Settled Landscape: Lessons from the 2018 Tax Law Changes
The Foundation co-hosted with Halsey Associates Inc. (a part of Washington Trust Wealth Management) the presentation: Settled Landscape: Lessons from the 2018 Tax Law Changes. Panelists Karen Clute, Atty., Wiggin and Dana, John Gordon, CPA, Donald L. Perlroth & Company, Peter Secrist, Vice President and Senior Portfolio Manager, Halsey Associates, Inc. and Dotty Weston-Murphy, Senior Vice President for Development and Donor Service discussed the benefits and challenges of the 2018 tax law changes and the impact on community philanthropy. The program was moderated by Kimberly McCarthy, Vice President, Chief Wealth Management Tax & Benefits Officer, Washington Trust Company. The program also provided continuing professional education credits for accountants and lawyers.
The Foundation is committed to advocating the value of philanthropy by building a knowledgeable community of professional advisors and offering informative programs about industry best practices for strategic philanthropic and estate planning.
What We Heard
Significant Philanthropic Tax Benefits Continue Under New Tax Law
- There are multiple gift planning options for philanthropic individuals that can be tailored to specific preferences such as control, convenience, and income- and estate-planning goals that provide tax relief.
- The two most popular and effective strategies that have emerged: (1) Qualified Charitable Distributions (QCDs) from Individual Retirement Accounts (IRAs) for people who have attained age 70.5, up to the lesser of the required minimum distribution or $100,000, and (2.) the Donor-Advised Fund (DAF), especially if your client is using appreciated property. Both strategies have the advantage of reducing Connecticut income tax that would, if paid, likely not be federally deductible.
- The increase in Adjusted Gross Income (AGI) limits from 50% to 60% for cash gifts is appealing and the 5-year carry forward has not changed.
- Estate Planning is still important.
- Connecticut estate tax threshold, although increasing is still lower than the Federal Government, making charitable giving an appealing option for some individuals.
- Individuals can still donate tangible assets such as property, antiques, cars, etc. as part of their charitable planning.
Other Interesting Effects of the Tax Law Changes
- As current and future volunteer board members, professional advisors need to be aware of the 21% excise tax on “remuneration” of over $1M (aggregated) for nonprofit executives and its impact on the organization’s budget as well as its ability to attract talent.
- There is a 1.4% excise tax on annual endowment returns of 35-targeted colleges/universities.
What You Can Do
- Inform your clients about Donor-Advised Funds
- Encourage bunching/batching your client’s annual charitable gifts to allow for itemization.
- Donor-Advised Funds provide an immediate charitable deduction, allows gifting on the donor’s schedule and can be an effective way to leverage the next generation.
- Discuss IRA QCDs with clients aged 70.5 and older as a way to reduce AGI. Since these assets grow tax-deferred, they are subject to income tax when distributed to heirs. By directing the distribution to a charity, your clients can pay lower income taxes. Here is a link to an example.
- Suggest your client gift appreciated securities as a way to avoid long-term capital gains, especially if your client can itemize and deduct the full value.
- Use estate-planning opportunities to discuss blending testamentary and current gifts as a way to take advantage of the lower Connecticut estate taxes.
- Consider philanthropic giving when your client has a life event such as:
- Sale of business
- Estate Planning
- Death of a family member
The Chronical of Philanthropy: "Gifts to Charity Dropped"
Give Tomorrow: Planned & Legacy Gifts
Give Today: IRA Charitable Distributions
Donor Advised Funds Made Easy
For additional information or if you have any questions, please contact Liana Garcia at LGarcia@cfgnh.org or call 203-974-1646