Latest / Money In Motion with Klaas Financial / RMDs & Charitable Savvy: Tax Smart Choices for Retirement Fund

Transcript

RMDs & Charitable Savvy: Tax Smart Choices for Retirement Fund · Money In Motion with Klaas Financial

• 0:00
  Speaker 1: At our telephone lines. They are open to you right now.
• 0:02
  Speaker 1: If you've got a question for our retirement planning professionals
• 0:06
  Speaker 1: from Class Financial, we'd love to have you join us.
• 0:08
  Speaker 1: The number to get on the air six oh eight
• 0:10
  Speaker 1: three two one thirteen ten. That's six oh eight three
• 0:13
  Speaker 1: two one thirteen ten. We're going to be talking about
• 0:15
  Speaker 1: charitable strategies for folks looking to uh looking to do
• 0:19
  Speaker 1: something with their rmds. We'll get the details this morning
• 0:22
  Speaker 1: from c jan Eric. But again, if you've got a
• 0:24
  Speaker 1: question anything retirement planning related, we've got our professionals here
• 0:28
  Speaker 1: to answer them for you. Again. The number to get
• 0:30
  Speaker 1: on the air six oh eight three two one thirteen ten.
• 0:32
  Speaker 1: That's six oh eight three two one thirteen ten. Of
• 0:35
  Speaker 1: course you can learn more about COSS Financial on their website
• 0:37
  Speaker 1: coss financial dot com. That's coss k laa asfinancial dot com.
• 0:42
  Speaker 1: And the office telephone number right here in Madison six
• 0:45
  Speaker 1: oh eight four four two five six three seven. No
• 0:48
  Speaker 1: charge for that initial get to know your apployment tech
• 0:50
  Speaker 1: co Loss Financial. It will be complimentary to you again
• 0:52
  Speaker 1: their number six oh eight four four two five six
• 0:55
  Speaker 1: three seven. Hey, joining us this morning our CJ Closs
• 0:58
  Speaker 1: and Eric Schwartz CJ. How you doing this morning.
• 1:01
  Speaker 2: I'm doing great, Sean.
• 1:02
  Speaker 1: How are you doing? Really good? Great to talk with you, Eric,
• 1:04
  Speaker 1: how have you been?
• 1:06
  Speaker 3: I am doing great, Sean. Glad to be here this morning.
• 1:08
  Speaker 1: By the way, and I'll see j I'll bring you
• 1:10
  Speaker 1: in on this. Nate Briby, did he pay a little
• 1:13
  Speaker 1: extra to get that get that sweet placement on the website? Wow?
• 1:20
  Speaker 1: Eric's jealous too, aren't you?
• 1:23
  Speaker 3: Maybe a little bit?
• 1:24
  Speaker 2: Answer on the air, Sean, geez.
• 1:28
  Speaker 1: Nate's great, obviously, he's joined us several times in the program.
• 1:31
  Speaker 1: A really great guy. Really cool to see him doing
• 1:33
  Speaker 1: great things as well.
• 1:34
  Speaker 2: And I should say no, it's a good question. So
• 1:37
  Speaker 2: Nate Briby is one of our advisors who's been with
• 1:39
  Speaker 2: us for about five years, and much like Eric Schwartz
• 1:41
  Speaker 2: who's on the line with us here today, Er Nate
• 1:44
  Speaker 2: recently became a member of our LLC. So that's that's
• 1:47
  Speaker 2: what Sean is referencing, is we now have a sixth
• 1:49
  Speaker 2: member of our Class Financial LLC, which is pretty exciting.
• 1:52
  Speaker 1: That is very exciting, really really cool. And again, of
• 1:54
  Speaker 1: course you can get to know everyone at Class Financial,
• 1:57
  Speaker 1: including date of course, at class financial dot com on
• 2:00
  Speaker 1: this morning by CJ. Class and Eric Schwartz. They are
• 2:02
  Speaker 1: our retirement planning professionals from Class Financial. Has mentioned got
• 2:05
  Speaker 1: a great conversation, important conversation ahead if you are looking
• 2:09
  Speaker 1: to develop a nice charitable strategy in retirement. There's some
• 2:12
  Speaker 1: great tools out there and we'll get the details on
• 2:14
  Speaker 1: that in just a moment. Really cool thing too about
• 2:16
  Speaker 1: the program, an opportunity for you to win a fantastic
• 2:19
  Speaker 1: prize this week. Our friends from Class Financial have provided
• 2:22
  Speaker 1: a twenty five dollars gift card to Texas Roadhouse for
• 2:25
  Speaker 1: the winner of the Class Quiz question the week. We'll
• 2:27
  Speaker 1: tell you a little bit later on in the program
• 2:29
  Speaker 1: about how you can win. That little tip though if
• 2:31
  Speaker 1: you listen closely, oftentimes the question and answer come up
• 2:34
  Speaker 1: on the program. And before we start this week's conversation
• 2:37
  Speaker 1: this week's topic, let's actually roll back to last week's
• 2:40
  Speaker 1: program get the question and answer there as well.
• 2:42
  Speaker 3: Eric, Yeah, so thank you to everybody for listening to
• 2:46
  Speaker 3: our show last week on one of our favorite topics,
• 2:49
  Speaker 3: social security, and congratulations to our winner who was Jason
• 2:53
  Speaker 3: from Cambridge, and the question was how many Social Security
• 2:57
  Speaker 3: credits do you need to qualify for a retire benefit.
• 3:01
  Speaker 3: The answer was most people need forty credits or about
• 3:04
  Speaker 3: ten years of work to qualify.
• 3:06
  Speaker 1: Do we have a winner? Was what Jason from Cambridge was?
• 3:09
  Speaker 1: Jason from Cambridge, Nice work, Jason, You too could be
• 3:12
  Speaker 1: like Jason. Of course, listen closely to the program. Again,
• 3:14
  Speaker 1: typically the question answer come up during the show, and
• 3:17
  Speaker 1: this week we are discussing some charitable strategies, one in
• 3:21
  Speaker 1: particular for folks who are retired in managing their required
• 3:26
  Speaker 1: minimum distributions those rmds, CJ. What do folks need to know?
• 3:29
  Speaker 3: There?
• 3:30
  Speaker 2: Yeah, good question, Sean. So when we talk about rmds
• 3:34
  Speaker 2: these days, it's a good time to also discuss charitable
• 3:37
  Speaker 2: giving because there can be some significant tax tax benefits
• 3:41
  Speaker 2: for those who are over seventy and a half. But
• 3:44
  Speaker 2: first let's lay the groundwork on what required distributions are
• 3:47
  Speaker 2: and how they've changed over time. So the Secure Act,
• 3:50
  Speaker 2: which took effect on January first of twenty twenty, changed
• 3:54
  Speaker 2: the required minimum distribution schedule. Now again, I just want
• 3:58
  Speaker 2: to remind everybody our industry loves its acronyms. So when
• 4:01
  Speaker 2: I say RMD, that stands for required minimum distribution or
• 4:05
  Speaker 2: MRD minimum required distribution. It's all the same stuff. So
• 4:10
  Speaker 2: rmds are designed to ensure that investments in iras don't
• 4:14
  Speaker 2: grow tax deferred forever. The IRS basically eventually wants to
• 4:19
  Speaker 2: collect taxes on these accounts. Now I said, I said
• 4:23
  Speaker 2: rmds on iras. Truth be told, you can have an
• 4:27
  Speaker 2: rm D on an old four to h one K
• 4:29
  Speaker 2: plan as well if you're no longer working and eligible
• 4:34
  Speaker 2: to contribute. But primarily when we think of rmds, we
• 4:37
  Speaker 2: think of pre tax irras, and the reason is because
• 4:40
  Speaker 2: most people are retired and have rolled over those dollars
• 4:43
  Speaker 2: to their individual retirement accounts. But with that being said,
• 4:47
  Speaker 2: here's a few key points. Under the current law, most
• 4:50
  Speaker 2: IRA owners must begin taking rmds at age seventy three.
• 4:56
  Speaker 2: This was previously seventy and a half, then it turned
• 4:59
  Speaker 2: into seventy d two and actually, believe it or not,
• 5:01
  Speaker 2: those who are born after nineteen sixty the required minimum
• 5:05
  Speaker 2: distribution ages seventy five. So think of it this way.
• 5:08
  Speaker 2: If you are not already drawing required minimum distributions out
• 5:13
  Speaker 2: of your irais, then your RMD age is either it's
• 5:16
  Speaker 2: one of two ages. It's either seventy three or seventy five.
• 5:21
  Speaker 2: If you were before born before nineteen sixty, your RMD
• 5:25
  Speaker 2: age is seventy three. If you were born after nineteen sixty,
• 5:28
  Speaker 2: your RMD age is now seventy five. Now, your first
• 5:32
  Speaker 2: required minimum distribution must be taken by April first of
• 5:36
  Speaker 2: the year following the year you turn seventy three. Every
• 5:41
  Speaker 2: year after that, required minimum distributions must be completed by
• 5:44
  Speaker 2: December thirty first. So this is really weird everybody. I'll
• 5:49
  Speaker 2: just be frank with you. I don't love that they
• 5:51
  Speaker 2: did this. It just creates a lot of confusion. So
• 5:53
  Speaker 2: the first year start is known as the RBD, the
• 5:58
  Speaker 2: required beginning date, and it matters a lot because if
• 6:03
  Speaker 2: you die before your required beginning date, that can change
• 6:06
  Speaker 2: RMD schedules. Blah blah blah blah blah. It's just so
• 6:09
  Speaker 2: much detail. I don't even want to bore you with it.
• 6:11
  Speaker 2: But in this first year you become eligible for these
• 6:15
  Speaker 2: rm ds, or I should say required for these rm ds.
• 6:18
  Speaker 2: You have a bypass. If you want to, you can
• 6:21
  Speaker 2: throw it forward to April first of the next year.
• 6:23
  Speaker 2: The problem with that is if you do that, then
• 6:26
  Speaker 2: you're going to have to double up that year, because
• 6:29
  Speaker 2: then that year's RMD will be due by December thirty first,
• 6:32
  Speaker 2: and every subsequent one will be due by December thirty first.
• 6:36
  Speaker 2: Many of you, your heads are rolling right now, and
• 6:38
  Speaker 2: that's fine. Talk to your account or your advisor and
• 6:40
  Speaker 2: they'll make sure you follow the rules. But if you
• 6:43
  Speaker 2: withdraw less than your RMD, you could face a penalty.
• 6:47
  Speaker 2: It has been reduced now to twenty five percent, and
• 6:50
  Speaker 2: in some cases even lower than that if has corrected promptly.
• 6:53
  Speaker 2: That number used to be fifty percent or more, but
• 6:56
  Speaker 2: they've kind of lessened to that, just recognizing that most
• 6:58
  Speaker 2: people who miss RMD it's because of health issues or mistakes.
• 7:02
  Speaker 2: And then withdrawals are generally taxable unless they include after
• 7:06
  Speaker 2: tax contributions or qualified WROTH distributions. But the RMD amount
• 7:11
  Speaker 2: is based on your IRA balance at the end of
• 7:14
  Speaker 2: the previous year, divided by a life expectancy factor from
• 7:18
  Speaker 2: the IRS uniform lifetime table. Now, if your spouse is
• 7:22
  Speaker 2: your sole beneficiary and more than ten years younger than
• 7:25
  Speaker 2: actually a different RMD table applies. But just think of
• 7:29
  Speaker 2: it as like, Okay, what are the factors? How do
• 7:30
  Speaker 2: they come up with this calculation? Well, it's all of
• 7:34
  Speaker 2: your IRA balances pre tax IRA balances on December thirty,
• 7:37
  Speaker 2: first of the year before you have that minimum distribution
• 7:41
  Speaker 2: whatever that balance is, and then there's a table that
• 7:44
  Speaker 2: you apply and you divide your life expectancy into that
• 7:47
  Speaker 2: and it kicks out a number. Now, that number tends
• 7:50
  Speaker 2: to be at around age seventy three. That number tends
• 7:52
  Speaker 2: to be right around three point four to six percent,
• 7:54
  Speaker 2: I think, give or take from there. And then it
• 7:56
  Speaker 2: grows as a percentage every year thereafter. So what many
• 8:00
  Speaker 2: people will say to Eric and I is oh, I
• 8:02
  Speaker 2: get it. Okay. So every year since it grows from thereafter,
• 8:06
  Speaker 2: my RMD will get nominally larger, and we go no,
• 8:10
  Speaker 2: not necessarily, because while the percentage will grow, what if
• 8:15
  Speaker 2: we have a major market decline, right and the value
• 8:18
  Speaker 2: of the assets with your near irray go down by
• 8:21
  Speaker 2: thirty percent. Even though the percentage may have gone up
• 8:24
  Speaker 2: by half a percent, the nominal dollar amount may decline.
• 8:29
  Speaker 2: So again, as I'm talking through all of this, I
• 8:32
  Speaker 2: know many of your heads are spinning. That's actually normal.
• 8:36
  Speaker 2: It's expected because it happened to me for the first
• 8:39
  Speaker 2: eight years I was in this career. It's just so
• 8:42
  Speaker 2: hard to understand these rules and how they impact one
• 8:46
  Speaker 2: another in the timelines. It's the reason why, you know,
• 8:48
  Speaker 2: people like us tend to have jobs because we help
• 8:51
  Speaker 2: you follow the rules, and we do it so frequently
• 8:54
  Speaker 2: that it's like a second language to us. But remember
• 8:58
  Speaker 2: this as well, Updated Life Expects and c tables. Actually
• 9:01
  Speaker 2: we're implemented in twenty twenty two, which is good because
• 9:04
  Speaker 2: people are now living longer, so that RMD schedule was
• 9:07
  Speaker 2: backed off, and then there are tools that help you
• 9:10
  Speaker 2: kind of figure out what that rm D amount would be.
• 9:12
  Speaker 2: You can go to Investor dot gov and search rm
• 9:15
  Speaker 2: D worksheet, or go to IRS dot gov for a
• 9:18
  Speaker 2: calculator and another worksheet there. So that's kind of the
• 9:23
  Speaker 2: groundwork for what rmds are. You know. Next, Eric will
• 9:27
  Speaker 2: be talking more about how that impacts charitable giving.
• 9:29
  Speaker 1: Talking this morning with CJ Closs and Eric Schwartz. They
• 9:31
  Speaker 1: are our retirement planning professionals from Class Financial. The website
• 9:35
  Speaker 1: COSS financial dot com. That's Coss k l a as
• 9:38
  Speaker 1: Financial dot com and their telephone numbers six oh eight
• 9:41
  Speaker 1: four four two five six three seven. That's six soh
• 9:43
  Speaker 1: eight four four two five six three seven. CJ has
• 9:46
  Speaker 1: always did a fantastic job laying out a very complicated
• 9:49
  Speaker 1: thing when it comes to rmds. Let's kind of take
• 9:51
  Speaker 1: that switch then and talk about how rmds connect to
• 9:55
  Speaker 1: charitable giving.
• 9:56
  Speaker 2: Eric.
• 9:57
  Speaker 3: It's a great question, Sean, and this is where quality
• 10:00
  Speaker 3: charitable distributions or qcds come into play. As CJ said,
• 10:05
  Speaker 3: can't miss an acronym in the financial industry qcds. Basically,
• 10:11
  Speaker 3: these have become a lot more popular in recent years
• 10:14
  Speaker 3: due to the larger standard deductions that began back in
• 10:17
  Speaker 3: twenty eighteen. As a result of that larger standard deduction,
• 10:21
  Speaker 3: a very small percentage of tax filers actually choose to
• 10:24
  Speaker 3: itemize their their tax deductions today. And what that does
• 10:28
  Speaker 3: is it really limits your ability to write off your
• 10:30
  Speaker 3: charitable contributions. But qcds they provide a way for retirees
• 10:34
  Speaker 3: to give to charity and potentially reduce their taxbile income
• 10:38
  Speaker 3: even if they are not itemizing at all. Now, as
• 10:42
  Speaker 3: a quick reminder, we always tell you this when we're
• 10:44
  Speaker 3: talking about taxes. We are not accountants, so you should
• 10:47
  Speaker 3: always confirm these strategies with your tax advisor. But as
• 10:50
  Speaker 3: CJ said, we help clients with this on a regular basis,
• 10:54
  Speaker 3: so we do have some knowledge in this space. Qcds
• 10:58
  Speaker 3: became permanent back in twenty fifteen with the Protecting Americans
• 11:03
  Speaker 3: from Tax Hikes or the Path Act, and let's just
• 11:06
  Speaker 3: talk a little bit care about how they work. A
• 11:09
  Speaker 3: QCD it allows individuals aged seventy and a half or
• 11:14
  Speaker 3: older to transfer up to one hundred and eight thousand
• 11:16
  Speaker 3: dollars per year in twenty twenty five directly from their
• 11:20
  Speaker 3: IRA to a qualified charity. Now this is per person,
• 11:24
  Speaker 3: so for married couples they can potentially give up to
• 11:27
  Speaker 3: two hundred and sixteen thousand dollars combined from their iras.
• 11:32
  Speaker 3: But let's pause here for a second on that seventy
• 11:34
  Speaker 3: and a half number. Notice that does not coincide with
• 11:37
  Speaker 3: the beginning of rmds, which are currently seventy three or
• 11:40
  Speaker 3: seventy five. So it used to back when RMD age
• 11:44
  Speaker 3: was seventy and a half, but the QCD age just
• 11:49
  Speaker 3: sort of got lost in the fray when they were
• 11:51
  Speaker 3: when they were pushing out the RMD age. So seventy
• 11:55
  Speaker 3: and a half act or seventy and a half is
• 11:58
  Speaker 3: the age, and QCD's actually become possible before you're even
• 12:01
  Speaker 3: required to take an RMD, but qcds do count toward
• 12:06
  Speaker 3: your rm D while being excluded from your taxable income.
• 12:10
  Speaker 3: So let's say that you have an RMD and it's
• 12:13
  Speaker 3: twenty thousand dollars this year, and you decide to give
• 12:16
  Speaker 3: five thousand dollars directly from your IRA to a charity
• 12:21
  Speaker 3: of your choice. What that means essentially is you're only
• 12:24
  Speaker 3: going to report fifteen thousand dollars of taxable income from
• 12:29
  Speaker 3: that transaction. So you're still satisfying that twenty thousand dollars RMD,
• 12:33
  Speaker 3: but only five thousand dollars actually or I'm sorry, fifteen
• 12:36
  Speaker 3: thousand dollars actually counts towards what you have to report
• 12:40
  Speaker 3: for taxes now to count for your rm D for
• 12:43
  Speaker 3: the year. The funds do have to be distributed by
• 12:46
  Speaker 3: December thirty first, and qualified charities include you know, any
• 12:50
  Speaker 3: five oh one C three organization or a house of worship.
• 12:54
  Speaker 3: And keep in mind, you cannot make qcds to donor
• 12:58
  Speaker 3: advised funds. We're going to talk a little bit more
• 13:00
  Speaker 3: about those later in the show, but you can't. You
• 13:03
  Speaker 3: can't make a QCD to a donor advised fund in
• 13:08
  Speaker 3: order to you know, do giving later it diriis does
• 13:11
  Speaker 3: not allow that. And a big reminder here, we talk
• 13:15
  Speaker 3: about this a lot. Your kids are not charities. You
• 13:17
  Speaker 3: cannot give to them through a QCD. So when we're
• 13:23
  Speaker 3: when we're looking at the mechanics of this, you you
• 13:25
  Speaker 3: won't get a charitable deduction for the QCD, but you'll
• 13:29
  Speaker 3: reduce your taxable income overall. So essentially, you know, it's
• 13:33
  Speaker 3: not showing up as oh, I'm writing off, you know,
• 13:36
  Speaker 3: five thousand dollars of charitable gifts. It's it's actually the opposite.
• 13:40
  Speaker 3: You're not reporting in the end, five thousand dollars of income. Now, really,
• 13:46
  Speaker 3: really importantly, this is something we've we've worked a lot
• 13:49
  Speaker 3: with our clients. On the tax form you get in
• 13:53
  Speaker 3: in late January early February from your IRA custodian, which
• 13:58
  Speaker 3: is called your ten ninety nine R, it does not
• 14:01
  Speaker 3: specify the part of your distribution that was a QCD.
• 14:05
  Speaker 3: So what it's going to do is it's going to say,
• 14:07
  Speaker 3: in that same example I gave earlier, Okay, you distributed
• 14:10
  Speaker 3: twenty thousand dollars from your IRA. So what you need
• 14:13
  Speaker 3: to do is is keep records from the charity and
• 14:16
  Speaker 3: actually tell your accountant okay, well, I took twenty thousand out,
• 14:19
  Speaker 3: but five thousand of it went to this charitable organization,
• 14:23
  Speaker 3: so it should not be counted as income and then
• 14:26
  Speaker 3: they can they can report it correctly. But a little
• 14:28
  Speaker 3: bit of like work on the back end and just
• 14:30
  Speaker 3: something to be aware of.
• 14:31
  Speaker 1: Really important guidance there. As we talked this morning with
• 14:34
  Speaker 1: Eric Schwartz and CG. Closs, they are our retirement planning
• 14:37
  Speaker 1: professionals from class financial website. It's a great one, Coss
• 14:40
  Speaker 1: Financial dot com. I hope you get a chance to
• 14:42
  Speaker 1: check that out. Coss Financial dot com. That's Klaasfinancial dot com.
• 14:47
  Speaker 1: They're tell for number six oh eight four four two
• 14:49
  Speaker 1: five six three seven. No charge for that initial get
• 14:52
  Speaker 1: to know you appointment dech Coss Financial. It will be
• 14:54
  Speaker 1: complimentary to you again their number six oh eight four
• 14:57
  Speaker 1: four two five six three seven. As Eric me, we're
• 15:00
  Speaker 1: going to talk a little bit about donor advised funds.
• 15:02
  Speaker 1: We will do that next as Money in Motion with
• 15:04
  Speaker 1: Coss Financial continues right here on thirteen ten, WI b
• 15:08
  Speaker 1: A talking with our retirement planning professionals from Coss Financial,
• 15:12
  Speaker 1: Eric Schwartz and CJ. Coss. Their website it is coss
• 15:16
  Speaker 1: Financial dot com. That's Coss k l a A S
• 15:19
  Speaker 1: Financial dot com. Great place there to learn more about
• 15:21
  Speaker 1: the team at COSS Financial, also learn about their separate divisions,
• 15:24
  Speaker 1: as well as an opportunity to stay current and sign
• 15:27
  Speaker 1: up further weekly Market Pulse newsletter that available to you
• 15:30
  Speaker 1: at Cossfinancial dot com. That's Coss k l a a
• 15:34
  Speaker 1: s Financial dot com and their telephone number six oh
• 15:37
  Speaker 1: eight four four two five six three seven. No charge
• 15:40
  Speaker 1: for that initial get to know you appointment at Coss Financial.
• 15:43
  Speaker 1: It will be complimentary to you again their number six
• 15:45
  Speaker 1: oh eight four four two five six three seven.
• 15:48
  Speaker 2: Uh.
• 15:48
  Speaker 1: Heard the term donor advised funds in the last segment
• 15:52
  Speaker 1: in CJ. Let's talk about what they are and how
• 15:55
  Speaker 1: those can help as well when it comes to saving
• 15:58
  Speaker 1: on taxes.
• 16:00
  Speaker 2: Absolutely, yeah, let's shift from those qcds to donor advice funds.
• 16:05
  Speaker 2: As Eric was just talking there. One thing I wanted
• 16:06
  Speaker 2: to clarify is we, we meaning Eric and I are
• 16:10
  Speaker 2: not your accounts. We don't file your income taxes for you. However,
• 16:13
  Speaker 2: we actually do have an enrolled agent on staff and
• 16:15
  Speaker 2: we do now and just within the last year, we
• 16:18
  Speaker 2: now provide tax prep work for clients of the organization.
• 16:24
  Speaker 2: We don't just do it for the general public. It's
• 16:25
  Speaker 2: meant for our existing wealth management clients. But that's one
• 16:29
  Speaker 2: kind of just clarification for our listeners. But yes, as
• 16:32
  Speaker 2: we shift from qcds to donor advice funds, which again
• 16:36
  Speaker 2: back to the acronyms, are dafts for short, a DAFT
• 16:39
  Speaker 2: is a charitable investment account held at a financial institution
• 16:42
  Speaker 2: or a community foundation. While these qcds are great for
• 16:47
  Speaker 2: IRA owners over seventy and a half, an older, dafts
• 16:51
  Speaker 2: offer another kind of different, tax efficient giving strategy, especially
• 16:56
  Speaker 2: for those looking to donate appreciated assets or those who
• 17:00
  Speaker 2: are looking to bunch donations into one tax year. So
• 17:05
  Speaker 2: let me just kind of describe at a high level
• 17:08
  Speaker 2: where this fits in. If you are over seventy and
• 17:12
  Speaker 2: a half and drawing money out of an IRA, and
• 17:15
  Speaker 2: you are looking for ways to reduce your taxable income,
• 17:18
  Speaker 2: or maybe you're over seventy three and you have required
• 17:20
  Speaker 2: minimum distributions and looking for a way to reduce your
• 17:23
  Speaker 2: taxable income, then qcds are absolutely your first stop to
• 17:28
  Speaker 2: accomplishing that. That's what Eric was just talking about. Absolutely,
• 17:32
  Speaker 2: bar none, that's what you need to do. But if
• 17:35
  Speaker 2: you're not yet those ages, so you're not required to
• 17:37
  Speaker 2: pull money out of your iras yet, and so maybe
• 17:40
  Speaker 2: you aren't for that matter, but you're still looking to
• 17:43
  Speaker 2: get a benefit for your charitable donations. But it turns
• 17:46
  Speaker 2: out when you talk to your accountant, your accountant says, yeah,
• 17:49
  Speaker 2: but CJ, you're not giving enough. You don't have enough
• 17:52
  Speaker 2: itemized deductions to exceed the standard deduction. Well, that is
• 17:59
  Speaker 2: where donor advised funds come in, because a donor advised
• 18:03
  Speaker 2: fund can is think of it as an intermediate step
• 18:07
  Speaker 2: between between you and the end charity where you want
• 18:11
  Speaker 2: it to go. But you can give a large amount
• 18:14
  Speaker 2: to this intermediate step in order to exceed the standard deduction.
• 18:19
  Speaker 2: So a simple example of this would be if the
• 18:22
  Speaker 2: standard deduction for me is I'm just going to use
• 18:24
  Speaker 2: around number thirty thousand dollars, that's a lot of charitable
• 18:27
  Speaker 2: giving in any one year to exceed the standard deduction.
• 18:30
  Speaker 2: So a lot of people don't meet that. But what
• 18:32
  Speaker 2: if I gave ten years worth of charitable giving to
• 18:35
  Speaker 2: this intermediate step, meaning it's not the end charity, but
• 18:39
  Speaker 2: it's the intermediate deaf Well, that's goodness, gracious that could
• 18:44
  Speaker 2: be two hundred thousand dollars that is way above the
• 18:47
  Speaker 2: standard deduction. And when I give that two hundred thousand
• 18:49
  Speaker 2: dollars to that donor advice fund, I take the immediate deduction. Now,
• 18:54
  Speaker 2: now there are some rules on that you can't eliminate
• 18:57
  Speaker 2: all of your income. You can typically reduce your AGI
• 19:01
  Speaker 2: by up to fifty or sixty percent or thirty percent
• 19:03
  Speaker 2: if it's a highly appreciated stock. But that doesn't matter.
• 19:06
  Speaker 2: Your accountant will go through that with you, your advisor
• 19:08
  Speaker 2: will go through that with you. But you get the idea.
• 19:11
  Speaker 2: It's like, oh, so I put it in the intermediate
• 19:13
  Speaker 2: step that daff I get this really large deduction in
• 19:18
  Speaker 2: that year against my standard income, and then in that
• 19:21
  Speaker 2: intermediate bucket that's where I give out of right, so
• 19:25
  Speaker 2: now for the next ten years, I'm taking it from
• 19:27
  Speaker 2: that intern and actually giving it to my church, giving
• 19:31
  Speaker 2: it to the Boys and Girls Club, giving it to
• 19:34
  Speaker 2: the Big Brothers, Big Sisters, whatever charities you're a part of.
• 19:37
  Speaker 2: You get the idea. This can be huge. This is
• 19:41
  Speaker 2: known as a tax bunching strategy. You are bunching multiple
• 19:45
  Speaker 2: years of giving into one year. But here's the key.
• 19:49
  Speaker 2: Without having to actually give it all to the end charity.
• 19:53
  Speaker 2: You're giving it to the intermediate charity. Now here's what's
• 19:57
  Speaker 2: really critical. When it goes into the donor fund, it
• 20:00
  Speaker 2: is gone. So some people misunderstand me. They go, oh, intermediate,
• 20:04
  Speaker 2: So if I change my mind, I can pull it back. No no, no, no, no, nope.
• 20:07
  Speaker 2: The donor Advice Fund is a charity, be charity. It's
• 20:11
  Speaker 2: just an intermediate charity that facilitates the transfer to the
• 20:14
  Speaker 2: end to charity. So contributions to donor Advice funds are
• 20:19
  Speaker 2: errevocable or irrevocable. They must go to an eventual charity.
• 20:24
  Speaker 2: And obviously if you die along the way, you've got
• 20:26
  Speaker 2: to either list final charity beneficiaries or list other people
• 20:30
  Speaker 2: to make those decisions for you. So tax benefits can
• 20:34
  Speaker 2: include tax free growth within those accounts. So often when
• 20:37
  Speaker 2: you put it in there, if you're going to give
• 20:38
  Speaker 2: out of there for the next ten years, you've got
• 20:40
  Speaker 2: to invest the money so you can get tax free
• 20:42
  Speaker 2: growth of that money. You can put an appreciated stock.
• 20:46
  Speaker 2: So think of if I have Facebook that I bought
• 20:49
  Speaker 2: at a really low price point. Now it's worth a lot.
• 20:51
  Speaker 2: I don't want to sell it to pay the capital
• 20:53
  Speaker 2: gains tax. So maybe I donate the stock I bypass
• 20:57
  Speaker 2: realizing the capital gain and get to reduce the fair
• 21:03
  Speaker 2: market value of that stock off of my AGI with
• 21:06
  Speaker 2: a limitation. There is a limitation on how much you
• 21:08
  Speaker 2: can do and then carry forward to future years. But
• 21:11
  Speaker 2: you get the idea this can be huge. Now, I
• 21:14
  Speaker 2: will admit this is kind of the wealthier slash higher
• 21:20
  Speaker 2: end strategy because you do have to be number one giving,
• 21:24
  Speaker 2: you have to have enough access to be giving, and
• 21:27
  Speaker 2: number two you have to have a long term strategy
• 21:30
  Speaker 2: of giving. If those two things apply, and then finally
• 21:34
  Speaker 2: number three you have the cash to give a bunch. Now,
• 21:37
  Speaker 2: if those three things apply, then a donor advice fund
• 21:40
  Speaker 2: could be a huge advantage to you. If anything I've
• 21:44
  Speaker 2: said has kind of perked the interest of anybody, call
• 21:46
  Speaker 2: into our office. We can tell you more about it,
• 21:48
  Speaker 2: or talk to your advisor or your accountant.
• 21:50
  Speaker 1: Really great stuff from CJ. Class and Eric Schwartz. They
• 21:53
  Speaker 1: of course are our retirement planning professionals from Class Financial.
• 21:56
  Speaker 1: A lot of great information in this week's program. As always,
• 21:59
  Speaker 1: that means you want to listen back to the podcast,
• 22:01
  Speaker 1: and you can listen back to this in previous shows
• 22:03
  Speaker 1: right online at Cossfinancial dot com. You can also subscribe
• 22:07
  Speaker 1: at cossfinancial dot com. That's class k l aas Financial
• 22:11
  Speaker 1: dot com. There telph number six O eight four four
• 22:14
  Speaker 1: two five six three seven. We'll talk about a little
• 22:17
  Speaker 1: bit more about with Eric and CJ about stuff going
• 22:20
  Speaker 1: on at Class Financial, including the listener Money and Motion
• 22:24
  Speaker 1: listener question corner. We'll get to that so much more
• 22:26
  Speaker 1: next as Money Motion continues here on thirteen ten WIV
• 22:29
  Speaker 1: eight talking with our retirement planning professional CJ. Closs and
• 22:36
  Speaker 1: Eric Schwartz. Of course they come to us from Class
• 22:38
  Speaker 1: Financial website coss Financial dot com. That's class k l
• 22:41
  Speaker 1: aas Financial dot com. Great website to learn more about
• 22:44
  Speaker 1: Coss Financial. Also an opportunity there to submit a question
• 22:47
  Speaker 1: to be answered right on the program and the Money
• 22:50
  Speaker 1: in Motion listener question corner. And Carol writes in she says,
• 22:53
  Speaker 1: I'm in my early seventies and I'd like to start
• 22:56
  Speaker 1: giving money to my grandchildren each year for college and
• 22:59
  Speaker 1: future your needs. Now, I've heard gifting can help reduce taxes,
• 23:03
  Speaker 1: but I'm not sure how it works. Can I give
• 23:06
  Speaker 1: them without getting taxed? And does it help me avoid
• 23:09
  Speaker 1: other taxes down the road. In Eric, I'll drop this
• 23:12
  Speaker 1: one on you.
• 23:15
  Speaker 3: Yeah, thank you Carol for writing in and for this question.
• 23:18
  Speaker 3: It's a great question, and it coincides coincides with a
• 23:22
  Speaker 3: lot of the topics we talk about on the show.
• 23:25
  Speaker 3: Giving money to your grandchildren it can be generous, obviously,
• 23:29
  Speaker 3: but it can also help you on taxes. Now, much
• 23:32
  Speaker 3: like your children, they're not considered a charity, so we're
• 23:34
  Speaker 3: not getting any sort of tax deduction or immediate tax
• 23:39
  Speaker 3: benefit from giving to the grandkids. But you are able
• 23:43
  Speaker 3: to gift to your grandchildren without triggering a gift tax
• 23:48
  Speaker 3: or any sort of filing requirements. So you can gift
• 23:51
  Speaker 3: up to nineteen thousand dollars per person per year, So
• 23:55
  Speaker 3: not just your grandchild, but any individual and if you're married,
• 24:00
  Speaker 3: spouse can actually each give nineteen thousand dollars, so that's
• 24:03
  Speaker 3: a total of thirty eight thousand dollars per person per year.
• 24:08
  Speaker 3: These gifts down the road could reduce the size of
• 24:10
  Speaker 3: your taxable estate, which could help you avoid any future
• 24:14
  Speaker 3: federal estate taxes, especially large estate. Now, if you're if
• 24:21
  Speaker 3: you live in a state that has a state level
• 24:23
  Speaker 3: a state tax, this could also help reduce the amount
• 24:25
  Speaker 3: that you owe at death. If you're helping with college
• 24:29
  Speaker 3: costs directly, which was one of the things that Carol
• 24:32
  Speaker 3: mentioned there, you can pay tuition directly to the school
• 24:36
  Speaker 3: and that actually doesn't even count towards the nineteen thousand
• 24:39
  Speaker 3: dollars limit at all. And if you're making maybe you're
• 24:43
  Speaker 3: helping a grandchild out with medical bills, if you make
• 24:46
  Speaker 3: payments directly to hospitals or doctors, that actually also does
• 24:51
  Speaker 3: not even count towards that that nineteen thousand dollars limit. Now,
• 24:55
  Speaker 3: while these annual gifts don't give you an immediate income
• 24:57
  Speaker 3: tax seduction, right they're not charities, they do help reduce
• 25:01
  Speaker 3: the overall state in you know, could keep your your
• 25:05
  Speaker 3: federal estate under the federal tax threshold and potentially reduce
• 25:11
  Speaker 3: state level inheritance taxes. So yes, with the right strategy,
• 25:14
  Speaker 3: gifting to your grandchildren can absolutely help you avoid extra
• 25:17
  Speaker 3: taxes and support their future at the same time, especially
• 25:20
  Speaker 3: if you have a large estate.
• 25:22
  Speaker 1: Great stuff, Carol, thank you for the email, and of
• 25:24
  Speaker 1: course you can submit emails right at class financial dot com.
• 25:27
  Speaker 1: That's coss k l aa as financial dot com. Also
• 25:30
  Speaker 1: learn more about the team and listen back to this
• 25:32
  Speaker 1: in previous shows podcasts. Again all at Cossfinancial dot Com.
• 25:35
  Speaker 1: Telephone number six oh eight four four two five six
• 25:38
  Speaker 1: three seven. No charge for that initial get to know
• 25:40
  Speaker 1: your appointment Tech COSS Financial. It will be complimentary to you. Again.
• 25:44
  Speaker 1: They're telephone number six oh eight four four two five
• 25:47
  Speaker 1: six three seven. You want to hold on to that
• 25:49
  Speaker 1: telephone number because it's time now for the Coss Quiz
• 25:51
  Speaker 1: Question of the week. Works like this. In just a moment,
• 25:53
  Speaker 1: I'll ask you the coss Quiz question of the week.
• 25:55
  Speaker 1: You will then have thirty minutes from the end today's
• 25:57
  Speaker 1: program to call the Class Financial office right here in
• 25:59
  Speaker 1: Madison at eight four four two five six three seven.
• 26:02
  Speaker 1: If you are the first call correct answer, win this
• 26:04
  Speaker 1: week's prize, which is a twenty five dollars gift card
• 26:07
  Speaker 1: to Texas Roadhouse. This week's closs Quiz Question the week
• 26:11
  Speaker 1: is this you can begin to utilize qualified charitable distributions
• 26:16
  Speaker 1: at age seventy and a half. True or false telephone
• 26:21
  Speaker 1: number six oh eight four four two five, six three seven.
• 26:23
  Speaker 1: First call correct answer win this week's prize. That's twenty
• 26:26
  Speaker 1: five dollars gift card to Texas Roadhouse. No forget as well.
• 26:28
  Speaker 1: That's Class Financials office right here in Madison. That number
• 26:31
  Speaker 1: six oh eight four four two five, six three seven
• 26:34
  Speaker 1: CJ Eric. Always great chatting with both of you, guys.
• 26:37
  Speaker 1: Enjoy this beautiful Dan. We'll talk real soon.
• 26:39
  Speaker 3: Thanks Sean, Thanks Sean, Take.
• 26:41
  Speaker 1: Care, guys. News comes your way next to here thirteen ten.
• 26:43
  Speaker 1: L W youive you. This is Money in Motion with
• 26:45
  Speaker 1: COSS Financial Asset Advisors, LLC, a registered investment advisor registered
• 26:51
  Speaker 1: with the SEC. The contents of this show are for
• 26:54
  Speaker 1: informational purposes only and should not be considered individual investment advice.
• 26:58
  Speaker 1: Class Financial does not offer tax or legal advice. Any
• 27:01
  Speaker 1: opinion offered during the course of this show is the
• 27:04
  Speaker 1: opinion of that particular investment advisor representative, and not necessarily
• 27:09
  Speaker 1: the opinion of Class Financial. News comes your way next
• 27:12
  Speaker 1: right here on thirteen ten.