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Warren Buffett’s Missed Opportunity

2 years ago By Evan Lange

When it comes to charitable giving, it often seems like the world’s wealthiest individuals have it figured out. With so many assets to manage, these donors know how to support charitable causes while capitalizing on the tax benefits of the giving process, right? Unfortunately, not all get it right. In July, an article in Forbes announced that Warren Buffett is donating $3.6 billion of his Berkshire Hathaway stock to charity. It also offered advice on how other donors could maximize their giving by following in Buffett’s footsteps. The problem? Buffett is primarily giving the stock to private foundations. Consequently, he is missing out on significant tax benefits he could receive if he utilized a donor advised fund (DAF) instead. There are important differences, when it comes to tax benefits, that all donors and advisors should consider.

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Advisor

Spring, Basketball, and Taxes

3 years ago By Evan Lange

Happy Spring! I love this time of year because the weather is getting warmer, lots of good basketball games, and it is tax time. Yes, I get excited about tax season because we finally find out how year-end tax planning strategies worked.  This is especially true because the 2018 tax year applied the new 2017 tax reform laws. Based on the phone calls I have received this Spring; a lot of people are feeling the effects of the changes.  Below is a recap of these conversations and some potential solutions moving forward: Doubled Standard Deduction. Only about 10% of all households in the U.S. will itemize their tax deductions for the 2018 tax year. The standard deduction (increased to $24,000 for married and $12,000 for individual), meant that many households that itemized deductions, including charitable giving, will no longer need to itemize. Unfortunately, several households left tax savings on the table, because they failed to plan properly. SALT Deduction Capped. State and local taxes (SALT) used to be fully deductible, but now SALT deductions are now capped at $10,000. This has affected several middle-income earners. Charitable Deduction Increases. Taxpayers that itemize may now deduct up to 60% of their adjusted gross income each year in charitable contributions; a 10% increase from 2017. Taxpayers may carry forward any amount that exceeds this limit up to five years after the gift is made. Taxpayers may still deduct up to 30% of their AGI using gifts non-cash assets to charity. The most noticeable effect of the 2017 tax reform, from a charitable giving standpoint, most households will not receive a tax benefit (in the form of a deduction) from their charitable gifts in 2018. In my opinion, this has occurred because of the increased standard deduction and the cap on the SALT deduction. For 2019, make sure that your clients consider two easy tax-saving strategies: Bunching charitable gifts one year using a donor advised fund. By combining multiple years of charitable giving in 2019, clients will be able to itemize their deductions for 2019. In the subsequent years, the client could give to charity from their DAF and then take the standard deduction for those years. Click here to learn more about bunching. Give assets! While several itemized deductions have been eliminated, the charitable deduction remained intact, including donating capital assets (assets that would be subject to long-term capital gains tax). When capital assets are given the donor receives a fair market value income tax deduction for the donation, and the capital gains that would have been paid will likely be avoided entirely by the charity. The vast majority of all charitable giving in the U.S. are cash gifts, but the real tax benefit is by donating capital assets!  Make sure your clients do it!

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Advisor

Having the Conversation on Asset Giving

3 years ago By Evan Lange

Many advisors find that being involved with their client’s giving is one of the most meaningful aspects of their work. Philanthropy is an easy way to build deeper relationships with clients. It not only paves the way for a lasting relationship but offers inroads into the next generation of clients and future givers. When your client is ready for the conversation on giving, discussing their assets will play a vital role in the discussion. The following three points offer an outline that will aid in the conversation. Identify which assets to contribute Whether your client is motivated by philanthropic or tax advantage goals, determining what types of assets they can gift is a crucial first step. The common types of assets that are generally gifted are cash, securities, real estate, or closely held business interest. All of these can be given through a donor advised fund. Timing of gift A recent article in Forbes states, “donating property that has appreciated in value, like stock, can result in a double benefit…not only can you deduct the fair market value of the property (so long as you’ve owned it for at least one year), you will avoid paying capital gains tax” Gift valuation guidelines are established in the current tax regulations. In general, the value of the gift is based on the type of asset and the date of contribution, which is typically the date the asset is delivered to the receiving organization. Gifting a complex asset can be a lengthy process. It is important to evaluate the timing of the gift to ensure it will benefit your client within the current tax year. Selecting a charity Deciding what organizations to support, is usually the most exciting part of the process for your client. For many donors, the organizations they choose often have personal meaning and speak to their experiences. By giving complex assets through The Signatry, donors can make grants to smaller nonprofits that would otherwise be unable to accept complex gifts. https://www.forbes.com/sites/kellyphillipserb/2018/12/11/14-tips-for-making-your-charitable-gift-tax-deductible-in-2018/#65eb5fb5f80c  

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