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2020 Year-End Advisor Checklist

Evan Lange

Evan Lange

November 13, 2020

Content adapted, with permission, from Russell James year-end planning guide.

The end of 2020 is drawing near (thank goodness!), and year-end planning conversations are occurring with clients. Because of the unique laws in 2020, including the CARES Act and the SECURE Act, Russell James provided a helpful synopsis in his year-end charitable planning guide.

  1. Deduct $300 without itemizing

For 2020 only, due to the CARES Act, taxpayers can deduct $300 of charitable cash gifts without itemizing. The limit is one per tax filing unit, so married couples filing jointly do not get $600. These must be cash gifts paid to an operating nonprofit, therefore contributions to a donor advised fund do not qualify.

  1. Deduct up to 100% of your income

For 2020 only, taxpayers can deduct up to 100% of adjusted gross income using charitable cash gifts. This may not be as attractive to higher income earners, but it is unique to 2020 and many clients are asking about it. These gifts must go to an operating nonprofit, so again, contributions to a donor advised fund do not qualify.

  1. Combine a Roth conversion with a charitable donation

A Roth conversion moves money from a standard IRA into a Roth IRA. The benefit: all distributions from the Roth IRA are tax free. The downside: the money moved into the Roth IRA counts as immediate income.

However, this year only, up to 100% of income can be offset by charitable deductions. This includes income created by a Roth conversion. It may benefit the client’s overall retirement and charitable goals to make those multi-year pledges or bunch charitable gifts for 2020!

  1. Make IRA gifts at age 70½ +

IRA accounts have no required minimum distribution (RMD) in 2020 under the CARES Act. But those age 70½ or older can still make gifts directly from an IRA to a nonprofit up to $100,000. This gift donates pre-tax dollars. The earned income is never taxed because it goes directly to the nonprofit. Read more on IRA giving here.

  1. Move your 401k/403b into an IRA rollover now to prepare for future IRA gifts

RMDs will return next year for those age 72+. A qualified charitable distribution from an IRA or IRA rollover reduces RMD. This is one of the best ways to give!

To do this with a 401(k) or 403(b), the client must first convert the account into an IRA rollover. But conversion requires first taking any RMD from the 401(k) or 403(b). The client must pay taxes on that distribution.

However, this can be avoided by making the conversion this year. There are no RMDs in 2020. So, the client can convert the 401(k) or 403(b) into an IRA rollover. Plus, this can be accomplished without paying any taxes, even if the client is age 72+. Then, the client will be set up to make future donations from their IRA rollover whenever they want.

  1. IRA gifts at age 59½ – 70½

IRA withdrawals during this age create no penalties, but they are taxable. However, this year cash gifts can be deducted up to 100% of income. If the client is already itemizing deductions this can help offset the tax impact from an IRA withdrawal.

  1. IRA beneficiary versus gift in a will

Many people like to include a charitable gift in their will to support a cause that has been important in their lives. One tax smart strategy is to leave part of an IRA, 401(k), or 403(b) account to a nonprofit or a donor advised fund. It is easy to change account beneficiaries by contacting the financial institution and with a donor advised fund this provides even greater flexibility for charitable beneficiaries.

Why is this smart? Because heirs pay income taxes on this money. Starting this year, under the SECURE Act, heirs (except spouses) must take out all funds (and pay taxes) within 10 years of inheriting. But any part left to a nonprofit avoids these taxes. So, if the client is leaving anything to a nonprofit, use these accounts first.

  1. Make a charitable swap: Give appreciated investments WITHOUT changing your portfolio

Donating appreciated publicly traded investments creates two tax benefits. The tax deduction is the same size as a gift of cash, plus the client avoids paying capital gains tax. Note that the asset must have been owned for a year or more.

With a charitable swap, the client donates old shares of stock and immediately purchases new shares in the same company. The portfolio does not change. But the capital gain is removed. There is no waiting period. Why? Because this is gain property not loss property. So, the “wash sale” rule does not apply.

  1. Bunch gifts with a donor advised fund

The 2018 Tax Cut and Jobs Act created much higher standard deductions. Fewer people can use charitable deductions because they are not itemizing. One way around that is to “bunch” charitable gifts.

Example: A donor puts 5 years’ worth of donations into a donor advised fund. The donor takes a tax deduction for the entire amount in that year. Because the deduction is so large, the donor itemizes in that year. In later years, the donor makes gifts to charities from the donor advised fund. This creates no tax deduction. But in those years the donor takes the standard deduction instead of itemizing.

  1. Give assets, not cash

The vast majority of wealth in the U.S. is held in non-cash assets. People that own a business or real estate investments, have most of their net worth in those assets. These assets present one of the greatest opportunities for charitable giving. In the current environment of uncertainty of laws in the upcoming years, 2020 may be the perfect time to take advantage of high values in real estate and company valuations by gifting (the donor may receive a fair market value tax deduction for these types of donations).

To learn more about how your gifts can make a lasting impact at The Signatry, contact me at to get started.

Disclaimer: The Signatry does not provide legal, tax, financial or other professional advice.
You should consult professional advisors concerning the legal, tax, or financial consequences of your charitable activities.

About Evan Lange

Evan Lange

Serving as President of the Midwest Region for The Signatry, Evan works with advisors, attorneys, and business owners to minimize taxes and maximize charitable giving.

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