“Since I think this is best for clients, to me it’s always worth it,” she says. The firm charges a minimum planning fee so that if someone needs the planning but doesn’t have much in assets, the firm is still compensated for the planning work.
Plancorp has software that allows it to pull a daily feed on accounts outside its management. It plugs this information into its retirement plan analysis. “It’s very difficult to offer sound advice without knowing the entire picture,” says Gelsheimer.
Another step she and her colleagues have taken with this client, who is very charitably inclined, is to encourage her to do qualified charitable distributions (QCD) directly from her taxable IRA. Under current tax law, individuals can gift up to $100,000 directly to charity to satisfy their required minimum distribution (RMD) and not have to include that in their ordinary income.
“This is definitely the best way for anyone over 70½ to give to charity,” says Gelsheimer. It enables them to still get credit for giving to charity at a time when, because of the doubling of the standard deduction, taxpayers have become less inclined to itemize deductions, she says.
The client made a qualified charitable distribution of approximately $20,000 in 2018, which is a large portion of her RMD, says Gelsheimer. Qualified charitable distributions must be granted directly to charities, not to donor-advised funds. If someone owns multiple IRAs managed by multiple advisory firms, it’s important to coordinate so the total distributions taken comply with tax laws, she says.
Family Ties
Gelsheimer’s client had inherited a lot of her farmland from her parents, but they hadn’t done a great job relaying pertinent information. She has voiced concern to Gelsheimer that she doesn’t want her heirs to feel that way.
“We’ve encouraged her to start those conversations as early as possible so she’s not leaving her loved ones in a similar situation,” says Gelsheimer. Clients shouldn’t simply speculate about whether younger heirs want to retain family property, she adds.
In this case, Gelsheimer’s client has made it clear that she would be OK if her children and grandchildren decide to sell the farmland bequeathed to them.
Gelsheimer realizes clients may feel awkward discussing their net worth with their offspring. Some worry the children will fail to do something productive with their lives if they know how much they’re slated to inherit, she says. However, “we can take that off the table and not even talk about numbers,” she says.
Instead, family meetings can start with an estate plan diagram that shows the types of accounts owned and the people who would take over should something happen to Mom and Dad, she says. That way, everyone knows what tasks they’ll have to perform.