The Perfect Gift? Ideas…From a Planning Perspective

December is here and 2016 is drawing to a close.  As we enter the holiday season, we scramble to pick the perfect gift for our family members, our friends, teachers… the list goes on.

At Parsec, we work with clients to create gifting strategies that fit into their overall financial plan.

This December we encourage you to think about giving and its potential longer term impact on both your family (children and grandchildren) and your taxes.  Let’s first review a powerful gifting strategy to younger family members: the custodial Roth IRA.

As long as there is earned income, which can come from mowing lawns, housework, babysitting etc., contributions to a custodial Roth IRA can be made up to the amount of the earned income but not over $5,500*.  For example, your 9 year old grandchild earned $1,000 over the summer through his lawn mowing business.  You can open a custodial Roth IRA for him and deposit a matching gift of $1,000. Let’s say he continues to mow lawns each summer for the next 10 years and you continue to match his earnings with a $1,000 holiday gift.  Assuming a 7% return each year, your gifts will grow to over $15,000 at the end of 10 years.  Remember this is only the beginning, the approximate $5,000 earnings in this example will continue to compound over time and ALL earnings are tax free upon withdrawal later in life.  Rewarding your grandchild’s hard work through Roth contributions is a holiday gift that offers valuable lessons on many levels.

Let’s switch gears to philanthropy.  Each year Parsec’s client service team processes hundreds of charitable gift requests from our clients.  These gifts of course offer tax advantages in various forms.  For many of our clients, the qualified charitable distribution or QCD brings the most formidable tax savings.  How does it work?  If you are over 70 1/2, up to $100,000 of your required minimum distribution (RMD) can be given directly to charity through a QCD.  The result: your AGI will be reduced dollar for dollar by the amount of the QCD.  A simple, yet impactful strategy:  on not only your charity of choice but also on your tax dollar.

As we enter this holiday season we hope that you reach out to your financial advisor to talk about gifting strategies that may be appropriate for you and your family.  Happy Holidays!

Betsy Cunagin, CFP®

Senior Financial Advisor

*$5,500 is the IRA contribution limit for 2016 and 2017.  

Share this:

Time is Running Out!

When we were kids, it seemed to take FOREVER for Christmas to get here.  After Thanksgiving, you knew it was close but oh so far!  Nowadays, it seems as if December just flies by.  We have so much to do!  How do we get it all done?

In the midst of the holiday chaos, let’s take a moment to handle charitable donations.  Your favorite non-profit organization appreciates anything you can do for them. 

You still have time to make a donation.  You must make cash donations by December 31 to count them toward the 2013 tax year. 

If you want to donate securities, call us the second you read this blog post.  Time is running out to ensure processing of these types of donations by December 31.

Also, if you have old clothes, furniture, or other items to donate, you should deliver the items to the charity by December 31.  (Some charities even offer pick-up service.)  Make a detailed list of the items you donated.  If something is particularly valuable, it would be a good idea to snap a picture.  You would have proof, if you are ever audited, of the item’s condition.

It is possible to get everything done on time.  As I mentioned, charities need our support.  Just take a deep breath, make a list, and do one thing at a time.  If you planned to make a donation, just add them to the “to do” list.

We hope everyone has a safe holiday season and a healthy, happy new year.

Cristy Freeman, AAMS
Senior Operations Associate

Share this: