Long-Term Charitable Gifts with Minimal Taxes Is “Big Deal for the Right People”
You can’t predict how new clients will find you. But once they do, it’s fulfilling to offer solutions that exceed their expectations. Just ask Thrivent Financial Wealth Advisor Don Goldsmith about his new client.
“After seeing an ad on National Public TV and doing some research on the internet, he just walked in our office one day,” Don says. The man had retired after a 30-year career and wanted a plan for his pension, Social Security benefits and 401(k).
Don recommended net unrealized appreciation (NUA) as a tax-deferral strategy for the significant amount of employer stock in the client’s 401(k). “It can be a big deal for the right people, and using a more sophisticated tool can enhance their charitable gifts,” Don says. Pre-retirees or retirees with company stock in their qualified plan may utilize NUA. Timing is crucial, though, since they are required to complete it the same year as the qualified plan rollover.
Don’s client could follow through on his charitable priorities while putting tax advantages to work with NUA. The client was able to make an in-kind distribution of the company stock into a non-qualified account. Then he only had to claim the $60,000 cost basis of the stock as income instead of its full $250,000 value.
To offset that income, the client donated stock directly to InFaith Community Foundation in a donor advised fund, which can be distributed to charities of his choice over time. “My client won’t have to bother with stock transactions but can just go online and make a gift,” Don says. It’s better for the charities that aren’t able to accept stock gifts because they don’t have a brokerage account. For any undonated stock left in the client's non-qualified account, when the stock is sold in the future, he will be subject to capital gains rates instead of ordinary income rates.
Don’s client is excited about the possibilities. “He plans to use all of his employer stock charitably, which means he may never pay another penny of taxes on his IRA money,” Don says.
Get Started Today. To learn more about donating appreciated securities and to discuss the options for specific clients, call InFaith gift planners at 800-365-4172.