December 23, 2024 • 38 mins
Join Aaron and Nic in this episode of Coffee with Your Retirement Coach as they discuss the challenges of holiday gifting while managing taxes. They detail how to make sure Uncle Sam isn't on your Christmas list by balancing generosity with smart financial planning, sharing valuable lessons on utilizing Qualified Charitable Distributions (QCDs), Donor-Advised Funds (DAFs), and gifting appreciated assets. The episode is packed with actionable tips for retirees and anyone looking to make impactful, tax-efficient gifts. Tune in for stories, strategies, and advice on how to give thoughtfully during the holiday season.
00:00 Introduction and Common Holiday Gifting Dilemma
00:30 Combining Generosity with Smart Financial Planning
01:17 A Black Friday Story: Lessons in Generosity
03:32 The True Purpose of Gift Giving
04:39 Maximizing Tax Benefits with Charitable Giving
05:45 Understanding Qualified Charitable Distributions (QCDs)
13:09 The Power of Donor Advised Funds (DAFs)
17:57 Generosity and Financial Planning
18:42 Establishing and Managing Donor Advised Funds
19:24 Guardrails and Financial Considerations
20:45 Gifting Highly Appreciated Assets
24:41 Living Legacy and Tax Strategies
30:30 Charitable Remainder Trusts
34:05 Recap and Final Thoughts
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Your Retirement Coach is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.
Your Retirement Coach is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Aaron (00:00):
Today on coffee with your retirement coach, we're going to talk
(00:02):
about how to be more generous withthe organizations that you care about
in your family and not uncle Sam.
All right, grab your favorite mug.
It's time for coffee withyour retirement coach.
Welcome back to coffee withyour retirement coach today.
I think I've got a common problemhere and tell me it's the kids.
(00:22):
I mean, they're not the problem,but it's the holiday season.
I'm trying to do equal and fairgifting, but I got another family
member getting in the white.
Oh, who's that?
It's not the wife.
I know when I saw the eyebrow,I knew what you were thinking.
Yeah.
It's my favorite uncle.
Your favorite uncle.
Yeah.
Uncle Sam.
That's your favorite uncle.
He gets the biggest hit this time of year.
When we look at thatspreadsheet, his column is fat.
(00:44):
Fair point.
Fair point.
But I think you and I can talk about howthe idea of what we owe in a way of taxes.
And our generosity, how thosetwo items can come together.
I love
Nic (00:55):
that, Aaron, because, you know, I've been dwelling on this, this comment,
this, this, this idea that combininggenerosity with smart financial planning
is one of the best things we can do.
Aaron (01:08):
It is.
It
Nic (01:08):
is.
And under the current law, theyactually play well together.
They
Aaron (01:11):
do.
You know, knowledge is power, Aaron.
Attention, holiday shoppers.
Uh, you know, speaking of knowledge,we learned a valuable lesson.
We've missed you buddy.
Listen,
I'm back.
You're back.
And everybody's going toget full Aaron this week.
That's that's a guarantee.
(01:33):
So we were in New York recently.
Yeah.
Yeah.
And the family, do wewant to mention when?
Well I'm getting there.
Okay.
Okay.
The family wanted to go to Macy's.
Macy's.
Macy's.
Yeah.
And we were like, Oh yeah,well we need to go today.
The Macy's of all Macy's.
Herald Square.
We need to go today becausewe're heading home soon.
So we headed to the Herald SquareMacy's and as we go to enter the
(01:57):
place, we realized something.
It's Black Friday.
We have lost our minds.
You're ever loving mind.
The crush of humanity was overwhelming
Nic (02:10):
Well, Aaron, you're such a gentleman and I know I have to tell this
Aaron (02:14):
story.
We have we don't
Nic (02:16):
Aaron I'm not doing this podcast without the people the people need to
know All right, we're gonna take a little
Aaron (02:21):
sidetrack to the point of this story.
I He's a gentleman.
I'm a southern gentleman.
And when I came to to enter the store.
People are everywhere.
And there is a couple thatare absolutely struggling.
So I opened the door, help themget situated and get out the door.
And then I work ongetting my family inside.
And then we all get in and getsituated the best that we can.
(02:45):
And then Peyton, my son, my youngest, hegoes, that's the guy that you helped out.
And he was being arrested, uh,him and his female, uh, um, uh,
counterpart counterpart, uh, apparentlythe, uh, North face jackets in
their arms were not their owns.
They were property ofthe Herald square Macy's.
Uh, still there had been no transaction.
(03:05):
I'm pretty
Nic (03:06):
sure we're going to hashtag this later, uh, eating and abetting a criminal.
That's where Parker, my
Aaron (03:11):
oldest went.
He said, Oh dad, I think they'regoing to want to talk to you.
That's, uh, you playeda strong hand in there.
Almost escape.
David.
Nic (03:18):
Yeah,
Aaron (03:19):
but the reason that we bring this up is because there's often times
where we get excited if we're wantingto get a gift, although sometimes
it's going to be out of obligation,it's to honor the relationship with
someone and to show them that we care.
We're celebrating the birthday, theholidays, a milestone, whatever.
And then when you go to the store,Or you go online to try and figure
(03:39):
out what they might want, whatthe size is, all of that stuff.
It can rob you of some of theexcitement of the gifting.
Well, in,
Nic (03:48):
in this time of year, it's easy to lose focus on what really the
purpose of this time of year is.
And as we're celebrating the best giftin the world, the ultimate gift, you
know, uh, it's easy to lose focus.
Lord.
I mean, uh, it is, it is.
And, um, but today.
Um, I thought it'd be reallyawesome to focus in on not the
(04:10):
gift receiving, but the gift
Aaron (04:13):
giving.
Well, and Nick, that's where I was headed.
If we're doing sometimes a moresubstantial gift, and a lot of times,
uh, in a large portion of our audienceis retirees, they get excited about
legacy or gifting while they're alive.
Making charitablecontributions making an impact.
Yeah.
But just like we felt the crushand there was the trade off of our
(04:34):
time and our comfort in that store.
Uncle Sam can take a big piece and allof a sudden our gift when shrunk down,
it can get frustrating and for, andwe've seen it for some of our clients.
It's almost pushing to the pointof, I don't even want to do it.
If I have to take that kind of ahaircut, if this much has to get
lost in the transition, I don'teven know if I want to do it.
Nic (04:54):
Yeah.
So,
you
know, Aaron, I think there are afew things that, um, really hinder
people from making really smart moves.
Okay.
And when, you know, we talk aboutsmart moves today, it's smart
moves with our charitable giving.
So we want maximum tax benefit,maximum impact, and how do
(05:16):
we marry those two together?
That's right.
Maximize the impact to thoseorganizations that we care about.
Our loved ones.
But also just be really smart about it
Aaron (05:26):
and bring back the feel good to it.
We can get excited about it.
It takes knowing the rules, beingaware of the options, but that's
what we're going to go over today.
If these things resonate with somethingthat you've been feeling inside that you
wanted to do for a child, a grandchild,an organization that you care about.
Our hope is that these, youknow, listeners are going to
come away from this, you know,episode thinking I could do that.
(05:48):
You know, need to have a conversationwith the CPA need to have a conversation
with my financial planner, but I've gota better method of attack for that thing
that maybe I've always wanted to do.
Um, but now really kind of have an ideaof maybe one of the paths I might take.
So let's kind of startgoing through those Nick.
Um, speaking of, uh, uncle Sam andthe inevitable taxes, we've talked
(06:09):
on the, on the podcast beforeabout required beginning dates
and required minimum distributionsand for people that are planning
towards that or in the thick of it.
QCDs have proven an awesome,awesome opportunity to
partner with their generosity.
Can you explain what the, you know,again, we talk about alphabet soup,
what that acronym stands for and,and kind of where you fall into the
(06:29):
crosshairs when it's appropriate.
Yeah, well, first of all, it
Nic (06:32):
is alphabet soup.
So, you know, I know.
Uh, when I first got in the industry,one of the things our founder, who's
my dad said, he said, things needto be sophisticated enough to work
well, but easy enough to understand.
So, so let's unwind some of this, right?
So a QCD is qualified charitable donation.
Okay.
And now, In order to do this,you have to have an IRA or some
(06:57):
form of retirement account.
And what this is probably the closestthing to having your cake and eating it
too, especially when it comes to taxes.
Okay.
Now.
A lot of people think that youhave to wait till required minimum
distribution age to start doing QCDs.
(07:17):
But actually, the IRS allows for youto start it as early as 70 and a half.
Now, I
Aaron (07:23):
want you to say that again.
Required beginning distributionplanning doesn't have to
begin the year that you start.
We can years in advance start talkingabout things like QCD and Roth conversion.
Oh, absolutely.
Conversations appropriateway ahead of time.
I've got a few clients that I'mhoping they're hearing this.
Nic (07:44):
So, well, you know, so now we've got the new RBD alphabet suit, right?
Required beginning date for IRA holders.
That's age 73.
Correct.
But IRS says, Hey, if you want to dothis cool thing, this QCD, this qualified
charitable distribution, and I'm goingto share with you how powerful this is
in just a second, we're going to let youstart that as early as age 70 and a half.
(08:09):
Now here's the power of this.
If I take a distribution, just any kindof distribution of a normal traditional
IRA or 401k is going to count asincome on my income tax return, right?
And I'm going to have to pay taxes onthat asset or that distribution, right?
So I'm going to have to pay taxes.
And if it counts towards income, itcould push me into higher tax brackets.
(08:31):
Absolutely.
Right.
Ouch.
Yeah.
Well, and then if we're, you know, we're,you know, we love the organizations
we care about, we're writing thecheck on Sunday, we're given to those,
you know, the museum or whatever.
Okay.
We're making those gifts out of cash.
What if there was a better way?
Here's the better way.
Yep.
If you're 70 and a half and you havean IRA or a 401k, you can fill out
(08:55):
a distribution form and elect a QCD.
And that same 10, 000 you're givingto that organization you care about,
you can give it out of your IRA.
Now, why would somebody do that?
The power in this is really two things.
One, when you take that distribution forthe QCD, It doesn't count as ordinary
(09:16):
income on your tax return, right?
Right.
And number two, it's a non taxable event.
That's right.
It's even better thangetting a tax deduction.
You're writing the check.
It's great.
You get that tax deduction, but if itcomes directly out of the IRA to that
organization, you care about as a QCD.
Not, it's not counted as incomeand it's a non taxable event.
(09:39):
It is literally having your cake and
Aaron (09:41):
eating it too.
And the question that we getfrom our clients, Nick, is
where does the other shoe drop?
And it doesn't.
Not a taxable event for you and nota taxable event for the charities
and organizations that we care about.
Yeah,
Nic (09:50):
yeah, no.
And so, um, if you are interested,we always say this in like every
episode, seek wise counsel.
Okay.
There's a few nuances to make this work.
Number one, Aaron, yourhands can't touch the money.
So you can't say, send methat 10, 000 from that IRA.
(10:11):
Don't withhold the tax.
And then I'm going togive it to whoever, right.
A five Oh one C three of my choice.
You can't do that.
Yeah.
Common misstep, right?
That's common misstep.
That's going to count as ordinaryincome on your tax return.
Yeah.
Maybe pushing the higher bracketsand yes, you will get a deduction.
But you might as well havejust written the check.
Okay.
Right.
So you've got to follow the appropriatesteps to make this happen and happen
Aaron (10:36):
right.
Yeah.
No, no, no.
It's so important, Nick.
Now, so that would be leading upto our required beginning date when
required minimum distributions begin.
That if we don't take under the currentlaw, there's a 25 percent penalty.
Can I count those qualified charitabledistributions towards my RMD after
I passed my required beginning date?
(10:56):
And
Nic (10:56):
here's what's so perfect, Aaron.
I know, you know, the answer.
Yes, yes, yes.
So if you don't need the distribution,like you don't need that required
minimum distribution, right.
And let's just say it's30, 000 this year for you.
Aaron (11:11):
Yeah.
Nic (11:12):
And you normally give 10, 000 away.
You can take that 10, 000 as a QCD pointedin the direction of the charities and
organizations you care about, right?
And then you only have the 20, 000remainder that you have to take as
a required minimum distribution.
The sweet thing gets sweeteris what you're telling us.
Absolutely.
(11:32):
Now there is a limit.
you can only do this upto just over 100, 000.
It is being indexed.
I think it's 108 or 109, 000 next year.
I can't remember the exact number, butthe bottom line is if your required
minimum distribution is all the wayup to 100, 000, you could QCD the
full 100, 000 to those organizations.
Aaron (11:53):
Well, and those would be the guardrails that we often talk about.
We want to make sure two things, one,it needs to stay with within the limits.
You know, stay within that a hundred K.
And then the other piece is if thismoney does not meet a budgetary
need, if you don't need yourrequired minimum distribution for
operational costs within the home,then we're talking about these plans.
(12:14):
And again, that's why I wantto talk to our CPAs, financial
planners want to seek wise counsel.
So while we're talking about that,let's talk about the next step up.
And this is one that I get reallyexcited about because I feel like a
lot of For people that are generousnow and know they're going to remain
generous and they need multi yearplanning to come alongside that donor
(12:37):
advised funds, the DAF, a whole notheracronym, but yeah, donor advised funds.
Nick, let's introduce them.
Nic (12:42):
Yeah, well, I think donor advised funds are one
of the most misunderstood and.
Most unknown planning tools in thecharitable giving world right now that
anyone in the middle class could use.
Absolutely.
I mean, this is not a wealthy persontactic or tool, although many, many
really affluent people, including clientswe have, I mean, they use this as a
(13:05):
planning tool, but the bottom line isthis can be used for so many people.
And it's so inexpensive to do, Aaron.
It's so easy.
It's inexpensive.
So
here's, the idea.
Aaron (13:17):
The level of tax planning that it unlocks is worth those nominal
costs.
Nic (13:22):
So big, so big.
So again, we're going around thisidea of, we want to be smart with
our financial planning and havethis high impact charitable giving.
So here's the idea.
I coined a term years ago, and it wasthis, term called bunching deductions.
Okay.
And really I've heard people use itin different contexts, but the way
(13:44):
we use it is if I know that I'm goingto give $10,000 a year now for the
next five years as an example, right?
Okay.
And so I, I know that's going to happen.
And I look at my bank account,my savings account, I look at my
brokerage account and I identified.
$50,000 Okay.
(14:05):
Now we can, you know, drill down in thisin just a second, but I could take $50,000
put it inside a donor advised fund.
And when I do that, I'm getting fiveyears worth of deductions in one year.
Yeah.
Okay.
Well, why would you do that?
(14:26):
Well, let's say youhad a really big bonus.
You weren't expecting you wantto offset the taxes on that.
Or let's say, you know, in the waythat we do it in our firm, mostly
we we want to get really aggressivewith getting more tax free money.
Yeah.
So we're gonna look at doingOf five years worth of a Roth
conversion all in one year.
(14:48):
Now that money inside that Roth beingtax free now gets half a decade of
tax free growth versus doing a littlebit each year for those five years.
So it allows us to front loadRoth IRA conversions, get
the big deduction up front.
But the power of the donor advicefund is I can choose when I gift it.
(15:12):
And again, it's got to be to a 501c3or it's got to be a charity, right?
It's got to be a legitorganization, right?
But I can change my mind.
You know, I might love this particularmissionary serving, you know, somewhere,
uh, around the world and I want to giveto the organization that supports them.
Or maybe it is, you know, maybe wehad a loved one that lost their lives
(15:35):
to cancer or something like that.
Well, maybe we want to give there,or maybe it's the local history
museum, or maybe it's one Whatever.
Yeah.
Okay.
We can direct how much money wewant to go to those organizations.
We can direct the frequencyand we can change our mind.
The only thing we can't do is thatthis is considered a completed
(15:57):
gift, so we can never call thatmoney back into our own hands to
use it for discretionary spending.
One way street.
So it's once it's in there, it hasto be marked for giving, right?
But you know what, Aaron?
Here's the thing.
Instead, for five years, maybe Isay, I want to, I've had a lot of
growth in it because it was invested
Aaron (16:14):
inside.
And that's the point that I feellike there, people are trying to
understand the concept and theymiss that other added value.
What goes in can be invested.
And so these assets can beearning interest dividends.
They can grow.
Nic (16:29):
Yeah.
Aaron (16:29):
Yeah.
Nic (16:30):
So if I put in 50, 000 over the course of the five years, it could have
grown to 65, 000, you know, and I've paidzero taxes on the growth of that money.
I will pay no taxes on any of that profit.
And the organizations that receivethe profit will pay no taxes doing
Aaron (16:48):
here.
A funny story with us.
Talk to me.
It's been a fantastic year.
We're recording this at the end of 2024.
The markets have done well.
Yeah.
I've got a client that this year theystarted their donor advice fund, right?
Yeah.
And we've been gifting out of it.
They gave us the instructions,the information, everything we
needed so that their charitableobligations are still being met.
And in the same timeframe thatthey were previously doing no
interruption, we had a review and theylooked at their donor advice fund.
(17:11):
Now, again, it's been astrong year in the market.
They said, when are wegoing to start giving?
And it's like, we've already startedgiving, we've met the obligations for
this year and they're like, no, no, no.
The amount that's in thereis the amount that I put in.
And I said, that's because it's invested.
Now.
It's not going to be the same everyyear, but what an exciting thing
in the year that they chose to begenerous, that they stepped in, they
(17:32):
saw that and they saw those results.
And again, we're talking about marryingfinancial planning with our generosity.
What a neat moment for them to have begun.
Oh, 100%.
Nic (17:43):
Uh, man, I love that story.
And you and I have a lot of stories withhow people have used this thing over time.
And, you know, in a few minutes, we'lltalk about a really, really high impact
strategy with a donor advised fund,but the big Big takeaway here is you
can establish a donor advised fund.
You can name it what you want to name it.
(18:03):
Like mine's called theyeoman's family foundation.
I think, okay.
Um, we can direct the frequencyand the amount that's given.
We can stop and startgifts anytime we want.
It can be invested and it's.
Most of these that I'vereviewed are extremely low cost.
(18:23):
I mean, even in our firm, Aaron, wecut our costs basically in half when
we're overseeing these things becausewe want to maximize the amount of
money that's going to the organizationsthat these people care about.
Absolutely.
Aaron (18:36):
Absolutely.
I love that.
And I love that we do that.
Um, so for this, ParticularAvenue, Nick guardrails for here.
We would want to make sure thatwe realize it's a one way street.
We don't want to put anythingin there that we're not going
to be able to live without.
The other thing is we want to, you know,speak to our financial professionals.
We want to be mindful of thestandard deduction in that year.
That number is going to play in bigwhen you compare that to what despite
(18:59):
because five years worth of givingIs different for every individual.
So again, when we're kind of workingthrough those things, as we're going
to say with almost every topic thatwe put on here, great conversation
to have with financial professionals.
Oh, absolutely.
Nic (19:10):
Oh, and I like that you're bringing that up because you'll again,
smart financial planning here, youknow, tying it together with that.
Um, you know, when are you retiring?
If you're not retired.
Right.
Yeah.
Um, you know, timing that out ortiming when you're receiving a lump
sum distribution, uh, timing when youexpect to receive an inheritance timing,
you know, the sell of a property thatwas highly appreciated, like all of
(19:34):
these things need to be considered.
And that's why financial planningis so important is, you know,
we want to be very intentional.
We want to be haphazard.
Like, like you were talking about earlier.
I don't want uncle Sam to be mybiggest beneficiary, but through,
uh, sometimes some good thingsthat we do that weren't best.
Aaron (19:55):
Yeah.
We overpay uncle Sam all day long.
Absolutely.
Absolutely.
Uh, Nick, we're about to transition.
We're gonna talk about gifting,highly appreciate assets, but we
have a pretty incredible story fromthis year as well about how this
tied in with donor advised funds.
If we kind of, I love it.
Some of these things play well together.
Can you kind of talk about how somethingthat had such a good feeling to it,
(20:18):
but then Uncle Sam's portion kind ofbrought the feelings down, but then it's
like, don't worry, you're not stuck.
Can you kind of walk us throughthat scenario with these clients?
Oh, yeah.
So we've
Nic (20:28):
got some, uh, amazing, amazing clients.
I mean, they're just, we work with someof the most generous people really.
Uh, and most of our folksare salt of the earth, middle
class millionaire type folks.
Okay.
But here's the deal.
Uh, we've got this client that itwas a multi generational client.
Okay.
We work with threegenerations of this family.
(20:49):
Yeah.
Okay.
And, uh, the patriarch of the family,he passes away, he and his wife had both
passed and they had, uh, left the familyin a trust, this highly appreciated
asset that has grown for over 40 years.
Right.
Okay.
And there's a punishment to that success.
There's a big punishmentbecause it's 90 percent profit.
(21:12):
That's never been taxed.
Unfortunately, in the type of trustthat was set up for this family and not
discussed by the attorney, by the way.
Gotcha.
Okay.
Uh, this is a type of trust that doesnot give a step up in basis when,
you know, the grantor passes away.
Yeah.
Okay.
(21:32):
So here we have, again, 90plus percent of a really highly
appreciated asset, all profit.
Subject to capital gains.
All subject to capital gains.
And uh, this couple is extremely kind,extremely generous, very faithful people.
And so.
(21:53):
You know, they're writing checks.
Aaron (21:55):
Everywhere.
So many different organizations.
So many, yeah.
Right.
Tell me something you care about.
They probably do too.
? Yeah.
. Nic: Um, and so, uh, as we were talking, you know, we identified,
hey, this is something they'reprobably gonna continue to do.
Yeah.
Right.
So what a lot of people don't realizeis that without selling the asset, we
(22:18):
could pick up shares of the asset, pullit from that trust, and we could place
it inside that donor advised fund.
Yeah.
Taxable event,
Nic (22:29):
Non-taxable event.
We paid zero taxes in capital gains.
Right.
And we got a tax deduction.
Yeah.
because it went into a,uh, the donor advised fund.
Right.
So not only did we legally not pay taxeson capital gains, we also got a deduction.
(22:51):
Right now, when you gift highlyappreciated assets, there is a different
way that's calculated than cash.
Again, seek wise counsel.
However, what a high impact for
them.
Aaron (23:03):
Yeah.
Now, sometimes you don'tjust sell an asset.
To take the cash out to, to buysomething, you might want to reallocate
the way that you're invested, but the,the, the situation for them is whether
it was touched or sold to reallocatethat gains was going to happen now.
Inside the donor advised fund alreadyreallocated to a, to an allocation
(23:23):
that makes sense in today's market.
Nic (23:25):
Absolutely.
And what we did, Aaron is we effectively,to your point, we took it from being in
Single position, one single asset, right?
And now it's well diversified andthey've paid no taxes to do this.
And it's so low cost.
Again, it was a win,win, win for the client.
Aaron (23:43):
So that's talking about inheritance.
When would gifting an appreciated asset beappropriate and what does that look like?
And what would be thereasoning behind that?
Because that's where we're headed.
Nic (23:55):
Yeah.
Well, you know, Aaron, what I really likeis, you know, a lot of our clients like
the idea of being a living legacy today.
Yeah.
Right.
So they see it.
They want to see the children and thegrandchildren that they're gifting
to be able to enjoy it and maybe it'shelping them start a small business
or maybe it's helping them purchase anew safe car because they've got young
(24:18):
children and they want to make surethey're they get from point A to point B.
You know, so there's all thesedifferent reasons and sometimes it's
just a I love you Christmas gift atthe end of the year that the client
says, look, they don't need stuff.
They got stuff.
We just want to give them some cash.
Yeah.
Right.
Yeah.
And so many times our clientsare in higher tax rates than the
(24:39):
children and then the grandchildren.
Absolutely.
Right.
And so the, a lot of people don'tnecessarily realize this, but there
is a 0 percent capital gains rate.
If you don't make acertain amount of money.
So what if we took that highlyappreciated asset and let's say
we're going to give 1, 000, uh, tofive different grandkids, right?
(25:00):
Right.
Yeah.
So that's 5, 000.
What's the capital gainsrate of that grandkid?
Probably zero.
Exactly.
Exactly.
Really low.
Zero or 15 percent maybe,but let's say zero.
Yeah.
So.
Now I've taken a highly appreciated asset.
I've given them a thousand dollars ofshares, you know, to the five grandkids.
(25:23):
Now mom and dad can help them sell itif they need help, or they could sell
it on their own if they're of age.
They pay zero taxes to do it.
Right.
It was better for theclient to keep the cash.
Yes.
To give them the appreciated asset.
Yeah.
And they've paid no taxes to do this.
Right.
This is a sweet,
Aaron (25:43):
sweet deal and it's overlooked all the time.
Let's put it in some layman terms,and this is not advice, this is
just a, you know, I want to givemoney to my kids or grandkids.
I was planning on giving'em a thousand bucks.
I bought that Nvidia stock thatdid really well, and if I touch it.
I'm going to get penalized.
I could give them a thousand dollarsworth of NVIDIA and then the thousand
(26:06):
dollars that I would have given them,I could invest in more NVIDIA after a
certain amount of time or something else.
Like, I mean, this is not, again,this is not a super wealthy strategy.
This is anybody that hasgot appreciated assets.
It's a great way to wipe out the gains.
If you're already Charitablyinclined or in a generous mood,
(26:26):
depending on how the kids acted.
That we, we, the listhas been checked twice.
We just need to look at it.
Nic (26:30):
Yeah.
So being very intentional,it definitely matters.
And once again, uh, we are notadvising or recommending any individual
stock or security, but that isa great example of a real life.
Clients that have ownedthat particular holding.
And it's such an easy thing to give,uh, when you've got such a massive
(26:53):
amount of appreciation, uh, versus cash.
So if you need help, or youwant to ask questions about how.
best to go do that for your kids orgrandkids, you know, uh, hit us up,
connect at your retirement coach.
com connect at your retirement coach.
com.
If you have questions about how tostructure a qualified charitable donation,
(27:14):
a donor advice fund or gift to the nextgeneration, highly appreciate assets.
Uh, we'd love to talk youthrough how to do that.
Aaron (27:21):
We read those emails because the coaches aren't just behind the clipboard.
They're behind the keyboard.
So Nick, can you kind of hit me?
And I know a time wise we need tokind of start wrapping things up.
Could we just do some rapidfire other things that might be
appropriate or just conserve?
You know, I, one of the big thingsthat you and I keep saying is if
you're going to give, give it thought.
Nic (27:40):
Yeah.
Aaron (27:41):
Don't not give, but give it thought.
Yeah.
So some of the other things thatI just like to knock off, um,
revisit the bunching, uh, of thecharitable contributions, uh,
a charitable remainder trust.
And then of course the King.
Cash could we kind of hit those thingsin succession and then I'll get us
wrapped up and we'll get out of here
Nic (27:58):
Yeah, well, why don't we hit the easy one?
Yeah, which is the last one first?
Okay.
I mean cash I mean cash is still cash.
Everyone loves cash You I mean, it'sthe most you know, obviously liquid
easy to use asset You're also goingto probably get a higher percentage
of deduction and gift, gifting cashinstead of a highly appreciated asset.
(28:21):
Again, talk to your CPA or yourfinancial professional, but that is
certainly a very, very easy thing togive and who doesn't love cash, right?
Right.
I prefer cash over the gift card.
Aaron (28:32):
It always fits.
I don't ever have to return it.
Yeah.
Nic (28:35):
Yeah.
Um, you know, the second thing,Aaron, that you just mentioned
was again, revisiting theidea of bunching deductions.
So you don't have to use a donor advisedfund to give a multiple years if you
have a really excellent income year.
You know, uh, this year has beenextremely good for us in the market.
As an example, uh, many people aregetting bonuses because their companies
(29:00):
have performed really, really well.
Well, if you know that you're planningon giving next year, just like you
gave this year, you know, this year,Nick, we gave 10, 000 to our church.
We plan to give 10, 000 again next year.
Maybe consider bunching two years ofgifting into this year and contact your
church and let them know, Hey, You know,we're going to go ahead and bless you.
(29:21):
We're going to make sure that youget this, uh, tie their offering,
uh, by December 31st, but itwill be a 2024 and 2025 gift.
Aaron (29:30):
Yeah.
Yeah, no, that's great.
That's great.
Last thing in there, Nick.
And this is, I think this is onethat people get anxious about, but
for the ones that it truly fits.
And it works.
We've seen a lot of success incharitable remainder trusts.
Nic (29:43):
Yeah.
So charitable remainder trust, I thinkare going to be a tool that's going to
get more and more popular and here's why.
Now there is the version of this inusing a charitable remainder trust that
I can take an asset that's appreciated.
I can get a benefit.
big, big deduction, sometimes even amulti year deduction, uh, in place to
(30:05):
get in a charitable remainder of trust.
And then that trust over my lifetime ormy and my wife's lifetime, as an example,
gives us income each and every year.
So some people treat it almostlike it's giving you a pension.
Okay.
And because you got that big, bigdeduction in that first, you know,
year, two or three years, um,You're able to, uh, you know, not
(30:28):
have to pay the taxes, obviously.
Right, right.
But during that period of time, at theend, um, you have to have, I believe
it's 10 percent of the remaining balance.
So you could have spent 90 percent ofthe asset and that remainder amount,
the charitable remainder trust, theremainder amount has to go to charity.
It's gotta go to the causes that youcare about, but Aaron, once it's set up.
(30:52):
You can change it throughout thecourse of that 20 year period of
time of you taking distributions.
You could change the organizations.
You can change who thecharity is or the nonprofit.
There's still flexibility within there.
Yeah.
So it's a powerful tool.
Now we may visit thisdifferently another day.
It definitely deserves a deeper look.
But, uh, if you are thinking about nextgeneration and getting a retirement
(31:19):
account to them with a secure at newtenure rule, you know, So that, that
retirement account has to be liquidatedin most instances by the end of that
10 years for your beneficiaries,excluding spouses and, uh, disabled,
uh, folks, some different nuances there.
Uh, but for most people at the end of10 years, it's gotta be liquidated.
(31:40):
Well, what if you wanted tostretch that retirement account
over 20 years or a kid's lifetime?
Well, looking at charitable repayment.
charitable remainder trust as thebeneficiary of an IRA could be
a really powerful planning tool.
Now, Aaron, there's one that youdidn't mention that I'd like to hit.
Aaron (31:56):
My list is not exhaustive.
Nic (31:59):
It's a good list.
Thank you.
It's a good list.
What you got off menu?
You ready?
Yeah.
We have seen a lot of clients over theyears want to help children buy homes.
Aaron (32:13):
Yes.
Nic (32:15):
So, one of the ways that we've looked at doing that, the problem
is how much can you gift, right?
Right.
So you've got gift taxlimits, like 18,000 right?
Well, if a home is, 300,000 or 400,000that you're wanting to gift to a kid, that
far exceeds that 18,000 quickly, right?
(32:36):
So, um, You know, one quick ideaof you with a concept of gifting
is what if you bought the home andyou held the mortgage for the kid?
And what if you structured the mortgagepayment as an example to be approximately,
I don't know, $18,000 a year?
(32:56):
Yep.
And what if you forgave $18,000in mortgage payments per year?
Right.
So again, there's a lotthat goes into that.
Aaron (33:04):
That should have been on my list.
Because that's a fantastic one.
Nic (33:06):
There's so much going.
However, the point is, let's besmart about our financial planning.
Yes.
Let's get the biggest taximpact that we can get.
Aaron (33:15):
Yes.
Nic (33:15):
And bless those individuals and those
organizations we care about.
Aaron (33:19):
So of the things that we mentioned, here's where we want to kind of talk about
what should be on your, on your radar.
Nic (33:24):
In recap, if you have an IRA or a work plan, like a 401k for instance,
qualified charitable distributions.
Before and after the requiredbeginning date within your age limits
again, a great tool to be tax free.
Aaron (33:39):
These are tax deferred assets, tax free when it comes out, as long
as you don't touch it and it goesto the organization you care about.
So it takes care of the obligationthat you have already thought,
Hey, I want to give to our church.
I want to give to the Boy Scouts.
I want to give to, you know, thehospital, those kinds of things.
You can take care of that this way.
So that's where those thingsneed to be considered for you.
If you're looking for flexibility andthat bunching that we talked about.
(34:02):
And you have the, the appreciatedassets or the cash to do it, the donor
advice fund, you know, again, it'sone of those things where you've got
to have the fuel to put in it and wewant to be mindful of the standard
deduction, talk to CPA when we do it.
But that's something that if you'relooking for flexibility in there, the
donor advice fund, something you wantto kind of research, have further
discussions on, um, Nick, anything elsethat, you know, appreciated assets.
(34:24):
We want to avoid tax.
If you, you know, got that Home Depotstock that you've, you know, you're,
we have, we deal with so many Georgiaboys that are like, I've got it.
Can't touch it.
Nic (34:33):
Lockheed Martin.
Exactly.
Coca Cola.
Delta.
Yeah.
Great companies.
It is what
Aaron (34:38):
it is,
Nic (34:38):
Nick.
Yep.
No.
Well.
Aaron, I think, you know, here's the deal.
Yeah.
Um, you know, this podcast is all aboutreally educating people and helping them
ask the right questions in their ownpersonal dynamic, their own scenario.
Yeah.
So here's what I'd liketo do for our audience.
If you're listening or watching todayand you'd like more information, if
(35:02):
you're like me, I'm a visual learner andyou know, us talking about this might
expose you to a lot of information,but seeing it would help kind of,
uh, further help your understanding.
Contact us again, connectat your retirement coach.
com and uh, we've got somegreat one pagers and some
fact sheets on these things.
(35:24):
We'd love to get in your hands.
We can email it to you, sendyou a printed copy here in
the continental United States.
Uh, but, um, we'd love to sharethat information with you if,
if that'd be helpful to you.
This time of year, you know,
Aaron (35:37):
Nick, the holidays remind us of what's most important.
And that's our faith andour friends and our family.
And if at this time you get inspired,you realize you want to do something,
but it's, it's too late for this year.
Well, we're not talking about this year.
We're talking about next Christmas.
Well, how do we takethe next steps for that?
I want you to set a reminderfor Christmas in July.
That almost seems like somethingthat should be marketed, right?
(35:59):
I love it.
We want you to make a note in your phone,talk to your spouse or any partner or.
Person that's going to be importantin these conversations as well as your
financial professionals, and we want tomake sure that you've got time next year
to digest the repercussions of this taxwise, these concepts, make sure you've got
plenty of time to talk with your financialprofessionals and remember for our CPA
friends and our financial planners, theremight be a time of year that's best.
(36:22):
So reach out to them and say, Hey, I wouldlike to talk about a donor advice fund.
Well, I would like to talk aboutqualified charitable distributions.
When would be appropriate time to do that?
Then you've got time to think about it,sleep on it and get it processed and
executed in time so that these can bemeaningful Christmas gifts, meaningful
year end donations, and you don't haveto worry about the time constraints.
(36:42):
I love it.
Yeah.
So listen to all of you guys out there.
We want to thank you for being here and wewant to encourage you to stay coachable.
Hey, Aaron.
Yeah.
Before we sign off, yes.
Merry Christmas.
Oh, Merry Christmas, bud.
Merry Christmas.
Merry Christmas.
We hope you enjoyed today's show,but you may have questions for our
coaches and they can be emailedat connect at yourretirementcoach.
(37:05):
com.
If you know someone thatneeds to hear this episode,
we encourage you to share it.
As a reminder, the content of thispodcast is for educational and
entertainment purposes only andshould not be construed as advice.
On behalf of our coaches, we want to thankyou for listening and for being coachable.
Devin (37:20):
Yeoman's Consulting Group, a registered investment advisor YouTube
channel based in Marietta, Georgia.
We strive to provide comprehensivewealth management services for
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This platform is solely for informationalpurposes, and it's not offering advisory
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Investing involves risk andpossible loss of principal capital.
Comments by viewers or recognitions areno guarantee of future investment outcomes
(37:40):
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(38:04):
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Step up to the podium.
Today on coffee with your retirement coach, we're going to talk
(00:02):
about how to be more generous withthe organizations that you care about
in your family and not uncle Sam.
All right, grab your favorite mug.
It's time for coffee withyour retirement coach.
Welcome back to coffee withyour retirement coach today.
I think I've got a common problemhere and tell me it's the kids.
(00:22):
I mean, they're not the problem,but it's the holiday season.
I'm trying to do equal and fairgifting, but I got another family
member getting in the white.
Oh, who's that?
It's not the wife.
I know when I saw the eyebrow,I knew what you were thinking.
Yeah.
It's my favorite uncle.
Your favorite uncle.
Yeah.
Uncle Sam.
That's your favorite uncle.
He gets the biggest hit this time of year.
When we look at thatspreadsheet, his column is fat.
(00:44):
Fair point.
Fair point.
But I think you and I can talk about howthe idea of what we owe in a way of taxes.
And our generosity, how thosetwo items can come together.
I love
Nic (00:55):
that, Aaron, because, you know, I've been dwelling on this, this comment,
this, this, this idea that combininggenerosity with smart financial planning
is one of the best things we can do.
Aaron (01:08):
It is.
It
Nic (01:08):
is.
And under the current law, theyactually play well together.
They
Aaron (01:11):
do.
You know, knowledge is power, Aaron.
Attention, holiday shoppers.
Uh, you know, speaking of knowledge,we learned a valuable lesson.
We've missed you buddy.
Listen,
I'm back.
You're back.
And everybody's going toget full Aaron this week.
That's that's a guarantee.
(01:33):
So we were in New York recently.
Yeah.
Yeah.
And the family, do wewant to mention when?
Well I'm getting there.
Okay.
Okay.
The family wanted to go to Macy's.
Macy's.
Macy's.
Yeah.
And we were like, Oh yeah,well we need to go today.
The Macy's of all Macy's.
Herald Square.
We need to go today becausewe're heading home soon.
So we headed to the Herald SquareMacy's and as we go to enter the
(01:57):
place, we realized something.
It's Black Friday.
We have lost our minds.
You're ever loving mind.
The crush of humanity was overwhelming
Nic (02:10):
Well, Aaron, you're such a gentleman and I know I have to tell this
Aaron (02:14):
story.
We have we don't
Nic (02:16):
Aaron I'm not doing this podcast without the people the people need to
know All right, we're gonna take a little
Aaron (02:21):
sidetrack to the point of this story.
I He's a gentleman.
I'm a southern gentleman.
And when I came to to enter the store.
People are everywhere.
And there is a couple thatare absolutely struggling.
So I opened the door, help themget situated and get out the door.
And then I work ongetting my family inside.
And then we all get in and getsituated the best that we can.
(02:45):
And then Peyton, my son, my youngest, hegoes, that's the guy that you helped out.
And he was being arrested, uh,him and his female, uh, um, uh,
counterpart counterpart, uh, apparentlythe, uh, North face jackets in
their arms were not their owns.
They were property ofthe Herald square Macy's.
Uh, still there had been no transaction.
(03:05):
I'm pretty
Nic (03:06):
sure we're going to hashtag this later, uh, eating and abetting a criminal.
That's where Parker, my
Aaron (03:11):
oldest went.
He said, Oh dad, I think they'regoing to want to talk to you.
That's, uh, you playeda strong hand in there.
Almost escape.
David.
Nic (03:18):
Yeah,
Aaron (03:19):
but the reason that we bring this up is because there's often times
where we get excited if we're wantingto get a gift, although sometimes
it's going to be out of obligation,it's to honor the relationship with
someone and to show them that we care.
We're celebrating the birthday, theholidays, a milestone, whatever.
And then when you go to the store,Or you go online to try and figure
(03:39):
out what they might want, whatthe size is, all of that stuff.
It can rob you of some of theexcitement of the gifting.
Well, in,
Nic (03:48):
in this time of year, it's easy to lose focus on what really the
purpose of this time of year is.
And as we're celebrating the best giftin the world, the ultimate gift, you
know, uh, it's easy to lose focus.
Lord.
I mean, uh, it is, it is.
And, um, but today.
Um, I thought it'd be reallyawesome to focus in on not the
(04:10):
gift receiving, but the gift
Aaron (04:13):
giving.
Well, and Nick, that's where I was headed.
If we're doing sometimes a moresubstantial gift, and a lot of times,
uh, in a large portion of our audienceis retirees, they get excited about
legacy or gifting while they're alive.
Making charitablecontributions making an impact.
Yeah.
But just like we felt the crushand there was the trade off of our
(04:34):
time and our comfort in that store.
Uncle Sam can take a big piece and allof a sudden our gift when shrunk down,
it can get frustrating and for, andwe've seen it for some of our clients.
It's almost pushing to the pointof, I don't even want to do it.
If I have to take that kind of ahaircut, if this much has to get
lost in the transition, I don'teven know if I want to do it.
Nic (04:54):
Yeah.
So,
you
know, Aaron, I think there are afew things that, um, really hinder
people from making really smart moves.
Okay.
And when, you know, we talk aboutsmart moves today, it's smart
moves with our charitable giving.
So we want maximum tax benefit,maximum impact, and how do
(05:16):
we marry those two together?
That's right.
Maximize the impact to thoseorganizations that we care about.
Our loved ones.
But also just be really smart about it
Aaron (05:26):
and bring back the feel good to it.
We can get excited about it.
It takes knowing the rules, beingaware of the options, but that's
what we're going to go over today.
If these things resonate with somethingthat you've been feeling inside that you
wanted to do for a child, a grandchild,an organization that you care about.
Our hope is that these, youknow, listeners are going to
come away from this, you know,episode thinking I could do that.
(05:48):
You know, need to have a conversationwith the CPA need to have a conversation
with my financial planner, but I've gota better method of attack for that thing
that maybe I've always wanted to do.
Um, but now really kind of have an ideaof maybe one of the paths I might take.
So let's kind of startgoing through those Nick.
Um, speaking of, uh, uncle Sam andthe inevitable taxes, we've talked
(06:09):
on the, on the podcast beforeabout required beginning dates
and required minimum distributionsand for people that are planning
towards that or in the thick of it.
QCDs have proven an awesome,awesome opportunity to
partner with their generosity.
Can you explain what the, you know,again, we talk about alphabet soup,
what that acronym stands for and,and kind of where you fall into the
(06:29):
crosshairs when it's appropriate.
Yeah, well, first of all, it
Nic (06:32):
is alphabet soup.
So, you know, I know.
Uh, when I first got in the industry,one of the things our founder, who's
my dad said, he said, things needto be sophisticated enough to work
well, but easy enough to understand.
So, so let's unwind some of this, right?
So a QCD is qualified charitable donation.
Okay.
And now, In order to do this,you have to have an IRA or some
(06:57):
form of retirement account.
And what this is probably the closestthing to having your cake and eating it
too, especially when it comes to taxes.
Okay.
Now.
A lot of people think that youhave to wait till required minimum
distribution age to start doing QCDs.
(07:17):
But actually, the IRS allows for youto start it as early as 70 and a half.
Now, I
Aaron (07:23):
want you to say that again.
Required beginning distributionplanning doesn't have to
begin the year that you start.
We can years in advance start talkingabout things like QCD and Roth conversion.
Oh, absolutely.
Conversations appropriateway ahead of time.
I've got a few clients that I'mhoping they're hearing this.
Nic (07:44):
So, well, you know, so now we've got the new RBD alphabet suit, right?
Required beginning date for IRA holders.
That's age 73.
Correct.
But IRS says, Hey, if you want to dothis cool thing, this QCD, this qualified
charitable distribution, and I'm goingto share with you how powerful this is
in just a second, we're going to let youstart that as early as age 70 and a half.
(08:09):
Now here's the power of this.
If I take a distribution, just any kindof distribution of a normal traditional
IRA or 401k is going to count asincome on my income tax return, right?
And I'm going to have to pay taxes onthat asset or that distribution, right?
So I'm going to have to pay taxes.
And if it counts towards income, itcould push me into higher tax brackets.
(08:31):
Absolutely.
Right.
Ouch.
Yeah.
Well, and then if we're, you know, we're,you know, we love the organizations
we care about, we're writing thecheck on Sunday, we're given to those,
you know, the museum or whatever.
Okay.
We're making those gifts out of cash.
What if there was a better way?
Here's the better way.
Yep.
If you're 70 and a half and you havean IRA or a 401k, you can fill out
(08:55):
a distribution form and elect a QCD.
And that same 10, 000 you're givingto that organization you care about,
you can give it out of your IRA.
Now, why would somebody do that?
The power in this is really two things.
One, when you take that distribution forthe QCD, It doesn't count as ordinary
(09:16):
income on your tax return, right?
Right.
And number two, it's a non taxable event.
That's right.
It's even better thangetting a tax deduction.
You're writing the check.
It's great.
You get that tax deduction, but if itcomes directly out of the IRA to that
organization, you care about as a QCD.
Not, it's not counted as incomeand it's a non taxable event.
(09:39):
It is literally having your cake and
Aaron (09:41):
eating it too.
And the question that we getfrom our clients, Nick, is
where does the other shoe drop?
And it doesn't.
Not a taxable event for you and nota taxable event for the charities
and organizations that we care about.
Yeah,
Nic (09:50):
yeah, no.
And so, um, if you are interested,we always say this in like every
episode, seek wise counsel.
Okay.
There's a few nuances to make this work.
Number one, Aaron, yourhands can't touch the money.
So you can't say, send methat 10, 000 from that IRA.
(10:11):
Don't withhold the tax.
And then I'm going togive it to whoever, right.
A five Oh one C three of my choice.
You can't do that.
Yeah.
Common misstep, right?
That's common misstep.
That's going to count as ordinaryincome on your tax return.
Yeah.
Maybe pushing the higher bracketsand yes, you will get a deduction.
But you might as well havejust written the check.
Okay.
Right.
So you've got to follow the appropriatesteps to make this happen and happen
Aaron (10:36):
right.
Yeah.
No, no, no.
It's so important, Nick.
Now, so that would be leading upto our required beginning date when
required minimum distributions begin.
That if we don't take under the currentlaw, there's a 25 percent penalty.
Can I count those qualified charitabledistributions towards my RMD after
I passed my required beginning date?
(10:56):
And
Nic (10:56):
here's what's so perfect, Aaron.
I know, you know, the answer.
Yes, yes, yes.
So if you don't need the distribution,like you don't need that required
minimum distribution, right.
And let's just say it's30, 000 this year for you.
Aaron (11:11):
Yeah.
Nic (11:12):
And you normally give 10, 000 away.
You can take that 10, 000 as a QCD pointedin the direction of the charities and
organizations you care about, right?
And then you only have the 20, 000remainder that you have to take as
a required minimum distribution.
The sweet thing gets sweeteris what you're telling us.
Absolutely.
(11:32):
Now there is a limit.
you can only do this upto just over 100, 000.
It is being indexed.
I think it's 108 or 109, 000 next year.
I can't remember the exact number, butthe bottom line is if your required
minimum distribution is all the wayup to 100, 000, you could QCD the
full 100, 000 to those organizations.
Aaron (11:53):
Well, and those would be the guardrails that we often talk about.
We want to make sure two things, one,it needs to stay with within the limits.
You know, stay within that a hundred K.
And then the other piece is if thismoney does not meet a budgetary
need, if you don't need yourrequired minimum distribution for
operational costs within the home,then we're talking about these plans.
(12:14):
And again, that's why I wantto talk to our CPAs, financial
planners want to seek wise counsel.
So while we're talking about that,let's talk about the next step up.
And this is one that I get reallyexcited about because I feel like a
lot of For people that are generousnow and know they're going to remain
generous and they need multi yearplanning to come alongside that donor
(12:37):
advised funds, the DAF, a whole notheracronym, but yeah, donor advised funds.
Nick, let's introduce them.
Nic (12:42):
Yeah, well, I think donor advised funds are one
of the most misunderstood and.
Most unknown planning tools in thecharitable giving world right now that
anyone in the middle class could use.
Absolutely.
I mean, this is not a wealthy persontactic or tool, although many, many
really affluent people, including clientswe have, I mean, they use this as a
(13:05):
planning tool, but the bottom line isthis can be used for so many people.
And it's so inexpensive to do, Aaron.
It's so easy.
It's inexpensive.
So
here's, the idea.
Aaron (13:17):
The level of tax planning that it unlocks is worth those nominal
costs.
Nic (13:22):
So big, so big.
So again, we're going around thisidea of, we want to be smart with
our financial planning and havethis high impact charitable giving.
So here's the idea.
I coined a term years ago, and it wasthis, term called bunching deductions.
Okay.
And really I've heard people use itin different contexts, but the way
(13:44):
we use it is if I know that I'm goingto give $10,000 a year now for the
next five years as an example, right?
Okay.
And so I, I know that's going to happen.
And I look at my bank account,my savings account, I look at my
brokerage account and I identified.
$50,000 Okay.
(14:05):
Now we can, you know, drill down in thisin just a second, but I could take $50,000
put it inside a donor advised fund.
And when I do that, I'm getting fiveyears worth of deductions in one year.
Yeah.
Okay.
Well, why would you do that?
(14:26):
Well, let's say youhad a really big bonus.
You weren't expecting you wantto offset the taxes on that.
Or let's say, you know, in the waythat we do it in our firm, mostly
we we want to get really aggressivewith getting more tax free money.
Yeah.
So we're gonna look at doingOf five years worth of a Roth
conversion all in one year.
(14:48):
Now that money inside that Roth beingtax free now gets half a decade of
tax free growth versus doing a littlebit each year for those five years.
So it allows us to front loadRoth IRA conversions, get
the big deduction up front.
But the power of the donor advicefund is I can choose when I gift it.
(15:12):
And again, it's got to be to a 501c3or it's got to be a charity, right?
It's got to be a legitorganization, right?
But I can change my mind.
You know, I might love this particularmissionary serving, you know, somewhere,
uh, around the world and I want to giveto the organization that supports them.
Or maybe it is, you know, maybe wehad a loved one that lost their lives
(15:35):
to cancer or something like that.
Well, maybe we want to give there,or maybe it's the local history
museum, or maybe it's one Whatever.
Yeah.
Okay.
We can direct how much money wewant to go to those organizations.
We can direct the frequencyand we can change our mind.
The only thing we can't do is thatthis is considered a completed
(15:57):
gift, so we can never call thatmoney back into our own hands to
use it for discretionary spending.
One way street.
So it's once it's in there, it hasto be marked for giving, right?
But you know what, Aaron?
Here's the thing.
Instead, for five years, maybe Isay, I want to, I've had a lot of
growth in it because it was invested
Aaron (16:14):
inside.
And that's the point that I feellike there, people are trying to
understand the concept and theymiss that other added value.
What goes in can be invested.
And so these assets can beearning interest dividends.
They can grow.
Nic (16:29):
Yeah.
Aaron (16:29):
Yeah.
Nic (16:30):
So if I put in 50, 000 over the course of the five years, it could have
grown to 65, 000, you know, and I've paidzero taxes on the growth of that money.
I will pay no taxes on any of that profit.
And the organizations that receivethe profit will pay no taxes doing
Aaron (16:48):
here.
A funny story with us.
Talk to me.
It's been a fantastic year.
We're recording this at the end of 2024.
The markets have done well.
Yeah.
I've got a client that this year theystarted their donor advice fund, right?
Yeah.
And we've been gifting out of it.
They gave us the instructions,the information, everything we
needed so that their charitableobligations are still being met.
And in the same timeframe thatthey were previously doing no
interruption, we had a review and theylooked at their donor advice fund.
(17:11):
Now, again, it's been astrong year in the market.
They said, when are wegoing to start giving?
And it's like, we've already startedgiving, we've met the obligations for
this year and they're like, no, no, no.
The amount that's in thereis the amount that I put in.
And I said, that's because it's invested.
Now.
It's not going to be the same everyyear, but what an exciting thing
in the year that they chose to begenerous, that they stepped in, they
(17:32):
saw that and they saw those results.
And again, we're talking about marryingfinancial planning with our generosity.
What a neat moment for them to have begun.
Oh, 100%.
Nic (17:43):
Uh, man, I love that story.
And you and I have a lot of stories withhow people have used this thing over time.
And, you know, in a few minutes, we'lltalk about a really, really high impact
strategy with a donor advised fund,but the big Big takeaway here is you
can establish a donor advised fund.
You can name it what you want to name it.
(18:03):
Like mine's called theyeoman's family foundation.
I think, okay.
Um, we can direct the frequencyand the amount that's given.
We can stop and startgifts anytime we want.
It can be invested and it's.
Most of these that I'vereviewed are extremely low cost.
(18:23):
I mean, even in our firm, Aaron, wecut our costs basically in half when
we're overseeing these things becausewe want to maximize the amount of
money that's going to the organizationsthat these people care about.
Absolutely.
Aaron (18:36):
Absolutely.
I love that.
And I love that we do that.
Um, so for this, ParticularAvenue, Nick guardrails for here.
We would want to make sure thatwe realize it's a one way street.
We don't want to put anythingin there that we're not going
to be able to live without.
The other thing is we want to, you know,speak to our financial professionals.
We want to be mindful of thestandard deduction in that year.
That number is going to play in bigwhen you compare that to what despite
(18:59):
because five years worth of givingIs different for every individual.
So again, when we're kind of workingthrough those things, as we're going
to say with almost every topic thatwe put on here, great conversation
to have with financial professionals.
Oh, absolutely.
Nic (19:10):
Oh, and I like that you're bringing that up because you'll again,
smart financial planning here, youknow, tying it together with that.
Um, you know, when are you retiring?
If you're not retired.
Right.
Yeah.
Um, you know, timing that out ortiming when you're receiving a lump
sum distribution, uh, timing when youexpect to receive an inheritance timing,
you know, the sell of a property thatwas highly appreciated, like all of
(19:34):
these things need to be considered.
And that's why financial planningis so important is, you know,
we want to be very intentional.
We want to be haphazard.
Like, like you were talking about earlier.
I don't want uncle Sam to be mybiggest beneficiary, but through,
uh, sometimes some good thingsthat we do that weren't best.
Aaron (19:55):
Yeah.
We overpay uncle Sam all day long.
Absolutely.
Absolutely.
Uh, Nick, we're about to transition.
We're gonna talk about gifting,highly appreciate assets, but we
have a pretty incredible story fromthis year as well about how this
tied in with donor advised funds.
If we kind of, I love it.
Some of these things play well together.
Can you kind of talk about how somethingthat had such a good feeling to it,
(20:18):
but then Uncle Sam's portion kind ofbrought the feelings down, but then it's
like, don't worry, you're not stuck.
Can you kind of walk us throughthat scenario with these clients?
Oh, yeah.
So we've
Nic (20:28):
got some, uh, amazing, amazing clients.
I mean, they're just, we work with someof the most generous people really.
Uh, and most of our folksare salt of the earth, middle
class millionaire type folks.
Okay.
But here's the deal.
Uh, we've got this client that itwas a multi generational client.
Okay.
We work with threegenerations of this family.
(20:49):
Yeah.
Okay.
And, uh, the patriarch of the family,he passes away, he and his wife had both
passed and they had, uh, left the familyin a trust, this highly appreciated
asset that has grown for over 40 years.
Right.
Okay.
And there's a punishment to that success.
There's a big punishmentbecause it's 90 percent profit.
(21:12):
That's never been taxed.
Unfortunately, in the type of trustthat was set up for this family and not
discussed by the attorney, by the way.
Gotcha.
Okay.
Uh, this is a type of trust that doesnot give a step up in basis when,
you know, the grantor passes away.
Yeah.
Okay.
(21:32):
So here we have, again, 90plus percent of a really highly
appreciated asset, all profit.
Subject to capital gains.
All subject to capital gains.
And uh, this couple is extremely kind,extremely generous, very faithful people.
And so.
(21:53):
You know, they're writing checks.
Aaron (21:55):
Everywhere.
So many different organizations.
So many, yeah.
Right.
Tell me something you care about.
They probably do too.
? Yeah.
. Nic: Um, and so, uh, as we were talking, you know, we identified,
hey, this is something they'reprobably gonna continue to do.
Yeah.
Right.
So what a lot of people don't realizeis that without selling the asset, we
(22:18):
could pick up shares of the asset, pullit from that trust, and we could place
it inside that donor advised fund.
Yeah.
Taxable event,
Nic (22:29):
Non-taxable event.
We paid zero taxes in capital gains.
Right.
And we got a tax deduction.
Yeah.
because it went into a,uh, the donor advised fund.
Right.
So not only did we legally not pay taxeson capital gains, we also got a deduction.
(22:51):
Right now, when you gift highlyappreciated assets, there is a different
way that's calculated than cash.
Again, seek wise counsel.
However, what a high impact for
them.
Aaron (23:03):
Yeah.
Now, sometimes you don'tjust sell an asset.
To take the cash out to, to buysomething, you might want to reallocate
the way that you're invested, but the,the, the situation for them is whether
it was touched or sold to reallocatethat gains was going to happen now.
Inside the donor advised fund alreadyreallocated to a, to an allocation
(23:23):
that makes sense in today's market.
Nic (23:25):
Absolutely.
And what we did, Aaron is we effectively,to your point, we took it from being in
Single position, one single asset, right?
And now it's well diversified andthey've paid no taxes to do this.
And it's so low cost.
Again, it was a win,win, win for the client.
Aaron (23:43):
So that's talking about inheritance.
When would gifting an appreciated asset beappropriate and what does that look like?
And what would be thereasoning behind that?
Because that's where we're headed.
Nic (23:55):
Yeah.
Well, you know, Aaron, what I really likeis, you know, a lot of our clients like
the idea of being a living legacy today.
Yeah.
Right.
So they see it.
They want to see the children and thegrandchildren that they're gifting
to be able to enjoy it and maybe it'shelping them start a small business
or maybe it's helping them purchase anew safe car because they've got young
(24:18):
children and they want to make surethey're they get from point A to point B.
You know, so there's all thesedifferent reasons and sometimes it's
just a I love you Christmas gift atthe end of the year that the client
says, look, they don't need stuff.
They got stuff.
We just want to give them some cash.
Yeah.
Right.
Yeah.
And so many times our clientsare in higher tax rates than the
(24:39):
children and then the grandchildren.
Absolutely.
Right.
And so the, a lot of people don'tnecessarily realize this, but there
is a 0 percent capital gains rate.
If you don't make acertain amount of money.
So what if we took that highlyappreciated asset and let's say
we're going to give 1, 000, uh, tofive different grandkids, right?
(25:00):
Right.
Yeah.
So that's 5, 000.
What's the capital gainsrate of that grandkid?
Probably zero.
Exactly.
Exactly.
Really low.
Zero or 15 percent maybe,but let's say zero.
Yeah.
So.
Now I've taken a highly appreciated asset.
I've given them a thousand dollars ofshares, you know, to the five grandkids.
(25:23):
Now mom and dad can help them sell itif they need help, or they could sell
it on their own if they're of age.
They pay zero taxes to do it.
Right.
It was better for theclient to keep the cash.
Yes.
To give them the appreciated asset.
Yeah.
And they've paid no taxes to do this.
Right.
This is a sweet,
Aaron (25:43):
sweet deal and it's overlooked all the time.
Let's put it in some layman terms,and this is not advice, this is
just a, you know, I want to givemoney to my kids or grandkids.
I was planning on giving'em a thousand bucks.
I bought that Nvidia stock thatdid really well, and if I touch it.
I'm going to get penalized.
I could give them a thousand dollarsworth of NVIDIA and then the thousand
(26:06):
dollars that I would have given them,I could invest in more NVIDIA after a
certain amount of time or something else.
Like, I mean, this is not, again,this is not a super wealthy strategy.
This is anybody that hasgot appreciated assets.
It's a great way to wipe out the gains.
If you're already Charitablyinclined or in a generous mood,
(26:26):
depending on how the kids acted.
That we, we, the listhas been checked twice.
We just need to look at it.
Nic (26:30):
Yeah.
So being very intentional,it definitely matters.
And once again, uh, we are notadvising or recommending any individual
stock or security, but that isa great example of a real life.
Clients that have ownedthat particular holding.
And it's such an easy thing to give,uh, when you've got such a massive
(26:53):
amount of appreciation, uh, versus cash.
So if you need help, or youwant to ask questions about how.
best to go do that for your kids orgrandkids, you know, uh, hit us up,
connect at your retirement coach.
com connect at your retirement coach.
com.
If you have questions about how tostructure a qualified charitable donation,
(27:14):
a donor advice fund or gift to the nextgeneration, highly appreciate assets.
Uh, we'd love to talk youthrough how to do that.
Aaron (27:21):
We read those emails because the coaches aren't just behind the clipboard.
They're behind the keyboard.
So Nick, can you kind of hit me?
And I know a time wise we need tokind of start wrapping things up.
Could we just do some rapidfire other things that might be
appropriate or just conserve?
You know, I, one of the big thingsthat you and I keep saying is if
you're going to give, give it thought.
Nic (27:40):
Yeah.
Aaron (27:41):
Don't not give, but give it thought.
Yeah.
So some of the other things thatI just like to knock off, um,
revisit the bunching, uh, of thecharitable contributions, uh,
a charitable remainder trust.
And then of course the King.
Cash could we kind of hit those thingsin succession and then I'll get us
wrapped up and we'll get out of here
Nic (27:58):
Yeah, well, why don't we hit the easy one?
Yeah, which is the last one first?
Okay.
I mean cash I mean cash is still cash.
Everyone loves cash You I mean, it'sthe most you know, obviously liquid
easy to use asset You're also goingto probably get a higher percentage
of deduction and gift, gifting cashinstead of a highly appreciated asset.
(28:21):
Again, talk to your CPA or yourfinancial professional, but that is
certainly a very, very easy thing togive and who doesn't love cash, right?
Right.
I prefer cash over the gift card.
Aaron (28:32):
It always fits.
I don't ever have to return it.
Yeah.
Nic (28:35):
Yeah.
Um, you know, the second thing,Aaron, that you just mentioned
was again, revisiting theidea of bunching deductions.
So you don't have to use a donor advisedfund to give a multiple years if you
have a really excellent income year.
You know, uh, this year has beenextremely good for us in the market.
As an example, uh, many people aregetting bonuses because their companies
(29:00):
have performed really, really well.
Well, if you know that you're planningon giving next year, just like you
gave this year, you know, this year,Nick, we gave 10, 000 to our church.
We plan to give 10, 000 again next year.
Maybe consider bunching two years ofgifting into this year and contact your
church and let them know, Hey, You know,we're going to go ahead and bless you.
(29:21):
We're going to make sure that youget this, uh, tie their offering,
uh, by December 31st, but itwill be a 2024 and 2025 gift.
Aaron (29:30):
Yeah.
Yeah, no, that's great.
That's great.
Last thing in there, Nick.
And this is, I think this is onethat people get anxious about, but
for the ones that it truly fits.
And it works.
We've seen a lot of success incharitable remainder trusts.
Nic (29:43):
Yeah.
So charitable remainder trust, I thinkare going to be a tool that's going to
get more and more popular and here's why.
Now there is the version of this inusing a charitable remainder trust that
I can take an asset that's appreciated.
I can get a benefit.
big, big deduction, sometimes even amulti year deduction, uh, in place to
(30:05):
get in a charitable remainder of trust.
And then that trust over my lifetime ormy and my wife's lifetime, as an example,
gives us income each and every year.
So some people treat it almostlike it's giving you a pension.
Okay.
And because you got that big, bigdeduction in that first, you know,
year, two or three years, um,You're able to, uh, you know, not
(30:28):
have to pay the taxes, obviously.
Right, right.
But during that period of time, at theend, um, you have to have, I believe
it's 10 percent of the remaining balance.
So you could have spent 90 percent ofthe asset and that remainder amount,
the charitable remainder trust, theremainder amount has to go to charity.
It's gotta go to the causes that youcare about, but Aaron, once it's set up.
(30:52):
You can change it throughout thecourse of that 20 year period of
time of you taking distributions.
You could change the organizations.
You can change who thecharity is or the nonprofit.
There's still flexibility within there.
Yeah.
So it's a powerful tool.
Now we may visit thisdifferently another day.
It definitely deserves a deeper look.
But, uh, if you are thinking about nextgeneration and getting a retirement
(31:19):
account to them with a secure at newtenure rule, you know, So that, that
retirement account has to be liquidatedin most instances by the end of that
10 years for your beneficiaries,excluding spouses and, uh, disabled,
uh, folks, some different nuances there.
Uh, but for most people at the end of10 years, it's gotta be liquidated.
(31:40):
Well, what if you wanted tostretch that retirement account
over 20 years or a kid's lifetime?
Well, looking at charitable repayment.
charitable remainder trust as thebeneficiary of an IRA could be
a really powerful planning tool.
Now, Aaron, there's one that youdidn't mention that I'd like to hit.
Aaron (31:56):
My list is not exhaustive.
Nic (31:59):
It's a good list.
Thank you.
It's a good list.
What you got off menu?
You ready?
Yeah.
We have seen a lot of clients over theyears want to help children buy homes.
Aaron (32:13):
Yes.
Nic (32:15):
So, one of the ways that we've looked at doing that, the problem
is how much can you gift, right?
Right.
So you've got gift taxlimits, like 18,000 right?
Well, if a home is, 300,000 or 400,000that you're wanting to gift to a kid, that
far exceeds that 18,000 quickly, right?
(32:36):
So, um, You know, one quick ideaof you with a concept of gifting
is what if you bought the home andyou held the mortgage for the kid?
And what if you structured the mortgagepayment as an example to be approximately,
I don't know, $18,000 a year?
(32:56):
Yep.
And what if you forgave $18,000in mortgage payments per year?
Right.
So again, there's a lotthat goes into that.
Aaron (33:04):
That should have been on my list.
Because that's a fantastic one.
Nic (33:06):
There's so much going.
However, the point is, let's besmart about our financial planning.
Yes.
Let's get the biggest taximpact that we can get.
Aaron (33:15):
Yes.
Nic (33:15):
And bless those individuals and those
organizations we care about.
Aaron (33:19):
So of the things that we mentioned, here's where we want to kind of talk about
what should be on your, on your radar.
Nic (33:24):
In recap, if you have an IRA or a work plan, like a 401k for instance,
qualified charitable distributions.
Before and after the requiredbeginning date within your age limits
again, a great tool to be tax free.
Aaron (33:39):
These are tax deferred assets, tax free when it comes out, as long
as you don't touch it and it goesto the organization you care about.
So it takes care of the obligationthat you have already thought,
Hey, I want to give to our church.
I want to give to the Boy Scouts.
I want to give to, you know, thehospital, those kinds of things.
You can take care of that this way.
So that's where those thingsneed to be considered for you.
If you're looking for flexibility andthat bunching that we talked about.
(34:02):
And you have the, the appreciatedassets or the cash to do it, the donor
advice fund, you know, again, it'sone of those things where you've got
to have the fuel to put in it and wewant to be mindful of the standard
deduction, talk to CPA when we do it.
But that's something that if you'relooking for flexibility in there, the
donor advice fund, something you wantto kind of research, have further
discussions on, um, Nick, anything elsethat, you know, appreciated assets.
(34:24):
We want to avoid tax.
If you, you know, got that Home Depotstock that you've, you know, you're,
we have, we deal with so many Georgiaboys that are like, I've got it.
Can't touch it.
Nic (34:33):
Lockheed Martin.
Exactly.
Coca Cola.
Delta.
Yeah.
Great companies.
It is what
Aaron (34:38):
it is,
Nic (34:38):
Nick.
Yep.
No.
Well.
Aaron, I think, you know, here's the deal.
Yeah.
Um, you know, this podcast is all aboutreally educating people and helping them
ask the right questions in their ownpersonal dynamic, their own scenario.
Yeah.
So here's what I'd liketo do for our audience.
If you're listening or watching todayand you'd like more information, if
(35:02):
you're like me, I'm a visual learner andyou know, us talking about this might
expose you to a lot of information,but seeing it would help kind of,
uh, further help your understanding.
Contact us again, connectat your retirement coach.
com and uh, we've got somegreat one pagers and some
fact sheets on these things.
(35:24):
We'd love to get in your hands.
We can email it to you, sendyou a printed copy here in
the continental United States.
Uh, but, um, we'd love to sharethat information with you if,
if that'd be helpful to you.
This time of year, you know,
Aaron (35:37):
Nick, the holidays remind us of what's most important.
And that's our faith andour friends and our family.
And if at this time you get inspired,you realize you want to do something,
but it's, it's too late for this year.
Well, we're not talking about this year.
We're talking about next Christmas.
Well, how do we takethe next steps for that?
I want you to set a reminderfor Christmas in July.
That almost seems like somethingthat should be marketed, right?
(35:59):
I love it.
We want you to make a note in your phone,talk to your spouse or any partner or.
Person that's going to be importantin these conversations as well as your
financial professionals, and we want tomake sure that you've got time next year
to digest the repercussions of this taxwise, these concepts, make sure you've got
plenty of time to talk with your financialprofessionals and remember for our CPA
friends and our financial planners, theremight be a time of year that's best.
(36:22):
So reach out to them and say, Hey, I wouldlike to talk about a donor advice fund.
Well, I would like to talk aboutqualified charitable distributions.
When would be appropriate time to do that?
Then you've got time to think about it,sleep on it and get it processed and
executed in time so that these can bemeaningful Christmas gifts, meaningful
year end donations, and you don't haveto worry about the time constraints.
(36:42):
I love it.
Yeah.
So listen to all of you guys out there.
We want to thank you for being here and wewant to encourage you to stay coachable.
Hey, Aaron.
Yeah.
Before we sign off, yes.
Merry Christmas.
Oh, Merry Christmas, bud.
Merry Christmas.
Merry Christmas.
We hope you enjoyed today's show,but you may have questions for our
coaches and they can be emailedat connect at yourretirementcoach.
(37:05):
com.
If you know someone thatneeds to hear this episode,
we encourage you to share it.
As a reminder, the content of thispodcast is for educational and
entertainment purposes only andshould not be construed as advice.
On behalf of our coaches, we want to thankyou for listening and for being coachable.
Devin (37:20):
Yeoman's Consulting Group, a registered investment advisor YouTube
channel based in Marietta, Georgia.
We strive to provide comprehensivewealth management services for
every stage of the journey.
This platform is solely for informationalpurposes, and it's not offering advisory
services or sales of securities.
Investing involves risk andpossible loss of principal capital.
Comments by viewers or recognitions areno guarantee of future investment outcomes
(37:40):
and do not ensure that a viewer will.
performance or results.
Public comments posted on thissite are not selected, amended,
deleted, or sorted in any way.
If applicable, certain editing ofpersonal, identifiable information
and misinformation may be deleted.
The opinions expressed herein are asof the date of publication and are
subject to revision due to changesin the market or economic conditions
and may not necessarily come to pass.
(38:04):
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Football’s funniest family duo — Jason Kelce of the Philadelphia Eagles and Travis Kelce of the Kansas City Chiefs — team up to provide next-level access to life in the league as it unfolds. The two brothers and Super Bowl champions drop weekly insights about the weekly slate of games and share their INSIDE perspectives on trending NFL news and sports headlines. They also endlessly rag on each other as brothers do, chat the latest in pop culture and welcome some very popular and well-known friends to chat with them. Check out new episodes every Wednesday. Follow New Heights on the Wondery App, YouTube or wherever you get your podcasts. You can listen to new episodes early and ad-free, and get exclusive content on Wondery+. Join Wondery+ in the Wondery App, Apple Podcasts or Spotify. And join our new membership for a unique fan experience by going to the New Heights YouTube channel now!
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!