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Smart Gifting: Charitable Donations and Donor-Advised Funds (DAFs) · Money In Motion with Klaas Financial

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Speaker 1: complementary to you again. They're number six O eight four
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Speaker 1: four two five six three seven and joining us this
1:09
Speaker 1: morning from Class Financial our CJ Class and Eric Schwartz CJ.
1:13
Speaker 1: How you doing this morning.
1:15
Speaker 2: I'm doing great, Sean. How are you doing?
1:17
Speaker 1: Absolutely fantastic? Eric, how have you been.
1:21
Speaker 3: I've been doing great, Sean, Glad to be back.
1:23
Speaker 1: It's great to have you both along. And we're going
1:25
Speaker 1: to talk about a really cool topic. And of course,
1:28
Speaker 1: as we start looking towards the end of the year,
1:30
Speaker 1: I know a lot of folks start thinking about opportunities
1:32
Speaker 1: to be charitable and gifting. We're going to talk about
1:34
Speaker 1: some smart gifting strategies with our retirement planning professionals from
1:38
Speaker 1: Class Financial. We'll get to that in just a moment.
1:40
Speaker 1: A couple of other features of the program I mentioned
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Speaker 1: the opportunity to have that complimentary chat online or that
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Speaker 1: free consultation in person with Class Financial. Another really cool
1:50
Speaker 1: thing that we do on this program is the Class
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Speaker 1: Quiz question the week, and our friends from Class Financial
1:54
Speaker 1: provided a fantastic prize again this week for that a
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Speaker 1: twenty five dollars gift card to Darden restaurants that's like
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Speaker 1: Olive Garden, Longhorn Steakhouse. Also speaking of steakhouse roots Chris
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Speaker 1: Steakhouse as well as a Darden restaurant as well. Chance
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Speaker 1: to win a twenty five dollars gift card to those restaurants.
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Speaker 1: Tell you a little bit later on the program more
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Speaker 1: specifically how you can win that little tip, though it
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Speaker 1: is a little thing that you want to keep in mind.
2:17
Speaker 1: Just pay close attention because it's just about every show
2:19
Speaker 1: the question and answer to the Class Quiz question we
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Speaker 1: comes up during that program, and before we get rolling
2:24
Speaker 1: on this morning's conversation about gifting strategies, let's actually take
2:29
Speaker 1: a look back at last week's program and get the
2:31
Speaker 1: question and answer there as well.
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Speaker 3: Eric, Yes, thank you to everybody for listening as always,
2:36
Speaker 3: and congratulations goes out to our winner from last week,
2:40
Speaker 3: and that was Brenda from New Claris. Last week's question
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Speaker 3: was in twenty twenty five, how many Americans will be
2:46
Speaker 3: reaching age sixty five and the choice was either two
2:49
Speaker 3: million or four million. People, and Brenda knew that just
2:53
Speaker 3: over four million Americans will reach the age of sixty
2:56
Speaker 3: five this year. So congratulations and thank you for listening.
2:59
Speaker 1: Great Brenda and you two could be like Branda, just
3:01
Speaker 1: pay close attention. I'll tell you a little bit later
3:03
Speaker 1: on how you can win. Speaking of last week's program,
3:06
Speaker 1: if you want to listen back, if you head on
3:07
Speaker 1: over to Class financial dot com. That's Class k l
3:10
Speaker 1: aas financial dot com of course, listen back to the podcast.
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Speaker 1: Also available on all the popular podcasting platforms as well.
3:17
Speaker 1: Just type in money in motion with Class Financially you
3:19
Speaker 1: will find it right there. As Mitch, we talked this
3:22
Speaker 1: week about gift giving strategy, smart gift giving strategies and CJ.
3:27
Speaker 1: As we think about that stuff, there's obviously a difference
3:30
Speaker 1: between gifts to individuals and then gifts to charities. What
3:33
Speaker 1: if folks need to know about the differentiation there and
3:36
Speaker 1: kind of clarify some of those some of those different nuances.
3:39
Speaker 2: Yeah, that's right, Sean. When when we talk about gifts,
3:42
Speaker 2: most people immediately think about presence for birthdays or the holidays,
3:47
Speaker 2: But in the world of financial planning, gifting is a
3:49
Speaker 2: strategic tool with potentially significant tax implications. However, before we
3:55
Speaker 2: get two deep into the weeds on today's show, we
3:57
Speaker 2: should define the word gift. So I defines the word
4:01
Speaker 2: gift as any transfer of property or money to an individual,
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Speaker 2: either directly or indirectly, where full consideration, which is measured
4:10
Speaker 2: in money or money's worth, is not received in return.
4:15
Speaker 2: Now that sounds very complicated, but just think of it.
4:18
Speaker 2: I give something to somebody of value, and they don't
4:22
Speaker 2: give me money or something to barter with you, something
4:25
Speaker 2: to kind of return that value. That is more or
4:28
Speaker 2: less a gift. Beyond that, there are significant exclusions and
4:32
Speaker 2: exemptions that make most gifts non taxable for the vast
4:37
Speaker 2: majority of people. So let's break it down a little
4:40
Speaker 2: bit further. First thing to know is that the donor
4:43
Speaker 2: typically pays the gift tax, again the donor. So if
4:48
Speaker 2: there is ever a tax to be paid on a gift,
4:51
Speaker 2: known as again a gift tax, it is generally the
4:53
Speaker 2: responsibility the person giving the gift aka the donor, and
4:58
Speaker 2: not the person receiving the gift aka the done. The
5:02
Speaker 2: recipient of a gift generally does not owe income tax
5:06
Speaker 2: on gifts received. Now, notice we're saying generally we don't
5:10
Speaker 2: want to get too deep into the weeds. There can
5:11
Speaker 2: be exceptions on this that we'll talk about a little
5:13
Speaker 2: bit later. But again, if there is a tax to
5:16
Speaker 2: be paid on a gift, it is typically the donor,
5:18
Speaker 2: not the done. Furthermore, it's generally unlikely that a gift
5:22
Speaker 2: tax will be due by the giver or the donor
5:26
Speaker 2: because of the significant exclusions that I mentioned earlier. So again,
5:30
Speaker 2: are there taxes on gifts? Generally know and if if
5:33
Speaker 2: there are taxes to be paid, it's going to be
5:36
Speaker 2: for the giver or the donor. The donor, however, because
5:40
Speaker 2: of these these exclusions, it's unlikely that even the donor
5:46
Speaker 2: will pay a tax. And here's some of those exclusions
5:48
Speaker 2: we're talking about. The annual gifting exclusion is the most
5:52
Speaker 2: important exclusion. For everyday gifting. For twenty twenty five, you
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Speaker 2: can give up to nineteen thousand dollars to as many
5:59
Speaker 2: people as you want without having to report it to
6:02
Speaker 2: the IRS or pay any gift tax. This is per recipient,
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Speaker 2: per year. So for example, in twenty twenty five, you
6:10
Speaker 2: can give nineteen thousand dollars to your child, nineteen thousand
6:13
Speaker 2: dollars to your grandchild, and nineteen thousand dollars to a friend,
6:17
Speaker 2: and none of those gifts would be subject to the
6:19
Speaker 2: gift tax. And then, of course a married couple can
6:22
Speaker 2: effectively double this, giving up to thirty eight thousand dollars
6:26
Speaker 2: per recipient with something called gift splitting. And then here's
6:30
Speaker 2: the second exclusion. So think of that as exclusion number one,
6:34
Speaker 2: nineteen thousand dollars per year to as many people as
6:36
Speaker 2: you want without any really IRS reporting or any sort
6:41
Speaker 2: of gift tax. Here's exclusion number two that, as a
6:44
Speaker 2: matter of fact, is even bigger. So beyond the annual
6:48
Speaker 2: gifting exclusion, there's another significant exclusion known as the lifetime exclusion.
6:53
Speaker 2: The gift tax is meant to be a backstop to
6:56
Speaker 2: the federal estate tax if you give a gift that
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Speaker 2: exceeds the annual exclusion amount, which again is nineteen thousand
7:02
Speaker 2: dollars in twenty twenty five. Like we talked about previously,
7:05
Speaker 2: if you exclude or if you exceed that amount, it
7:08
Speaker 2: does not automatically mean you owe a gift tax. Instead,
7:12
Speaker 2: the excess amount simply reduces your lifetime gift and a
7:17
Speaker 2: state tax exclusion. So for twenty twenty five, this lifetime
7:20
Speaker 2: exclusion amount is very high. It's almost fourteen million dollars
7:24
Speaker 2: for an individual. So you would only start to owe
7:27
Speaker 2: a gift tax once your lifetime gifts are above and
7:32
Speaker 2: beyond that annual exclusion amount. And this is that multimillion
7:36
Speaker 2: dollar amount that we were just thinking about, So again,
7:38
Speaker 2: think of it this way. I've got a certificate in
7:40
Speaker 2: my back pocket that as of twenty twenty five, it
7:43
Speaker 2: has a number of we're just going to round to
7:45
Speaker 2: fourteen million dollars. I can give up to nineteen thousand
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Speaker 2: dollars a year to do as many people as I
7:50
Speaker 2: want and not reduce my fourteen million dollars. But if
7:53
Speaker 2: I go over nineteen thousand dollars in any one year
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Speaker 2: to any one individual, then only the money over that
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Speaker 2: nineteen thouds and starts to reduce my fourteen million dollars
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Speaker 2: that I can give during and afterlife. And only once
8:06
Speaker 2: I'm over fourteen million dollars what a gift tax apply? Gosh,
8:10
Speaker 2: I'm exhausted, But you get the idea here, right, So
8:13
Speaker 2: it's like, Okay, well, gifts are taxable, but there's so
8:16
Speaker 2: many exclusions that very few people end up paying that gift.
8:21
Speaker 1: I feel like we need a camera on UCJ and
8:23
Speaker 1: a dry erase boards. It is really good information, really
8:30
Speaker 1: helpful stuff there too. As we talked this morning with
8:32
Speaker 1: CJ Closs and Eric Schwartz, our retirement planning professionals from
8:35
Speaker 1: Class Financial, learn more online classfinancial dot com. That's Class
8:39
Speaker 1: k l a A s Financial dot com. Speaking of
8:42
Speaker 1: some videos and small stuff. I know you guys put
8:44
Speaker 1: some stuff up on the website from time to time
8:46
Speaker 1: as well, so you definitely want to check that out.
8:48
Speaker 1: Classfinancial dot Com. Talking this week about gift giving and Erica.
8:52
Speaker 1: You know, how how do we kind of interact with
8:55
Speaker 1: gifts when it comes to charities.
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Speaker 3: That's a great question, Shoan. And this is where more
9:01
Speaker 3: of the exemptions come into play that make it really
9:04
Speaker 3: really unlikely that most givers or donors will ever pay
9:07
Speaker 3: a gift tax. CJ is just talking about this and
9:10
Speaker 3: outlining some of those some of those exemptions. But in
9:14
Speaker 3: addition to the annual exclusion and the lifetime exclusion, there
9:17
Speaker 3: are other types of gifts that are completely exempt from
9:20
Speaker 3: the gift tax and they don't count towards your annual
9:22
Speaker 3: or your lifetime limits either. So any gifts that you
9:25
Speaker 3: give to your spouse. You can give an unlimited amount
9:28
Speaker 3: to your US citizen's spouse without incurring any gift tax. Okay.
9:33
Speaker 3: Another example would be direct payments for tuition. So if
9:36
Speaker 3: you pay tuition directly to an educational institution for your
9:41
Speaker 3: child or grandchild, niece, nephew, whoever it might be, that
9:45
Speaker 3: is going to be that is going to be exempt
9:48
Speaker 3: from any sort of gift consideration. Direct payments for medical expenses,
9:53
Speaker 3: so you can pay any amount of money directly to
9:56
Speaker 3: a medical provider. So that's really important, directly to a
9:59
Speaker 3: medical provider for someone's medical care without being concerned about
10:03
Speaker 3: a gift tax. And I suppose I'm surprisingly if you
10:08
Speaker 3: gift to political organizations, you are not subject to the
10:11
Speaker 3: gift tax. So give to your heart's content to the
10:15
Speaker 3: political leaders in your.
10:16
Speaker 1: Life translated those who write the laws.
10:18
Speaker 2: But struggling.
10:23
Speaker 3: Yeah, yeah, And finally to get to your question here
10:31
Speaker 3: sean charitable donations. So gifts to a qualified charity are
10:35
Speaker 3: not subject to the gift tax, and they're often tax
10:37
Speaker 3: deductible to the donor, so that the exemptions that I
10:41
Speaker 3: previously mentioned here, those are those are not often tax
10:45
Speaker 3: deductible for the donor. But giving to charities generally is
10:49
Speaker 3: in this last category gifting to charitable organizations. This is
10:53
Speaker 3: where we're gonna spend the remainder of today's show kind
10:57
Speaker 3: of talking about and digging into a little bit.
10:59
Speaker 1: More talking this morning with CJ. Closs and Eric Schwartz,
11:02
Speaker 1: our retirement planning professionals from Class Financial online Class Financial
11:06
Speaker 1: dot com. That's class k l a A S Financial
11:09
Speaker 1: dot com. They're tough number six oh eight four four
11:11
Speaker 1: two five six three seven. No charge for that initial
11:14
Speaker 1: get to know you appoinment dech loss Financial. It will
11:16
Speaker 1: be complementary to you again their number six O eight
11:19
Speaker 1: four four two five six three seven. We're going to
11:21
Speaker 1: continue our conversation with Eric and CJ. We'll talk about
11:25
Speaker 1: some of those charitable gifts and the exemptions. We'll get
11:28
Speaker 1: some of the details from CJ and Eric. We will
11:30
Speaker 1: do that next as Money in Motion with Class Financial
11:33
Speaker 1: continues right here on thirteen ten do wleu ib A
11:37
Speaker 1: talking with our retirement planning professionals, CJ. Closs and Eric Schwartz.
11:41
Speaker 1: Of course they come to us from Class Financial, the
11:43
Speaker 1: website Class Financial dot com. That's Coss k l a
11:47
Speaker 1: A S Financial dot com. Great website and resource and
11:50
Speaker 1: they're telephone number six oh eight four four two five
11:53
Speaker 1: six three seven. Don't forget no charge for that initial
11:56
Speaker 1: get to know you appointment dech loss Financial. It will
11:59
Speaker 1: be complementary g again, they're number six so eight four
12:01
Speaker 1: four two five six three seven. Talking this week about
12:05
Speaker 1: smart gifting strategies and really making the most of those opportunities.
12:09
Speaker 1: Just before the break, Eric was talking about about charities
12:12
Speaker 1: and gifting to charities and CJ. We'll bring in on
12:16
Speaker 1: this one as well, so as we kind of focus
12:18
Speaker 1: in on those charitable gifts that are exempt from any
12:21
Speaker 1: tax consequences. Folks think about things like writing checks and
12:25
Speaker 1: other things. Are there other and maybe more advantageous ways
12:29
Speaker 1: to give and maybe some pros and cons about giving
12:32
Speaker 1: cash versus something like appreciated stock for example.
12:37
Speaker 2: Yeah, good question, Sean, and you're right. Most people think
12:40
Speaker 2: about giving gifts to charities in terms of writing a
12:42
Speaker 2: check to their church, a food bank, center for the arts,
12:46
Speaker 2: or a high school foundation. However, when you start thinking
12:49
Speaker 2: more strategically about giving to charities, you could potentially enhance
12:54
Speaker 2: the overall net tax benefit to yourself and to the
12:57
Speaker 2: charitable entity you want to support. Here's what I mean.
13:01
Speaker 2: A cash gift is simple and direct. You get a
13:04
Speaker 2: deduction for the amount you give, up to sixty percent
13:07
Speaker 2: of your adjusted gross income if you itemize. But for
13:14
Speaker 2: many people, especially those with investment portfolios, giving highly appreciated
13:18
Speaker 2: stock that's outside of a retirement account or an annuity
13:22
Speaker 2: is a far more tax efficient move. The reason is twofold. First,
13:27
Speaker 2: you get the same tax deduction for the full fair
13:30
Speaker 2: market value of the stock, just as you would with cash. Second,
13:34
Speaker 2: and this is the big one, you completely bypass the
13:37
Speaker 2: capital gains tax you would have to pay if you
13:41
Speaker 2: sold the stock yourself and then donated the cash proceeds.
13:45
Speaker 2: This is a huge win for the charity. The charity
13:48
Speaker 2: receives a larger gift because it gets the full value
13:52
Speaker 2: of the shares, and you avoid potentially a significant capital
13:55
Speaker 2: gains tax bill. So let me give you an example.
13:58
Speaker 2: If you're holding a stock you bought for ten dollars
14:01
Speaker 2: more than a year ago that's now worth one hundred dollars,
14:05
Speaker 2: you can give that one hundred dollars worth of stock,
14:08
Speaker 2: get a deduction for the full one hundred dollars, and
14:11
Speaker 2: never have to pay tax on the ninety dollars of game,
14:14
Speaker 2: and for anyone thinking I don't want to get rid
14:16
Speaker 2: of that stock, you can always donate the appreciated shares
14:20
Speaker 2: and then use the cash you would have otherwise donated
14:23
Speaker 2: to the charity to just buy new shares of the
14:25
Speaker 2: same stock. You're out of pocket. Cost is the same,
14:28
Speaker 2: but you've sidestepped or stepped up your cost basis on
14:32
Speaker 2: the new shares, which means less capital gains tax down
14:36
Speaker 2: the road if they continue to appreciate. However, before we
14:41
Speaker 2: move beyond the simple concept of using kind of appreciated
14:45
Speaker 2: stock for your charitable gifts instead of cash, it is
14:48
Speaker 2: important to highlight two important caveats to what I'm saying here,
14:51
Speaker 2: because I know our CPA friends out there and enrolled
14:54
Speaker 2: agents are saying, but, but, but so. Unlike gifts to
14:58
Speaker 2: a public charity of cash, where you can have a
15:00
Speaker 2: deduction for up to sixty percent of your adjusted gross
15:03
Speaker 2: income and an a tax year, gifts of appreciated stock
15:07
Speaker 2: that you have held for more than a year have
15:09
Speaker 2: a lower limitation of only thirty percent of your adjusted
15:12
Speaker 2: gross income. So said another way, it's possible to reduce
15:16
Speaker 2: your annual tax taxable income by a larger magnitude using
15:21
Speaker 2: cash donations than by using appreciated stock donations. Now talk
15:25
Speaker 2: to your accountant or your financial advisor for more details
15:27
Speaker 2: about this. I mean, there's a lot of things, right.
15:29
Speaker 2: You have to have appreciated stock, you have to have
15:31
Speaker 2: it outside of a retirement account. You have to have
15:34
Speaker 2: enough income to justify. You have to be above the
15:37
Speaker 2: standard deduction amount. You get the idea. The list goes
15:40
Speaker 2: on and on here, but you are generally only able
15:44
Speaker 2: to deduct gifts of cash or appreciated stock to a
15:46
Speaker 2: public charity if you're itemizing your deductions on Schedule A
15:51
Speaker 2: that exceed your standard deductions. There is a small exception
15:55
Speaker 2: to this for something called first dollar above the line
15:58
Speaker 2: deductions to charities and starts in tax your twenty twenty
16:01
Speaker 2: six so next year, whereby an individual can immediately deduct
16:05
Speaker 2: one thousand dollars for an individual or two thousand dollars
16:08
Speaker 2: for a couple of gifts to charities, assuming they don't itemize.
16:13
Speaker 2: So this would just be we call them like immediate
16:15
Speaker 2: dollar deduction or first dollar deductions to charities. But once
16:19
Speaker 2: you go above that one thousand or two thousand, if
16:21
Speaker 2: you're a couple then it has to exceed the standard
16:24
Speaker 2: deduction in order to be a benefit on your taxes.
16:28
Speaker 2: So some of you know what I'm referencing here. Some
16:31
Speaker 2: of you kind of either deal with taxes or have
16:34
Speaker 2: seen your own income tax return enough to understand it.
16:37
Speaker 2: Others of you are going, what is this lunatic saying? Listen,
16:41
Speaker 2: if you're the one saying, what is this lunatic saying,
16:43
Speaker 2: talk to your accountant, talk to your financial advisor. What
16:46
Speaker 2: we are referencing here, if you are charitably inclined can
16:50
Speaker 2: be a huge win for you and for the charity.
16:54
Speaker 2: You just have to work with somebody who understands the rules.
16:56
Speaker 1: As I talk this morning with CJ Claus and Eric
16:58
Speaker 1: Schwartz our retirement planning for offcials from COSS Financial, some
17:01
Speaker 1: great opportunities out there to really help out and really
17:05
Speaker 1: maximize those those gifting strategies. It's really important as we
17:09
Speaker 1: talk with c J and Eric about having that plan,
17:11
Speaker 1: putting it in place. Of course, you can learn more
17:13
Speaker 1: about making a plan. You can learn more about Colass
17:15
Speaker 1: Financial as well online their website Coss financial dot com.
17:18
Speaker 1: That's Coss k l a A S Financial dot com
17:21
Speaker 1: and they're telephon number six O eight four four two
17:24
Speaker 1: five six three seven. No charge for that initial gets doy.
17:26
Speaker 1: Appointments at Coss Financial be complementary to you again, they're
17:30
Speaker 1: telephone number six O eight four four two five six
17:33
Speaker 1: three seven. H Dorner Advised Funds. We'll get some details
17:37
Speaker 1: on those from Eric next. As Money in Motion with
17:39
Speaker 1: Coss Financial continues here on thirteen ten, wu ib A
17:44
Speaker 1: talking with our retirement planning professionals from Coss Financial, Eric
17:48
Speaker 1: Schwartz and CJ. Closs. Of course, you can learn more
17:50
Speaker 1: online about Class Financial. We've got a great website. It's
17:52
Speaker 1: Cossfinancial dot com. That's Coss k l a A S
17:56
Speaker 1: Financial dot com. Telphl number six O eight four four
17:59
Speaker 1: two five six three seven. Mentioned before the break, DAFs
18:03
Speaker 1: donor advised funds, Eric, how does this kind of fit
18:06
Speaker 1: into this? What are they and how do they fit
18:09
Speaker 1: into this conversation?
18:11
Speaker 3: Yes, we love donor advised funds or dafts when they
18:15
Speaker 3: are when they're used appropriately, and these have really gained
18:18
Speaker 3: popularity since the tax a lot of changes we saw
18:21
Speaker 3: back in twenty seventeen. They've really become a great tool
18:25
Speaker 3: for folks to use to not only give to charities
18:28
Speaker 3: but also get a tax benefit for it. So a
18:31
Speaker 3: DAF is like a charitable investment account. You make a
18:35
Speaker 3: contribution that is an irrevocable contribution of either cash or
18:40
Speaker 3: shares of stocks or even other assets to a DAFT sponsor,
18:45
Speaker 3: which is in itself a public charity. So let me
18:48
Speaker 3: give you an example of a DAFT sponsor that people
18:50
Speaker 3: might recognize. Fidelity is a huge asset manager and custodian.
18:57
Speaker 3: They have a Fidelity Charitable as an example of a
19:00
Speaker 3: a DAFT sponsor. Charles Schwab is another investment company folks
19:04
Speaker 3: have heard of. Schwab Charitable is also a public charity
19:09
Speaker 3: a DAFT sponsor. So not suggesting these, just giving examples
19:13
Speaker 3: for folks to recommend or I'm sorry to recognize what
19:16
Speaker 3: we're talking about here. So when you make this contribution
19:19
Speaker 3: to your charitable investment account with the DAFT sponsor, you
19:24
Speaker 3: get an immediate tax deduction for the full contribution in
19:27
Speaker 3: the year that you make it. Okay, So if you
19:30
Speaker 3: put this large chunk of money in there, you get
19:32
Speaker 3: a full tax deduction right away. The funds are then
19:35
Speaker 3: invested and they can grow tax free over time, and
19:39
Speaker 3: then you can give them away as you like. So
19:42
Speaker 3: the advised part of the name here is key, So
19:44
Speaker 3: you who who are the donor. You can recommend grants
19:50
Speaker 3: from your DAFT to other qualified charities whenever you like.
19:53
Speaker 3: So this gives you a ton of flexibility. You can
19:56
Speaker 3: make a large single contribution to your DAFT in a
19:59
Speaker 3: year when you you have, say a high income event
20:02
Speaker 3: like you're selling a business or whatever it might be,
20:05
Speaker 3: and then you distribute the funds to your favorite charities
20:08
Speaker 3: over many years. So it simplifies your record keeping and
20:11
Speaker 3: it allows for a more thoughtful kind of long term
20:14
Speaker 3: approach to giving. Beyond that, if you understand how large
20:18
Speaker 3: your schedule A itemized deductions have to be in order
20:21
Speaker 3: to exceed your standard deduction, it makes you realize why
20:25
Speaker 3: as of twenty twenty two, only about ten percent of
20:28
Speaker 3: American taxpayers actually were itemizing their deductions. CJ was just
20:32
Speaker 3: talking about this, Right, if post twenty seventeen, the standard
20:36
Speaker 3: deduction is so high that you need to be giving
20:40
Speaker 3: a lot, well, you need to have a lot of
20:42
Speaker 3: schedule A itemized deductions in order to deduct your charitable giving.
20:47
Speaker 3: So said another way, while it's estimated that only about
20:49
Speaker 3: sixty percent of American households give to charity in a
20:52
Speaker 3: calendar year. Only about ten percent of American households actually
20:56
Speaker 3: obtain a financial benefit from these charitable gifts by itemized
21:01
Speaker 3: and the reason for that is the level of their
21:04
Speaker 3: charitable giving is not actually exceeding their standard deduction. So
21:09
Speaker 3: a DAPH is often used for something that we call
21:11
Speaker 3: tax punching, whereby you give multiple years, say like five
21:16
Speaker 3: years worth of charitable donations into a DAPH in order
21:20
Speaker 3: to exceed your standard deduction for that year and get
21:24
Speaker 3: and obtain a tax deduction and benefit the organization. Then
21:30
Speaker 3: you take the standard deduction for the following five years
21:32
Speaker 3: while you're actually giving the money to your charities from
21:35
Speaker 3: your DAF account through the grant process. We realize this
21:38
Speaker 3: sounds pretty complicated, but it's really not once you kind
21:42
Speaker 3: of understand it. It's one of those things you have
21:43
Speaker 3: to wrap your brain around and then you kind of
21:45
Speaker 3: get to the point where you're like, oh, okay, okay,
21:48
Speaker 3: this makes sense, and suddenly all the foreign language we've
21:53
Speaker 3: been speaking makes a lot of sense, and it can
21:56
Speaker 3: be really powerful in maximizing your charitable impact. And basically,
22:00
Speaker 3: he allows you to give more to the charities and
22:02
Speaker 3: less to the government in the form of taxes.
22:04
Speaker 2: It is.
22:05
Speaker 1: It's really interesting stuff. As we talked this morning with
22:07
Speaker 1: Eric and CJ, our retirement planning professionals from Coss Financial.
22:11
Speaker 1: If you've been interested, you want to start that conversation,
22:13
Speaker 1: maybe you're thinking about these very things as we kind
22:15
Speaker 1: of get towards the end of the year, you want
22:17
Speaker 1: to start that conversation at Class Financial. They make it
22:19
Speaker 1: real easy to do. If you head on over to
22:20
Speaker 1: classfinancial dot com. You can schedule a chat right from
22:24
Speaker 1: the website or pick up phone Gemmi call six soh
22:26
Speaker 1: eight four four to two five six three seven. No
22:29
Speaker 1: charge for the initial gets to know you appointment at
22:31
Speaker 1: Colss Financial. It will be complementary to you again their
22:34
Speaker 1: number six oh eight four four two five six three seven.
22:36
Speaker 1: We'll continue our conversation with CJ and Eric. We will
22:39
Speaker 1: do that next as Money in Motion with Coss Financial
22:41
Speaker 1: continues right here on thirteen ten, Wuiba talking with CJ.
22:47
Speaker 1: Closs and Eric Schwartz, our retirement planning professionals from COSS Financial.
22:51
Speaker 1: Talking this week about smart gift giving strategies, making the
22:54
Speaker 1: most of those opportunities and as we're talking this morning.
22:57
Speaker 1: I know there's some people saying, what about qcds. Yeah,
23:01
Speaker 1: what about qcds? Only ask CJ all about them, CJ.
23:04
Speaker 1: For folks that are familiar, I know a lot of
23:05
Speaker 1: folks really love qualified charitable distributions. What's kind of the
23:09
Speaker 1: deal and how do they differ from some of the
23:11
Speaker 1: other methods that we've talked about this morning.
23:15
Speaker 2: Yeah, good point, Sean. So for our listeners, we have
23:17
Speaker 2: been trying to go about talking about gifting and what
23:20
Speaker 2: is a gift and why are most of them not taxable?
23:22
Speaker 2: Down to then focusing today's show on charitable gifting. So
23:27
Speaker 2: one of those kind of exemptions that Eric defined earlier
23:30
Speaker 2: in the show where it doesn't even qualify as part
23:34
Speaker 2: of an annual exemption amount or even a lifetime exemption amount.
23:38
Speaker 2: But there's still more creative or strategic ways to give
23:42
Speaker 2: to charities to make sure you're maximizing the benefit to
23:45
Speaker 2: those charities. We talked about highly appreciated stock. Eric just
23:49
Speaker 2: talked about a donor advised fund and then yes, many
23:52
Speaker 2: people go, but wait a minute, what are the you
23:54
Speaker 2: haven't talked about. Don't kind of like qcds or qualified
23:58
Speaker 2: charitable distribution for the benefit of our listeners. Think of
24:02
Speaker 2: donor advised funds or dafts what Eric was just talking
24:06
Speaker 2: about earlier, as an optimal strategy to consider for those
24:09
Speaker 2: giving a fair amount of money to charities each year
24:13
Speaker 2: who are interested in maximizing the charitable gifting through tax bunching.
24:17
Speaker 2: But here's the key. Prior to age seventy and a half. Okay,
24:22
Speaker 2: so donor advised funds, your brain should be going optimal
24:25
Speaker 2: for people giving a fair amount of money wanting to
24:27
Speaker 2: benefit from that prior to age seventy and a half. However,
24:31
Speaker 2: once you reach age seventy and a half, dafts become
24:34
Speaker 2: much less popular or even necessary, due to the availability
24:38
Speaker 2: of something called qualified charitable distributions known as qcds for short.
24:44
Speaker 2: A QCD is a specific type of gift that comes
24:46
Speaker 2: directly from a traditional I ray. The rules are very specific.
24:51
Speaker 2: You must be at least seventy and literally a half
24:55
Speaker 2: years old to do this, yes, literally over that exact day,
25:00
Speaker 2: and the distribution must go directly from your IRA custodian
25:04
Speaker 2: to a qualified charity. It can't go to you and
25:07
Speaker 2: then do the qualified charity. The main benefit here is
25:10
Speaker 2: that the amount of the QCD is not included in
25:13
Speaker 2: your taxable income. For retirees who don't itemize their deductions,
25:17
Speaker 2: this is a huge advantage because they get a tax
25:20
Speaker 2: benefit they wouldn't have otherwise received. It's also a great
25:24
Speaker 2: way to satisfy your required minimum distribution or RMD once
25:28
Speaker 2: you turn seventy three or seventy five, depending upon the
25:31
Speaker 2: agent which you have to first start performing rm ds.
25:35
Speaker 2: So instead of being forced to take a taxable distribution,
25:38
Speaker 2: you can send that money directly to a charity as
25:41
Speaker 2: a QCD and it never flexible income. So the key
25:46
Speaker 2: difference is that a QCD doesn't give you a tax deduction,
25:50
Speaker 2: but rather an exclusion from your taxable income. And important notes,
25:55
Speaker 2: because this is something that people get tricky on. A
25:57
Speaker 2: QCD must be a direct gift to the charity itself.
26:01
Speaker 2: You can't use it. You can't use the QCD to
26:04
Speaker 2: fund a donor advised fund, So that's an important distinction here.
26:08
Speaker 2: But there you go, everybody, there's there's kind of all
26:10
Speaker 2: the way down the list we talked about giving highly
26:12
Speaker 2: appreciated stock, we shifted to using donor advice funds for
26:15
Speaker 2: those underage seventy and a half who want to use
26:17
Speaker 2: tax punching strategies. And then finally, for those over seventy
26:21
Speaker 2: and a half who want to maximize their gift to charities,
26:24
Speaker 2: qcds can be a great way to do it.
26:25
Speaker 1: It's really amazing. As I said while there, so you
26:28
Speaker 1: were kind of reviewing what all we talked about. There's
26:30
Speaker 1: a lot of great opportunities out there and real strategic
26:33
Speaker 1: ways to do gifting. Just make sure that you're doing
26:36
Speaker 1: it right. And it's also a great reminder of you know,
26:38
Speaker 1: if you are in that position to be thinking about
26:40
Speaker 1: about setting something up, really making sure that you're following
26:43
Speaker 1: following the guidelines and exactly how they work to really
26:47
Speaker 1: maximize things. So we talk each week with our friends
26:49
Speaker 1: from Class Financial. Don't forget I'd love to hear your feedback,
26:52
Speaker 1: love to get your questions as well. You can call
26:53
Speaker 1: any time during the program. You can also, of course
26:56
Speaker 1: call the Class Financial office six so eight four four
26:58
Speaker 1: two five six three seven that first appointment at COSS Financial.
27:02
Speaker 1: It will be complementary to you their number six oh
27:04
Speaker 1: eight four four two five six three seven. Go on
27:06
Speaker 1: hold on that telephone number now as well, because it's
27:09
Speaker 1: time for the Coss Quiz Question the week. It works
27:11
Speaker 1: like this. In just a moment, I'll ask you the
27:13
Speaker 1: Coss Quiz question of the week. You will then have
27:14
Speaker 1: thirty minutes from the today's program to call the Coss
27:16
Speaker 1: Financial office right here in Madison at six oh eight
27:19
Speaker 1: four four two five, six three seven. If you are
27:22
Speaker 1: the first caller with correct answer, he will win this
27:25
Speaker 1: week's prize, which is a twenty five dollars gift card
27:27
Speaker 1: to Darden Restaurants. This week's Class Quiz question the week?
27:30
Speaker 1: Is this true or false? As of twenty twenty, only
27:34
Speaker 1: about ten percent of American tax pipayers itemize their deductions.
27:39
Speaker 1: Is that true or is that false? Telephone number six
27:42
Speaker 1: oh eight four four two five, six three seven. It's
27:44
Speaker 1: Class Financial's office right here in Madison online Coss Financial
27:48
Speaker 1: dot com. That's Coss k LaaS Financial dot com. CJ.
27:52
Speaker 3: Eric.
27:53
Speaker 1: It's always great chatting with both of you. You guys, enjoy
27:55
Speaker 1: this beautiful day.
27:56
Speaker 3: Thanks Sean, Thanks Son.
27:57
Speaker 1: News comes your way next year. On thirteen ten, w
27:59
Speaker 1: I be eight