Tips to Help with Your Year-End Financial Planning
The following is a reprint of the JCF's recent Money Matters column, published in the November 2, 2022 issue of the Jewish Community Voice:
With December 31 approaching, you may be reviewing and updating your estate, financial, and tax plans before 2022 concludes. The Jewish Community Foundation, Inc. (JCF) aims to provide helpful information about how you can incorporate philanthropy into those plans and support the South Jersey Jewish community while also gaining benefits for you and your loved ones. As always, please consult your trusted advisor to help you determine the outcome of your gifts.
Consider these six tips for year-end planning, thanks in part to the 2022 Tax Planning Letter from the Jewish Federations of North America:
– Keep the Cash, Gift Appreciated Assets: This tried-and-true way to give charitably can earn key tax benefits for donors. Per JFNA, “gifts of appreciated assets (stock) remain a best practice. Such gifts not only provide a deduction to the donor but also avoid the capital gains tax.”
– Sell Depreciated Assets, Gift the Proceeds: A corollary to bullet #1 above, you may own stocks, bonds, or other assets that have lost value. In this case, as JFNA writes, “built-in loss assets generally should be sold (generating a tax loss) with the resulting cash proceeds donated, if desired. Note that, as in previous years, up to $3,000 of capital losses may be used to offset ordinary income.”
– Rollover Your IRA’s RMD to Charity: If you are aged 72 or up and have an individual retirement account (IRA), you must satisfy your required minimum distribution (RMD) annually. By initiating an IRA charitable rollover (a.k.a.—qualified charitable distribution) to the Jewish Federation of Southern New Jersey or other charity, you can avoid taking income and paying subsequent taxes, while also having the rollover count towards your RMD.
• Rethink Your IRA Beneficiaries: According to JCF Investment Committee Co-chair and Senior Vice President- Wealth Management at UBS David Ostrum, children or grandchildren often inherit IRA funds “at a much higher tax bracket than the deceased parent/ grandparent, and 40-50% of the money they inherit from the IRA is going to taxes (federal+NJ state).” In addition, due to legislation from several years ago, “leaving kids/grandkids your IRA dollars might not be the best strategy now that they have to take all funds out of the IRA account within a 10-year window.” By leaving IRA dollars to charity and life insurance proceeds to loved ones, you will save them on taxes and payout requirements.
– Leave a Legacy Gift in Your Will: Support the charitable organizations of your choice for many future generations with an after-lifetime gift. When creating or updating your will, leave a gift to the JCF, then, upon receiving your bequest, the JCF professionally manages your gift and spins off annual income to your preferred cause. Join the hundreds of individuals who are leaving a legacy gift, inspired by the LIFE & LEGACY® initiative of the Harold Grinspoon Foundation.
– Open a Donor Advised Fund (DAF): Suppose you want to donate appreciated stock or a portion of your year-end bonus or other monetary windfall by December 31, but your philanthropic plans are not finalized. By contributing the stock or cash to your DAF with the JCF, you gain immediate tax benefits and can recommend grants from your fund at any future time to any qualified 501(c)(3) charity or synagogue. A DAF even allows anybody to build up charitable “savings” during one’s working years and then initiate distributions throughout retirement or have philanthropic dollars available to support unexpected emergencies around the world. In short, use a DAF to plan your philanthropy on your terms.
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