“As I speak with residents and friends out in our communities, we’re getting a lot of questions about recent tax law changes,” says Katharine Miller, Executive Director of the Covia Foundation. “We thought it would be good to share an overview on some of these changes – especially now since many of us have time to catch up on all of that planning and some of those details.”

To provide some information, the Foundation invited Bill McMorran of Green Oak Consulting to provide some basics on the recent Coronavirus Aid, Relief and Economic Security (CARES) Act – “880 pages of fun” – while emphasizing that “as always, you need to talk to your own advisors because they do know your situation better than anyone else.”

Although the new tax deadline is July 15^th, “It’s really important if you have a refund coming to file as soon as possible.” Although McMorran filed his taxes and those of his mother on the same day, McMorran received the direct deposit into his account after five working days, while his mother received her paper check about a week later. “We’re seeing that the direct deposit accounts are the ones that receive priority – or at least they’re moving them out faster,” he says.

On the other hand, if you expect to owe taxes, “you have 90 more days to file your federal returns, and California gives you until July 15 as well to file your tax return. So if you owe money, figure it out, and then sit on it until about July 10, then send it in.” The July 15 deadline also extends to contributions to retirement funds.

Estimated tax payment deadlines have also been extended. Your April 15 first quarterly estimated taxes for the United States and for California are now due July 15. In a recent change, the June 15 second quarterly payment to the US and to California are also now due on July 15.

McMorran noted that “probably one of the best pieces of news I think anyone could expect or have asked for is that, if you take a required minimum distribution out of your IRA, you do not have to take it this year.” Those who choose not to take the distribution will have a lower income and, accordingly, lower taxes.

“If you’ve already taken your required minimum distribution in the past 60 days, you can put it back in,” explains McMorran. He refers people and their financial advisors to section 2203 of the CARES Act to determine what’s best for them. 

Finally, McMorran encourages people to take advantage of this time to review their overall estate plan. “Have you looked at your estate plans in the past three to five years?” he asks. He suggests making sure that your beneficiaries, trustees, and legally responsible parties are all current and able to fulfill the duties assigned to them. “Also, while we have a lot of time on our hands, think about your own legacy: how to best benefit people, the organizations you care about, what really matters, and what you want to share with the future.”

If you would like to see McMorran’s full presentation, as well as another video that goes into more depth about other planning topics, please contact Katharine Miller at the Covia Foundation at kmiller@covia.org and she will send you the online video links.  Covia Foundation will be offering more useful information by video in the future.

The Foundation is available to provide support and insight into your financial planning, charitable giving, charitable remainder trusts, charitable gift annuities, and legacy planning. You can read the Foundation’s most recent Community Matters newsletter to learn about Covia’s impact in the greater community and how gifts and donations to the Foundation help provide critical services to older adults.

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In honor of this week, we’re sharing some gift giving tips from the Covia Foundation that directly relate to estate planning. Check out these tips, consult your advisors, and remember to regularly review your personal estate plan to make sure it is accurate and up to date.

Make a Gift Through Your Will

When people think about estate planning, writing a will is what often comes to mind. A will is an important tool to make sure your wishes are carried out after your death – including gifts to your favorite charitable organizations.

One of the most common gifts in a will is a gift of a specific dollar amount. Another common approach is to leave a percentage of the balance of your estate that is left after specific gifts are made to family members (this is generally called a residuary gift). Every gift, no matter how small or large, can make a difference.

A will can be easily amended with language (referred to as a codicil) to include a gift to a charitable organization.

Individual Retirement Account Gifts

If you leave your Individual Retirement Account to a child or loved one, you also leave them with the obligation to pay taxes on the money that is distributed from the IRA. You, too, must pay taxes on the money you are required to withdraw for your IRA each year—but recent tax policy changes mean you can make charitable gifts today with those funds and they won’t increase your taxable income.

Once you are over the age of 70.5, you are required to make minimum distributions from your IRA. Instead of taking the funds directly, you can direct your IRA trustee instead to make a payment to a charity (or charities) directly from your IRA account. These qualified charitable distributions (up to the $100,000 maximum per year) are not added to your gross income, so they are not taxable to you.

Even if you do not itemize deductions on your 1040 personal income tax return, you’ll come out ahead making charitable gifts this way. Just be sure you complete these qualified charitable donations from your IRA before the end of the calendar year.

Beneficiary Designations

You can leave a gift to charity from an IRA, 401(k), or other qualified retirement plan using a ‘beneficiary designation.’ Generally, you fill out a simple form with your plan administrator naming the charitable organization as a beneficiary of a death benefit payable under the retirement plan.

The designated portion will be paid directly to the organization, not to your estate, and is not designated by a will. Paying these benefits directly to charity means that neither the estate nor any beneficiary of the estate are subject to income tax attributable to the retirement plan.

Charitable Gift Annuity: The Gift that Gives Back

What if you want to make a charitable gift in your will but don’t know how much you might be able to commit? A Charitable Gift Annuity (CGA) can be a tax-smart way to benefit both you and your community. This gift plan allows you to make a charitable gift today that provides you with regular fixed income. After your death, this gift goes to the cause you care about. Because the payment rate is fixed based on your age, your income will never change and a portion of your payment could be tax free. (As an example, the rate for someone aged 81 is 7.5%)

A Charitable Gift Annuity offers other tax planning benefits. The gift annuity provides you an immediate income tax deduction in the year it is established and you can bypass capital gains tax if you fund the gift with appreciated stocks. Plus, you get the joy of planning your legacy today. With the Covia Foundation, you can choose to have your gift used where it is most needed, to support your retirement community, or to help a program you care about.

More Information

It is always best to consult with your legal, tax, and/or financial advisors before making any significant change to your will or estate plan. If you are interested in learning more about estate planning, have any questions, or are considering a gift to the Covia Foundation, please contact Katharine Miller, Covia Foundation Executive Director, at 925-956-7414 or kmiller@covia.org.

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While the primary motivation for most charitable gifts is a desire to make a difference, not simply tax breaks, good financial planning leaves more for charitable gifts. Donors are paying attention to the impact of the new tax law – and making plans to maximize the difference their gifts can make.  The Covia Foundation offered several workshops this year on maximizing your charitable contribution and offers the following strategies you can use for your own planning purposes.

The new tax law that went into effect for 2018 nearly doubles the standard deduction to $12,000 for individuals and $24,000 for married couples filing jointly. That means fewer Americans will itemize deductions on their tax returns – including charitable gifts.

Using tax-smart giving strategies can allow some donors to give more and enable others to grow their initial contributions tax-free until funds are disbursed to designated organizations:

APPRECIATED STOCK:

One strategy is to donate appreciated assets such as stocks or real estate directly to a charity. Donors receive the fair-market value of the asset at the time of the gift as a charitable deduction – without incurring the capital gains tax they would face if selling an appreciated asset outright. The charity then liquidates the asset and puts the funds to work to make a difference.

IRA CHARITABLE ROLLOVER:

Taxpayers over the age of 70 ½ can plan a Qualified Charitable Distribution from their Individual Retirement Accounts (IRA). Diverting some or all of the required minimum distribution from an IRA can provide financial benefits. While the distribution doesn’t count as a charitable deduction, it also doesn’t add to the donor’s adjusted gross income – which can reduce income taxes (and possibly Medicare premiums). Up to $100,000 annually may be requested as a Qualified Charitable Distribution.

DONOR ADVISED FUNDS:

Donors can make several years’ worth of charitable gifts in cash or appreciated assets to a donor-advised fund. This strategy can provide an immediate tax deduction on the amount contributed and allows the donor to direct gifts from the fund each year to the charities he or she supports.

Charities are able to continue their work in good part because of the support of people who care about making a difference. Planning ahead gives you the opportunity to make an even bigger impact with your charitable dollars. Generosity combined with knowledge can make all the difference in the world.

If you would like to attend a future charitable giving forum, please contact Michelle Haines, Covia Foundation Development Associate, at mhaines@covia.org. And to join our effort to provide life-changing support for seniors, please visit our secure online donation page.

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