June Monthly Newsletter – “Supercharged” Charitable Giving with Retirement Assets

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Many people are charitably inclined and take advantage of charitable giving during their life. Most people know that as a general rule you can deduct up to 50% of your Adjusted Gross Income annually for charitable gifts to qualified organizations[1] – quite a significant tax advantage you can use to reduce your annual income for tax planning purposes. However, one of the most effective charitable gifting techniques for individuals is to gift a portion of your estate to charity after you pass. If you choose the right assets, there could be significant benefits to your beneficiaries and designated charities.

In order to get the most “bang for their buck,” we generally advise those with charitable inclinations and a tax-deferred retirement account to consider naming a charity as the primary beneficiary. Used in concert with the individual’s estate plan, this simple planning tool can have a dramatic effect on the amount of the distribution ultimately passing to the charity upon the individual’s death, thereby enhancing their intended charitable objective.

As the name implies, the intended use of retirement accounts is to save for retirement using pre-tax contributions. As the retirement account grows, taxes are deferred until the owner begins taking distributions from the account which are then taxed at their ordinary income tax rate. Although the tax deferred nature of retirement accounts makes them a tremendous vehicle for saving for retirement, tax deferred retirement accounts are not an ideal asset to pass to non-charity beneficiaries because upon the death of the account owner, the non-charity beneficiary will be stuck with a deferred income tax burden, thereby reducing the end distribution to the non-charity beneficiary.

However, if the charitably inclined retirement account owner names a tax-exempt charity as the beneficiary of the retirement account, the charity can take a tax-free withdrawal of the account balance following the account owner’s death. Because the balance in the retirement account at the time of the owner’s death has never been taxed and due to the fact the charity will take a tax-free distribution from the retirement account makes this planning technique a “supercharged” charitable gift. The icing on the cake is that because the assets will pass directly to the charity via the beneficiary designation, the retirement assets will not be included in the decedent’s probate proceeding.

By satisfying their charitable objectives through their retirement account, individuals can designate assets receiving a step-up in basis to family members and loved ones in their estate plan documents or payable on death accounts.

Your advisor can assist you with determining your estate and charitable planning objectives and how to accomplish those objectives in the most tax efficient manner possible by identifying the appropriate beneficiary for each specific asset.

If you are charitably inclined and have questions about how to get the most “bang for your buck,” contact your Advisor or a member of the Wealth Enhancement Group for a complimentary consultation.

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Monthly Investment Review: May 2017

May continued to build on the excellent performance results so far in 2017. The S&P 500 rose 1.1%. Global stocks rallied even more, as the MSCI All Country World Index (ACWI) gained 1.9%. The U.S. bond market, represented by the Bloomberg Barclays Capital Aggregate Bond, climbed 0.8% for the second straight month. For the year, the S&P 500 is up 7.7%, the ACWI up 10.0% and the bond aggregate has gained 2.4%

U.S. economic growth seems to be slowing, at least temporarily. Jobs data came in below expectations and the Federal Reserve left rates unchanged in May. Even with the weaker-than-expected data, the Fed is expected to raise rates in June and December. OPEC extended previously announced production cuts, but the announced cuts were less than expected and oil prices declined.

While markets remain strong at a broad level, sectors have performed quite differently from each other. Declining energy prices have been particularly hard on energy stocks. The MSCI USA IMI Energy index dropped 4.4% in May and is now down 14.6% for the year. The MSCI USA IMI Information Technology index rallied another 4.2% in May and is now up 19.0% this year.

While the performance in 2017 has been quite strong, it remains wise to focus on potential risks, too. Below is a summary of three important risk factors:

  • Valuations: U.S. stock valuations remain above average, but not excessively high. Future stock market returns should be positive, but lower than the long-term average.
  • Global Events: Terrorist attacks and upcoming key European elections have generated little negative reaction from investors. This could change rapidly if investors begin to react more fearfully to events or markets are surprised by election results in Britain, Italy or Germany.
  • Investor Complacency: While the S&P did have one day that dropped more than 1%, it is only the second this year compared to 17 at this point last year. There is a risk that negative events could trigger a much sharper decline than normal, as investors have become used to very low levels of volatility.

While pockets of opportunity continue to exist, we encourage investors to be ready for heightened volatility in the latter half of the year.


The MSCI USA IMI Information Technology index
The MSCI USA Investable Market Index (IMI) Information Technology is designed to capture the large, mid and small cap segments of the US equity universe. All securities in the index are classified in the Information Technology sector as per the Global Industry Classification Standard (GICS®).


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December Monthly Newsletter: Tax Reform and Year-End Planning

After several last-minute changes, the Senate voted 51-49 in the early hours of Saturday morning[1] to pass their version of tax reform. Only one Republican, Tennessee Senator Bob Corker, voted against the bill, concerned about the $1 trillion or more in budget deficits the plan is expected …

November Monthly Newsletter – Tax Cuts and Jobs Act

Last Thursday House GOP leaders unveiled the Tax Cuts and Jobs Act (TCJA), a tax plan that proposes a broad overhaul to the corporate and individual tax system, building from the framework announced in September by the White House and House GOP leaders. The TCJA proposes to create more jobs …

October Monthly Newsletter: Medicare Open Enrollment

Leaves changing colors and falling to the ground. Playoff baseball. Pumpkin spice everywhere. We can certainly tell fall is officially here. Fall is also the perfect time to consider an often overlooked yet extremely important aspect of cash flow planning in retirement – Medicare coverage.

September Monthly Newsletter – Conflict Avoidance in Estate Planning: Tangible Personal Property

An often overlooked aspect of estate planning is documenting how to distribute tangible personal property after death. Relatively speaking, it is much easier to divide financial assets among your beneficiaries.

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