You can do well by doing some good!  Not only can giving to a charity make a positive impact, it can provide an opportunity for some tax benefits too. If you are a high-income earner or a retiree who plans on writing checks to your favorite charities, then you may benefit from these three wealth and tax planning tips you can take advantage of in the future.

Donor Advised Funds (DAFs)

• An immediate tax deduction can be taken for the amount donated in the year the contribution is made to the DAF.  Then, you as the donor advisor to the DAF decide which 501(c)(3) organizations (e.g., religious organization, college, hospital/clinic, community center, etc.) receive grants from the fund at any time in the future.  DAFs are a great vehicle to us if you have a big cash flow year and you know you want to make a large deductible contribution, but you aren’t sure to which organizations yet. A DAF allows you to get the deduction today and decide which charities will be ultimate beneficiaries at a later date.

• If a client contributes long-term appreciated securities to their DAF, they can avoid capital gains tax on the appreciated portion and receive an immediate charitable tax deduction for the full market value of the gift.

• Assets donated during the life of the client are no longer part of the client’s estate, and therefore, are not subject to probate or estate taxes. The DAF can also be named as a beneficiary to an IRA, a charitable remainder trust, or other asset.

• Unlike private foundations, there are no start-up costs, no tax on the fund’s investment income, no individual payout requirement, and all record keeping services are included.

Qualified Charitable Distributions (QCDs)

• A QCD allows individuals who are 70.5 years of age or older to donate up to $105,000 per year per individual to one or more charities directly from a Traditional IRA (For 2024, QCD limit increased to $105,000 from $100,000 in 2023). The charity must be a 501(c)(3) organization. Private foundations or donor advised funds are not eligible to receive QCDs.  

• QCDs count toward your required minimum distribution (RMD) amount. (Inherited IRAs also qualify for QCD provided you meet the age requirement.)

• QCDs are non-taxable distributions and not included in your adjusted gross income (AGI).  This is important because regular charitable contributions do not lower AGI.  Lowering AGI can have a number of benefits, including bringing down Medicare Part-B premiums, qualifying for certain deductions, and lowering the taxable portion of Social Security.

• Keeping your taxable income lower can help avoid elevating to the next federal tax bracket or potentially provide opportunities for other tax planning considerations.

Donate appreciated investments.

• Look at your portfolio as an opportunity toward donating long-term appreciated securities (e.g., stocks, mutual funds, bonds). 

• Capital gains are eliminated when you contribute long-term appreciated assets directly to a charity (via the charity’s trustee or custodian) instead of selling the assets and donating the after-tax proceeds.

• The charity can then sell the assets and pay no tax on the appreciated gains because of their tax-exempt status.

In Summary

Act today and consult your fiduciary wealth manager and tax professional to develop a plan to best align with your goals and charitable endeavors. You have an opportunity to make a positive IMPACT on charities both today and tomorrow while also receiving some tax benefits along the way. Please do not hesitate to contact us if you have any questions or if we can help in any way.    

About the Author

Known for his professionalism and calming demeanor, Zac is focused on helping his clients reach their financial goals through comprehensive financial planning and unbiased guidance.  Zac and his team support and care for…

Sewickley

724-719-6609

zac.saunders@confluencefp.com

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Heading into 2023, the Investment Advisory Committee believes we are beginning to return to a more historically normal, rational economic environment.

The Committee has identified four key themes for 2023 and the years ahead:

1. Fundamentals Matter Again:

• From 2009 to 2021, expansive government and monetary policies kept interest rates and inflation near record lows.
• This environment favored US and growth stocks, whose stock prices are driven primarily by future growth prospects, as opposed to things like profitability and earnings.
• The unwinding of these accommodative policies is leading us back to an environment where strong company fundamentals will likely again be vital when building investment portfolios.

by Jackson Elizondo

Working with a Registered Investment Advisor (RIA) is desirable for high-net-worth individuals, families, and institutions for the personal, unbiased, and tailored advice to their unique financial situation. They have a fiduciary duty to act in your best interest while providing comprehensive financial services to meet your goals.

What is an RIA? 

A Registered Investment Advisor is a firm registered with the Securities and Exchange Commission (SEC) that provides clients with financial advice. A team of advisors will often employ their expertise for customized guidance with the freedom to choose from a wide range of investment options for tailored advice for you.

What is the benefit of working with a Registered Investment Advisor?

1. A legal obligation to act in your best interest

The fiduciary standard of an RIA has a “fundamental obligation” to work in the best interests of its advisory clients. Recommendations will be made in good faith, based on your needs, and allow a direct line of communication if there is a need for clarification or change.

2. Providing more than just investment advice

Financial professional teams within an RIA firm are often skilled in disciplines beyond just portfolio management. They include retirement, estate, charitable legacy, tax, insurance, education planning for you and your family, and corporate services, including employee benefits. These teams will work hand-in-hand with an established financial network to develop investment strategies considering tailored solutions for your unique financial situation.

3. Transparent & available public records

Each RIA must file and publicly post a Form ADV that offers a comprehensive view of the organization. A Form ADV offers objective and transparent information, including conflicts of interests, compensation, disciplinary filings, education, and the firm’s key personnel.

4. Straightforward fee-based compensation

Many RIA’s offer financial advice and planning for a fee based on a percentage of your assets under management. This service creates a mutual benefit of a transparent fee structure that aligns the clients’ best interests with those of the RIA.

5. Professional Education

Many wealth management teams will usually include highly experienced financial professionals with prestigious designations. These teams often bolster professional training and certifications such as the Certified Financial Planner® (CFP®) designation, Accredited Asset Management Specialists® (AAMS®), Certified Public Accountant (CPA) or Accredited Investment Fiduciary® (AIF®) and commit themselves to continuous education on your behalf.

Consider a Registered Investment Advisor at Confluence Financial Partners

Simple, straightforward, and non-biased assistance with your comprehensive financial plan aligns with the priorities of an RIA. If you are looking for wealth management advice at a concierge level of service, Confluence Financial Partners, may be the team of financial professionals for you.

Please contact a member of the Kimmich Team if you’re interested in having a discussion.

In late December, a $1.7T omnibus spending package was passed in Congress and subsequently signed into law by President Biden. This bill included some significant updates to the landmark 2019 SECURE Act, such that this portion of the legislation is being referred to as SECURE Act 2.0.

The legislation is far-reaching and offers several enhancements intended to strengthen American’s retirement and financial readiness.

While there are many changes that impact personal savers, I’d like to focus on one change that will have a significant impact on 401(k) plans, and the companies that sponsor retirement plans.

Automatic Enrollment

• The new legislation requires businesses creating new 401(k) and 403(b) plans beginning in 2025, to automatically enroll eligible employees, starting at a contribution rate of at least 3%, up to 10% of employee compensation.
• Contribution rates must increase by 1% each year until at least 10% is reached, but not more than 15%. Employees have the option of declining to participate or adjusting their personal savings rate.   

Why is this impactful?

Roughly 25% of working adults have no retirement savings, and fewer than 4 in 10 believe their retirement savings are on track, according to the Federal Reserve’s Report on the Economic Well-Being of U.S. Households in 2019.

• Proponents are hopeful that the provision will increase 401(k) participation rates and raise the amount workers save for retirement.

Signing up for a 401(k) is simple – filling out a form isn’t a difficult task, but research has shown that workers need a nudge. As the data have repeatedly shown, auto enrollment is indeed that nudge.

• According to a Vanguard Research study, among newly hired employees, participation rates were at 91% under auto enrollment, versus 28% under voluntary enrollment. 

The future impact of Automatic Enrollment can be significant. Employees benefit from these automated plan design options. Employers benefit by having engaged employees that are financially fit. 

If you have questions about how this plan design enhancement could affect your retirement program, please call (412)815-4721 to speak with our Retirement Plan Services team today.

See below for additional key provisions in SECURE Act 2.0 for employers: