Thankful

As we approach Thanksgiving, here are twenty things I’m thankful for in 2020.

  1. Family
  2. Friends
  3. Faith
  4. Neighbors
  5. Pets
  6. Health
  7. Long walks
  8. Good books
  9. Provision
  10. Democracy
  11. Zoom
  12. Netflix
  13. Amazon
  14. Barbeques
  15. Vaccines
  16. The Dodgers
  17. The Lakers
  18. My guitar
  19. Fly Fishing
  20. Holidays

Do not be anxious about anything, but in every situation, by prayer and petition, with thanksgiving, present your requests to God. And the peace of God, which transcends all understanding, will guard your hearts and your minds in Christ Jesus. ~ Philippans 4:6-7

Happy Thanksgiving!

November 23, 2020

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor. Turkey with mashed potatoes, gravy, corn, and crescent rolls is my go-to meal on Thanksgiving. What is yours?

The Giving Season

November is the beginning of the giving season. From now until the end of the year, charities and non-profits will receive much-needed dollars to help fund their mission. For several organizations, the money they receive in the next few weeks will subsidize most of their annual budget. Individuals typically wait until the end of the year before they give because they don’t have a giving or philanthropic plan.

For where your treasure is, there your heart will be also. ~ Matthew 6:21.

During my financial planning meetings, I ask people if they have a charitable giving strategy or if they donate money regularly; thankfully, most people are generous. I once worked with an individual who didn’t believe in giving money away while he was living. He was going to donate his money at his death through his estate. He was missing an opportunity to see his gifts bear fruit.  I didn’t tell him that people who don’t give today won’t give tomorrow.

Each one must give as he has decided in his heart, not reluctantly or under compulsion, for God loves a cheerful giver. ~ 2 Corinthians 9:7.

Most individuals don’t have a coordinated giving plan, and as a result, they wait until the last minute to make donations. Without a strategy, you may be missing valuable deductions, so here are a few ideas to help you with your charitable contributions.

Appreciated Securities.  The stock market has done well, so you probably have stocks with unrealized capital gains. When you donate appreciated securities to a charity, you get the deduction, avoid a capital gains tax, and your charity receives the money. Let’s say you purchased YETI Holdings in January at $14.84, and today it’s selling for $31.90 for an unrealized gain of $17.06 or 115%. You can gift your shares directly to your charity and avoid paying taxes on the appreciation. The charity will sell the shares on the open market to receive the cash, and they, too, will avoid a capital gains tax. You must donate your securities to a 501c3 organization to receive a deduction

Qualified Charitable Distribution.  The IRS allows you to satisfy your required minimum distribution by giving your money directly to a charity from your IRA. It’s called a qualified charitable distribution (QCD), and you’re allowed to donate up to $100,000 per year. The QCD will enable you to avoid paying taxes on the distribution, and it will satisfy your required minimum distribution.

Donor-Advised Fund (DAF). A Donor Advised Fund allows you to transfer appreciated shares to the fund. Once inside the DAF, you can sell your shares and purchase new investments without realizing a capital gain. You can deduct the contribution from your taxes, and it occurs in the year of your gift, not in the year of distribution. You don’t have to distribute the proceeds immediately, so if you’re not sure which charities to support, you can defer the payment until you identify the organizations. For example,  you can transfer $100,000 worth of ABC Inc. stock to your Donor Advised Fund, sell it, reinvest the proceeds, and then send a portion of the funds to your favorite charity. The funds that remain inside your DAF will grow tax-free.

Charitable Remainder Trust (CRT). This trust allows you to transfer your shares to a Charitable Remainder Trust, sell your holdings, diversify your assets, and receive income from the proceeds. At your death, your charity will receive the remainder of the trust assets. The stock, once transferred, can be sold free of taxation and the proceeds reinvested into a diversified portfolio of stocks, bonds or funds. Your contribution to the trust qualifies for a charitable deduction. The amount of income you can receive from the trust is between 5% and 8% of the portfolio value. You will pay ordinary income tax on the income you receive.

Cash.  Cash is king, and it’s easy to give away. The IRS allows you to give away $15,000 per person per year without having to pay taxes. However, you won’t receive a tax deduction, but you’ll be able to help the next generation. For example, if you have four children and ten grandchildren, you can give away $210,000 this year. You can also give $15,000 to friends and strangers if you want.

The end of the year is a great time to give money to those in need, and it’s always the right time to help others.  However, an annual charitable giving strategy may be beneficial to your long-term planning and budgeting needs.  A philanthropic plan can pay huge dividends to you and those you support.

Do not withhold good from those to whom it is due, when it is in your power to do it. ~ Proverbs 3:37.

November 5, 2019

Bill Parrott, CFP®, CKA®, is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.

 

 

 

 

Give.

Thanksgiving marks the beginning of the giving season.  From now until the end of the year charities and non-profits will receive much needed dollars to help fund their good works.   For several organizations the money they receive in the next few weeks will be the bulk of their annual budget.  Individuals typically wait until the end of the year to give because they want to know what their tax situation will be before they donate their money.  Some people give from their wallet, but most give from their heart.

For where your treasure is, there your heart will be also. ~ Matthew 6:21.

During the financial planning discovery phase I ask people if they have a charitable gift giving strategy or if they donate money to charities on a regular basis.  I’m happy to report most people are charitable.  I once worked with a young pilot from Fed-Ex who didn’t believe in giving money away while he was living.  He wanted to donate all his money at his death through his estate.   I told him part of the joy of giving money away while you’re living is you get to see your gift bear fruit.  I didn’t tell him that people who don’t give today won’t give tomorrow.

Each one must give as he has decided in his heart, not reluctantly or under compulsion, for God loves a cheerful giver. ~ 2 Corinthians 9:7.

Here are few ideas and strategies to help you with your charitable donations.

  1. Appreciated Securities. The stock market has produced stellar results in 2017 so you may have a stock or two that has performed well.  When you give appreciated securities to a charity, you get the deduction, avoid a capital gains tax, and your charity receives the money.   Let’s say you purchased Maui, Land & Pineapple in January at $7.15 and today it’s selling for $17.40 for an unrealized gain of $10.25 or 143%.    You can gift your shares directly to your charity and avoid paying taxes on the $10.25 gain.  The charity will sell the stock on the open market to receive the cash and they, too, will avoid the capital gains tax.  You must donate your securities to a 501c3 organization to receive a deduction.  It would be nice to donate your appreciated stock to your Aunt Martha, but the IRS says no go to that idea.
  2. Qualified Charitable Distribution. The IRS will let you satisfy your required minimum distribution by donating your money directly to a charity from your IRA.   This distribution is referred to as a qualified charitable distribution and you’re allowed to give up to $100,000.   The advantage to the QCD is you get to avoid paying taxes on your IRA distribution and it will satisfy your required minimum distribution for the year so consider a QCD over an RMD.
  3. Donor Advised Fund. If you have too much money, too many charities, but not enough time, consider establishing a donor advised fund.   You can establish a DAF by year end to receive your charitable deduction.   Once your DAF is funded you can spend time on deciding how much money to give to your charities and when they should receive your gift.  One attraction of the DAF is you get the deduction for this calendar year, but you don’t have to give the money away until later years.  The money in your DAF can be distributed over several years to numerous charities.  You can also manage and invest the money inside your DAF.
  4. Cash. Cash is king and it’s easy to give away.  An envelope of cash is a welcomed gift to many.   The IRS allows you to give a way $14,000 per person, per year without having to pay taxes on your gift.   However, you won’t receive a tax deduction.  For example, if you have four children and ten grand-children, you can give away $196,000.  You can also give $14,000 to non-relatives and random strangers.   The IRS allows you to deduct up to 50% of your adjusted gross income for tax purposes if you donate your money to a recognized charity.  If you give more than 50%, the IRS lets you carry your donation forward for up to five years.

The end of the year is a great time to give money to those in need and there’s always a right time to help others.  However, an annual charitable giving strategy may be beneficial to your long-term planning and budgeting needs.  A strong charitable and philanthropic plan can pay huge dividends to you and those you support.

Do not withhold good from those to whom it is due, when it is in your power to do it. ~ Proverbs 3:37.

 

Bill Parrott is the President and CEO of Parrott Wealth Management an independent, fee-only, fiduciary financial planning and investment management firm in Austin, TX.  For more information please visit www.parrottwealth.com.

November 26, 2017

Note:  Past performance is not a guarantee of future returns.  Your returns may differ than those posted in this blog.