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Four Tax Questions Answered

Question 1

What is the maximum pre-tax retirement contribution available for those very well paid individuals age 50 or over with Defined Contribution and Defined Benefit Plans?


  • 401K - $18,000 contribution + $6,000 catch-up contribution = $24,000 per year1
  • SEP IRA - The lesser of 25% of annual income or $53,0001
  • Simple IRA - $12,500 contribution + $3,000 catch-up contribution = $15,500 per year1
  • Defined Benefit Plan - Approximately $210,000 subject to current age and retirement age1

Question 2

How much does it cost to set up your own charitable foundation through a donor advised fund?



Question 3

Name a financial product (two words) that when properly designed grows tax-deferred or tax-free with the flexibility of pulling out principal first, can be used as an asset protection tool, and, once annual interest is paid, cannot be taken away or lost because of market conditions.


Whole Life (Once the annual dividend is credited.)3

Question 4

What does the acronym N.I.C.R.U.T stand for?

(Hint: You can avoid capital gains tax; flexibly save tax dollars today; help provide deferred income in future lower income years; and, at life’s end, gift the balance to a charitable organization, or your own foundation, not the IRS.)


Net-Income Charitable Remainder Trust

A NICRUT is a special, tax-exempt trust that can help manage income and estate taxes.  This type of trust is primarily used by high net-worth individuals and is often used when the trust is initially funded with an illiquid asset that is not easily converted to cash.

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1. For tax year 2016.  Source:

2. Source: Fidelity Charitable

3. Whole life insurance is intended to provide death benefit protection for an individual’s entire life.  With payment of the required guaranteed premiums, you will receive a guaranteed death benefit and guaranteed cash values inside the policy. Guarantees are based on the claims-paying ability of the issuing insurance company. Dividends are not guaranteed and are declared annually by the issuing insurance company’s board of directors. Guardian has paid a dividend every year since 1868. Any loans or withdrawals reduce the policy’s death benefits and cash values and affect the policy’s dividend and guarantees. Whole life insurance should be considered for its long-term value. Early cash value accumulation and early payment of dividends depend on policy type and/or policy design, and cash value accumulation is offset by insurance and company expenses. Consult with your Guardian representative and refer to your whole life insurance illustration for more information about your particular whole life insurance policy. Policy benefits are reduced by any withdrawals. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, any cash value considered gain in the policy may be subject to ordinary income tax. If the policy is a Modified Endowment Contract (MEC), withdrawals are distributed as gain first and subject to ordinary income taxes. If the policy owner is under 59 ½, any taxable withdrawal may also be subject to a 10% tax penalty. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.

Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice.  Consult your tax, legal, or accounting professional regarding your individual situation.