With the end of the year quickly approaching, there are several tricks advisors can use to maximize the power of their clients’ charitable giving, according to tax consultant Ed Slott of Ed Slott & Company.
While many clients are giving thought to strategic philanthropic giving, they should also receive advice regarding giving to family, and not necessarily default to waiting to transfer assets via an estate, said Slott.
“These are high-value conversations,” Slott said on a Financial Advisor webcast last week. “There was a piece in the Wall Street Journal about why people should pay their advisors a fee of 1%, what makes an advisor worth that fee."
He noted that investment advice has become commoditized, so philanthropic advice is among the services that can allow advisors to separate themselves from the competition.
"Dealing with family and beneficiaries makes you valuable to your clients,” Slott said.
Giving strategies can help reduce large estates to lower or eliminate federal estate taxes, or used to reduce the tax impact of required minimum distributions from traditional IRAs and workplace retirement plans, said Slott.
Slott described three tiers of giving to family and friends.
Tier One – The Annual Exclusion
There is an annual gift tax exclusion of $15,000 per year for individual filers, $30,000 per year for married couples filing jointly, said Slott.
“You can give that to anyone you want once per year and it doesn’t cut into the $11.7 million lifetime gift and estate tax exemption,” said Slott.
If a client knew 1,000 people they wanted to give to, they could theoretically give away $15 million before 2021 is over without using a cent of their lifetime gift and estate tax exemption, according to Slott. “You can expand that client’s exemption to over $25 million by using annual gifts,” he said.