Welcome to Giving Tuesday 2020 & Other End of the Year Topics

 In Planning Insights

Giving Tuesday was created in 2012 with a simple idea: a day that encourages people to do good. Over the past seven years it has grown into a global movement that inspires hundreds of millions of people to give, collaborate, and celebrate generosity.

Whether it’s making someone smile, helping a neighbor or a stranger out, showing up for an issue or people we care about, or giving some of what we have to those who need our help, every act of generosity counts and everyone has something to give. This day generally kicks off the charitable season and the yearend giving.

We thought this would be a perfect day to remind you about gifting for 2020. Gifting stock is a great way to “give back” to family, individuals or organizations. Gifting cash or low-cost basis stock can be beneficial for your long-term estate planning and is an important tax strategy. The annual gift tax exclusion for 2020 is $15,000 per person. For married couples, each spouse can gift $15,000 for a total of $30,000 to any one individual or charitable organization. We encourage you to have a “check-in” with your accountant or CPA before the end of the year regarding gifting and how it might affect your situation.

Something to keep in mind this year are the limits on charitable contributions as a percentage of Adjusted Gross Income (AGI) that apply. This year the CARES Act allows you to gift up to 100% of AGI directly to a charity — this excludes donations made to private foundations or Donor Advised Funds (DAFs). Alternatively, you can give up to 30% of AGI in stock and 70% in cash directly to charities, which does include private foundations and DAFs.

If you are considering gifting stock or cash out of the accounts managed by your team at Main Street Research, it is best to let us know right away. Please note, is important that your signed documents for gifting are received by December 10th. Requests made after this date are not guaranteed to be delivered by December 31st.

Another important end of the year topic is IRA Required Minimum Distributions (RMDs). If you have inherited IRA funds from an individual other than your spouse or if you are 70½ or older and have funds invested in retirement accounts, the Federal government requires you to take a minimum taxable distribution annually. However, with the passing of the CARES Act in March of this year, all RMDs have been suspended for 2020 only.

The suspension of RMDs brings up the possibility for Roth conversion or an IRA Qualified Charitable Distribution. Typically, you must take RMDs out before you can do a Roth conversion. Now, with the RMD “holiday,” the first pre-tax dollars you take out you may pay the tax and convert it to a Roth. Therefore, this year allows for the potential to convert more pre-tax dollars before being pushed into a higher tax bracket.

Another strategy for those who are charitably inclined is a Qualified Charitable Distribution (QCD). If you’re 70 ½ or older this year, you can give up to $100,000 directly from your IRA to a qualified, 501(c)(3) charity. Normally QCDs count towards your RMD. If you give to charity, and like most taxpayers take the standard deduction, the QCD still leaves you ahead — even though you don’t have to take the RMD.

Once again, if you would like to make a gift from your Main Street Research accounts this year, please let us know as soon as possible. If you will not be gifting this year or will be making your gifts from funds not managed by Main Street Research, you need not respond to this email.

We look forward to helping you with your end of the year needs. Please feel free to contact your Main Street Research team with any questions or thoughts you may have!

If you have any friends or colleagues who you feel may benefit from our services, we would be happy to introduce ourselves to them with a no-obligation introductory meeting.