by admin | Dec 17, 2024 | Charitable Giving, Legacy Planning
The holiday season is a time for reflecting on what truly matters—family, connection, and generosity. For many, it’s also the perfect moment to align their wealth strategies with personal values by giving back. Whether you’re aiming to support charitable causes or provide financial gifts to loved ones, understanding the tools and strategies available can enrich your holiday giving experience while offering significant tax benefits. This article explores best practices for individuals and families related to charitable giving and wealth, gifting, while also highlighting the unique opportunities available to business owners for giving stocks to charities and gifting stocks to loved ones.
Charitable Giving to Causes You Care About
Charitable giving is about more than supporting worthy causes—it’s a powerful tool for planning your financial future while reducing your tax liabilities. Here are some strategies to make your philanthropic efforts more impactful:
1. Use Donor-Advised Funds (DAFs)
Donor-Advised Funds are one of the simplest ways to manage your charitable giving. These accounts allow you to contribute cash, securities, or other assets and receive an immediate tax deduction. You can then recommend grants to charities over time, letting you support causes you care about without the pressure of immediate decisions.
By funding your DAF by December 31, you can secure a 2024 tax deduction while giving more thoughtfully in 2025 and beyond.
2. Take Advantage of Qualified Charitable Distributions (QCDs)
If you’re age 70½ or older, consider donating directly from your IRA using a Qualified Charitable Distribution. With a QCD, you can give up to $100,000 per year to eligible charities without it being counted as taxable income.
This strategy is especially helpful for retirees who don’t need their Required Minimum Distributions (RMDs) but want to avoid additional tax burdens.
3. Align Giving with Personal Values
The most meaningful philanthropy reflects your passions. Consider focusing on causes that resonate with your family values or involve subjects you deeply care about. Whether it’s education, healthcare, the arts, specific community development, giving purposefully can deepen connections with the organizations you support and create lasting legacies.
4. Donate Appreciated Assets
One often-overlooked option is donating appreciated assets such as stocks, bonds, or mutual funds. By giving these instead of cash, you not only avoid paying capital gains taxes on the asset’s increased value but also receive a charitable deduction for the full fair market value. The benefits extend to both you and the charity.
Strategic Financial Gifting to Loved Ones
When it comes to spreading holiday cheer, financial gifts to loved ones can go beyond being thoughtful—they can serve as savvy wealth-transfer strategies. Here’s how to gift wealth strategically and stay within IRS guidelines:
1. Leverage Annual Gift Exclusions
The IRS allows you to give up to $17,000 per recipient per year (in 2024) without incurring any gift taxes. Married couples can combine this for a total of $34,000 per recipient. This is an excellent way to transfer wealth to family members or friends while staying within IRS limits.
For example, grandparents could help fund a grandchild’s education or contribute to their first home purchase while reducing the overall size of their estate and the potential future tax burden to these grandchildren.
2. Set Up Financial Legacies
Consider using tools and legal vehicles like trusts to dictate the distribution and use of assets and set things up in a way that will create ongoing financial support for loved ones after you’re gone. There are many types of trusts, but options like a revocable living trust, can allow you to maintain control of your assets during your lifetime while outlining in detail how they should be distributed after you pass away.
For family business owners, a trust can also help ensure that wealth is passed down in a way that aligns with long-term goals and values.
3. Make Direct Financial Contributions
If you want your gifts to go further, consider funding accounts like 529 college savings plans directly because these contributions will grow tax-free and can offer significant financial advantages and sizable amounts of money for the beneficiary. All the while, offering you the satisfaction of being part of their educational success.
Using Stocks for Charitable Giving and Wealth Gifting
Stock ownership provides unique opportunities to maximize both charitable giving and wealth gifting for business owners.
1. Charitable Giving with Stock
Business owners can donate shares of stock directly to qualified charities. By doing so, you avoid capital gains taxes on the appreciated value of the stock, and you can claim an income tax deduction for the current market value of the shares.
For example, if you own stock worth $50,000 that originally cost $10,000, donating the stock could result in a $50,000 deduction while avoiding capital gains on the $40,000 increase. Charities can then sell the stock without incurring taxes.
2. Gifting Stock to Loved Ones
Gifting shares of stock to family members can be another strategic move. Transferring stock as part of your annual gift exclusion reduces the size of your taxable estate while providing a valuable asset for your loved ones. If the recipient is in a lower tax bracket, they may benefit from reduced taxes when they sell the stock.
For closely-held business owners, gifting shares in the company itself can be part of a broader succession and estate plan, allowing the next generation to become stakeholders.
3. Establishing Private Foundations or Charitable Trusts
Successful business owners may also explore creating charitable foundations or trusts funded with stock. These structures facilitate ongoing philanthropy while offering major tax advantages. Depending on how these entities are set up, they can also benefit heirs or support specific causes over a long period of time.
The “Wrap” Up on Giving & Gifting
The end of the year is an ideal time to consider how your wealth can make a difference—for your loved ones, the causes you care about, and your broader legacy. Charitable giving strategies like donor-advised funds, qualified charitable distributions, and donating appreciated stock can help maximize your financial impact while also minimizing tax burdens. Meanwhile, strategic financial gifting, including leveraging annual gift exclusions and giving stock can strengthen family bonds and create lasting benefits.
Thinking ahead and incorporating these strategies not only makes the holiday season special but also sets the stage for long-term financial success. Whether you’re an individual, family, or business owner, aligning your financial moves with your personal values is a powerful way to end the year on a meaningful note and give a gift that keeps on giving.
If you’d like tailored advice on charitable giving or gifting, our team is here to help. Reach out to us today for a personalized plan that maximizes your generosity and tax savings.
by Juliet K | Dec 2, 2024 | Retirement Planning
Roth IRA Conversions & The Potential Tax Benefits in Retirement
Understanding the tools available to enhance your financial well-being is crucial as you navigate retirement. At Altus Wealth Management, we’re committed to guiding you through strategies that can help optimize your retirement savings. One such strategy is the Roth IRA (Individual Retirement Account) Conversion, a powerful tool that can offer significant tax benefits and greater control over your retirement funds.
What is a Roth IRA Conversion?
A Roth IRA Conversion involves transferring funds from a Traditional IRA to a Roth IRA. This process allows retirees to convert their pre-tax retirement savings into a Roth IRA, where future earnings can grow tax-free. It’s a strategic move that provides retirees with the opportunity to manage their tax liabilities more effectively and build a more flexible financial future.
Potential Tax Benefits
- Lower Future Taxable Income: By converting your Traditional IRA to a Roth IRA, you pay taxes on the converted amount at today’s rates. This can help reduce your taxable income in the future when you potentially withdraw from your retirement funds. This strategy is particularly beneficial if you anticipate being in a higher tax bracket later in retirement.
- Tax-Free Withdrawals: Once the funds are in a Roth IRA, they grow tax-free, and qualified withdrawals are also tax-free. This means that your hard-earned savings can continue to grow without the drag of taxes, providing you with a more tax-efficient income stream during retirement.
- Elimination of Required Minimum Distributions (RMDs): Unlike a Traditional IRA, a Roth IRA does not require minimum distributions during the account holder’s lifetime. This absence of RMDs offers retirees the flexibility to decide when and how much to withdraw, allowing for more strategic financial planning that aligns with where you are in life.
- Things to Consider: Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.
Strategic Planning with Altus Wealth Management
Embarking on a Roth IRA Conversion requires careful planning to maximize the potential benefits and minimize the potential challenges. At Altus Wealth Management, we specialize in helping retirees assess whether this strategy aligns with your long-term financial goals, and we collaborate with your tax professionals as necessary to ensure we’re helping you as comprehensively as possible.
Our team provides personalized advice, taking into account your current tax situation, potential future tax rates, and overall retirement plan. We aim to ensure that conversions are executed optimally to enhance your financial position, with the goal of providing confidence and security in your golden years.
Conclusion
A Roth IRA Conversion can be a valuable tool in retirement planning that offers tax advantages and increased control over your financial future. At Altus Wealth Management, we’re here to help you confidently navigate this process, ensuring you make the most of your retirement years. Reach out to us today to explore how a Roth IRA Conversion may benefit your retirement strategy in an effort to secure a more prosperous future.
Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.
Recent Comments