Strategies to Optimize Charitable Giving and Financial Planning
As the year draws to a close, it’s a crucial time for financial advisors to assist clients in reviewing and optimizing their charitable giving and financial strategies. By taking proactive steps now, clients can maximize their tax benefits and ensure their philanthropic intentions are met. Here are some key strategies to consider.
Review Beneficiary Designations
Ensure your clients’ beneficiary information is current on all retirement accounts, insurance policies, and other assets. Consider naming a charity, such as the Foundation, as a primary or secondary beneficiary to make a lasting impact without incurring additional costs.
Meet Required Minimum Distributions (RMD)
Clients with traditional or inherited IRAs who haven’t taken their RMD for 2024 can transfer up to $105,000 directly to a charity like The Foundation for Delaware County. This approach allows them to avoid taxes on the distribution. This option is available to all IRA owners beginning at age 70 ½. Initiate IRA distributions by December 15 to count them toward the 2024 tax year.
Evaluate Life Insurance Policies
Clients may find they possess insurance policies that are no longer necessary due to financial independence of their children, paid-off mortgages, or retirement. Transferring ownership of such a policy to a charity can yield a tax deduction equivalent to the policy’s current value.
Analyze Investment Performance
Recent market highs present an opportunity for clients to donate appreciated stocks, obtaining a deduction for the fair market value while avoiding capital gains taxes. This approach allows more funds to benefit their selected causes.
Diversify Retirement Income
Clients can utilize a charitable gift annuity (CGA) to secure a steady income stream for life at current high rates. The new “Legacy IRA” provisions enable donors over 70 ½ to fund a CGA with a one-time, tax-free transfer of up to $53,000 from their IRA. Not all nonprofits offer CGAs, but the Foundation does.
Optimize Charitable Contributions
By consolidating multiple years of donations into one tax year, clients can surpass the standard deduction threshold, claiming a full tax deduction now while distributing grants to their preferred charities over time.
Plan Business Succession
As business owners contemplate retirement, donating part of their privately held company interests to charity can offset taxes from a sale. It’s beneficial to initiate these discussions well before any potential sale.
Update Estate Planning Documents
Review and update wills, trusts, and powers of attorney to align with current wishes. For optimal tax savings, leave IRAs to charity and other assets to family. New inheritance rules mean beneficiaries might face significant taxes, but IRAs can be donated to charities tax-free.
Set Future Goals
While establishing savings and investment goals for 2025, incorporate charitable priorities. Collaborating on a tax-efficient strategy for charitable contributions can enhance your clients’ philanthropic impact.
For more information or to schedule a consultation to discuss these strategies, contact us. We offer support and guidance at no cost.
Contact Monika Collins at [email protected]; 610-744-1015
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