Make Charitable Gifts by Year End to Save Deductions from the New Tax Law

By Jim Glass, J.D.
IRA Analyst

Charitable GivingThis is the season for charitable giving. And this year it is especially so for those who want to get the most tax benefit from charity deductions before new Tax Cuts and Jobs Act becomes law. The Act effectively reduces the tax-saving value of the charitable contribution deduction for many.

While details may change, at this writing the Act increases the standard deduction on joint returns to $24,000 from $12,700, on single returns to $12,000 from $6,350, and eliminates many popular itemized deductions. Because taxpayers claim itemized deductions only when their total exceeds the standard deduction, lawmakers project that under the Act the number of taxpayers who itemize deductions may be reduced by half or more.

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C&J Wealth Advisors’ Campaign Raises Money for ADFAC

Money for ADFACC&J Wealth Advisors engaged their client base in a fundraising campaign that generated over $4,800 for Aid to Distressed Families of Appalachian Counties’ (ADFAC) School Supplies Program. For every client donation, C&J Wealth Advisors made a financial pledge and volunteer efforts. This will help to purchase approximately 96 backpacks and supplies.

ADFAC’s 2017 goal is to provide 3,500 backpacks filled with school supplies to underprivileged Anderson and Morgan County children. In 2016, ADFAC helped 3,060 children in 30 area schools to have the necessary supplies. According to ADFAC, this was only 34% of the children that could have benefited from the 2016 program and the need grows.

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Avoiding Charitable IRA Beneficiary Mistakes in 5 Easy Steps

Can IRAs be used to benefit a charity?

Avoiding Charitable IRA Beneficiary MistakesIRAs can be a great source of funds to provide a benefit for a favorite charity, but using these funds can create several traps that must be avoided to maximize benefits to both the charity and other IRA beneficiaries.

1. Name the charity directly on your beneficiary form. The money will go directly to the charity, avoiding both the time and expense of probate. Additionally, the distribution to the charity will not be considered income to the estate of the deceased IRA owner.

2.  Set up separate accounts. Consider transferring the portion you intend to leave to charity into a separate IRA account. If other beneficiaries inherit the same IRA as a charity and the charity’s portion is not “cashed out” or split within the IRS prescribed time frames, the stretch IRA for the living beneficiaries will be lost.

3. Reverse your bequests. If you have made provisions for certain charities under your will and also have retirement plans, an effective tax strategy would be to reverse the bequests with non-retirement assets. This way, the charity receives the same amount that you were going to leave them in your will, but your heirs will end up with more, because the money they will inherit will not be subject to income tax, as the retirement plan would be.

4. Don’t convert assets you plan to leave to a charity. Many charitable organizations and religious groups are structured tax-exempt organizations. When an IRA is left to one of these charities, the charity does not have to pay income tax on the distribution as other beneficiaries would. As a result, if you intend to leave your IRA to charity, converting it to a Roth IRA is generally not a wise move. Why pay income tax on the conversion when the money will be going to the charity tax free anyway?

5. Beware of naming a charity as a trust beneficiary. A charity is known as a “non-designated beneficiary,” because it does not have a life expectancy. In general, trusts are also non-designated beneficiaries. Certain trusts, known as see-through (or look-through) trusts allow for post-death distributions to be stretched based on the trust beneficiary with the shortest remaining life expectancy. Since a charity has no life expectancy, if it is named as a beneficiary of a trust that is also inheriting an IRA, it can eliminate the stretch for the remaining trust beneficiaries.

5 Points to Know About Qualified Charitable Distributions

You Must Be Age 70 ½

Photo by photostock familyIRA owners who are age 70 ½ and over are eligible to do a Qualifiied Charitable Distribution (QCD). This is more complicated than it might sound. A QCD is only allowed if the distribution is made on or after the date you actually attain age 70 ½. It is not sufficient that you will attain that age later in the year.

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