The Integration of Retirement Income and Cash Flow Planning and Charitable Structures

For almost 100 years, Americans have integrated philanthropy and retirement planning through the use of charitable vehicles. Several of these structures produce tax advantaged income while leaving a remainder interest to charities. These two objectives, income and philanthropy, have existed hand in hand in Charitable Remainder Annuity Trusts (CRAT), Charitable Remainder Unit Trusts (CRUT), Gift Annuities, and other lesser known tools. Now a new, patent pending method, utilizing the ROQS™ (Retirement Optimization of Qualified Stock) LLC becomes the latest tool to help retirees improve their retirement income and cash flow while supporting philanthropic causes. This strategy is specifically for former employees of publicly traded companies whose retirement plans include their company stock.

Maximizing Intentional Benefits

In the world of charitable gifting, there are two basic purposes for the outcomes donors seek. The first maximizes the donor’s charitable deduction but often generates no income or cash flow. In these vehicles, the initial gifts tend to grow over time to the charity’s benefit. These include foundations, supporting organizations, public charities, donor advised funds, and the like. The second category can produce significant tax advantaged income for the donor but greatly lessens the charitable deduction, and the final gift to charity. In these, the initial gifts tend to deplete over time as the donor takes more and more income (or cash flow) out of these structures over their lifetimes. These include the aforementioned CRATs, CRUTs, and Gift Annuities. The ROQS™ LLC combines the best of both, usually producing the highest after-tax cash flow of any structure, and an increasing final gift to charity.

Origin of Philanthropy in the United States

The origins of organized philanthropy in the United States date back to The St. George Society of New York City to help impoverished colonists in 1770. After the Civil War charities organized and began to serve public interests. At the end of the 19th century, and early 20th, wealthy families from the automobile, oil, telegraph, railroad, and steel industries began making large scale donations in the form of grants to charitable causes. The first private family foundation was formed in 1907, the Russell Sage Foundation. The Carnegie, Rockefeller, Mellon, Getty & Ford families followed suit. Today, Bill & Melinda Gates, Walton Family, Bloomberg, Hewlett, Packard, Kellogg, George Lucas, Dell, Bush Family, Lebron James, Tiger Woods, Peyton Manning and many others have created private foundations that support numerous charities. Today there are 72,000 grant making entities and philanthropy now represents 3% of GDP in the United States.

The Launch of the First Nonprofit

The first public charities were organized in late 1800’s, however the first major public support came during World War I to the Red Cross. Today there are over 1.5 Million non-profit organizations in the US according to the National Center for Charitable Statistics. The latest and fastest growing charitable entity is the Donor Advised Fund. Although the origins of DAF’s harken back to 1930, it was not until the Tax Reform Act of 1969 that the regulatory framework for these vehicles was formalized. In the 1990’s, these began to grow in use and visibility. These are essentially a conduit between donors and public charities. These allow the donor to change who will receive the ultimate donations annually, and for deductible contributions as frequently as the donor wishes. As charities themselves, DAF’s offer many of the characteristics of a foundation at very reasonable expense and great flexibility.

Evolution of Charitable Giving to Date

Charitable Remainder Trusts were created in the same 1969 Tax Reform Act as DAF’s. The Charitable Remainder Annuity Trusts (CRAT) and Charitable Remainder Unit Trusts (CRUT) were the first Congressionally adopted vehicles which combined philanthropy with retirement income on a tax advantaged basis. These tools provide lifetime income to the donor while leaving the charity a final gift upon their death. Income from these is most often partially tax free, partially investment income, and part capital gain resulting in a lower overall tax rate than the donor’s earned income bracket. The predecessor of these, the Gift Annuity is generally recognized as having exploded into the philanthropic scene in 1927, although the original vehicles date back to the 1830s. The Gift Annuities are not flexible and are uniform to all donors who invest on the same day, meaning the terms and distribution rate are identical. There are rarely any expenses to the donor for Gift Annuities, and they accommodate donations as low as $5,000. Often Charitable Remainder Trusts (CRTs) require over $100,000 to start and require legal expenses to establish. Each of these provide lifetime, tax advantaged income to the donor, and a residual gift to charity.

Access to Charitable Giving Strategies has been Limited

For most W-2 wage earners whose wealth is in their home and their retirement plan, use of any of these instruments has been difficult. The margin between what most retirees need to make ends meet and charitable gifts are slim. For those who are in position to give larger sums, Federal law prohibits the transfer of greater than $100,000 from a retirement plan to a charity without enduring significant negative tax consequences. The use of foundations, CRAT’s, or CRUT’s requires larger gifts and legal fees that make their use challenging. Even the use of a Gift Annuity is awkward due to their ‘one size fits all’ nature which lacks the capability to meet changing income needs in retirement or any customization.

Expanding Access to Giving Strategies Benefits More People

The new ROQS™ (Retirement Optimization of Qualified Stock) method is the latest in a long history of charitable techniques. On the one hand it mirrors CRT’s and Gift Annuities which benefit both the donor and charity. On the other hand, it leaves a significant gift to charity that traditionally grows in value until the death of the donor when the gift matures. However, unlike foundations or CRT’s, ROQS™ is not for just the mega-wealthy or ‘well to do’. It was developed to help hard working, long serving, W-2 employees, with company stock in their retirement plans, ‘do well, by doing good’. This novel process accomplishes both by helping these retirees often improve the retirement cash flow produced by their company stock from 35% to 50%, while creating a meaningful legacy for charities of their choosing.

For those interested in learning more about this patent pending concept, and improving your retirement, please contact The Charitable Payraise™ at either, or (844) GET- ROQS. We look forward to helping you enjoy a better retirement, and making this world a better place, one retiree at a time.

Bill Lloyd


William R. Lloyd, CFP®, ChFC, AIF®, CPFA, M.Ed. is a thirty-year financial advisor specializing in advanced tax strategies. He is presently a partner with Comprehensive Wealth Advisors LLC, and Senior Wealth Manager for Spire Investment Partners.