christian causes like Young Life.

Their situation:

  • Total annual income of $1 million.
  • Total estate value of $10 million.
  • They pay $275,000 in annual taxes.
  • They use $200,000 for lifestyle needs.
  • They want to give at least $2 million to charity at death.

Their new plan provides:

  • Lower annual taxes paid by nearly $160,000.
  • More current gifts to charity.
  • Creation of funds to pay for future charitable works.
Results State and Federal Taxes Paid Giving Fund Annual Gift to Charity Dollars Available for Lifestyle Needs
New Plan $115,000 $350,000 For future charitable purposes $150,000 $485,000
Old Plan $275,000 $0 $100,000 $425,000

Only $50,000 of the $350,000 in the Giving Fund comes from cash. The balance could come from non-controlling shares of a family partnership. Leveraging dollars that will be given away at death can result in lowering taxes during life.

Please contact us to learn more.

The information contained herein is for explanatory purposes only and is not intended to be used as tax or legal advice. The Young Life Foundation recommends that you contact a professional tax advisor who can provide you with additional information on how the use of the above techniques and ideas may apply to your personal tax situation.