Tax Planning Advice: Charitable Tax Deductions—Gavin Morrissey

More On Tax Planning

from The Advisor's Professional Library
  • Annuities: Estate Tax The value of certain types of annuities may be included in an estate’s value. Understanding the intricacies of these inclusions is a critically important aspect of estate planning.
  • Annuities: Variable Annuities Annuities are hot. The tax rules vary with the circumstances. Advisors must be aware of these intricacies when discussing annuities with clients.

This is the eighth in a series of 23 tax tips thatAdvisorOne will publish on each business day in March as part of our Tax Planning Special Report (see ourSpecial Report calendar for a more complete list of topics to be covered and experts who will deliver their insights).

The tax tip today comes from Gavin Morrissey, director of advanced planning at Commonwealth Financial Network, in San Diego, Calif. Morrissey consults on issues involving insurance, tax, executive benefits, business, and estate and charitable planning. He also consults with advisors on concentrated stock and stock option planning and writes a tax planning blog for AdvisorOne (for instance, see his widely read posting on the 'unprecedented' tax planning opportunities in the 2010 tax act).

The Tip: Charitable Tax Deductions on Income Tax, Not Estate Tax

High-net-worth families with charitable intent have used various giving strategies to reduce the size of their estates. In the wake of The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the Act), charitable giving has become interesting, Morrissey (left) says. Many estates are not big enough to have to use the charitable giving strategy to reduce the estate to the level where there is no estate tax.

Now, high-net-worth clients are looking to take advantage of the income tax deduction rather than the estate tax deduction, and are giving away assets during life versus leaving charitable bequests. The Act repealed for two years the phasing out with rising income of itemized deductions, including for charitable gifts, and personal exemptions.

Morrissey says clients are using such vehicles as donor-advised funds or charitable trusts whereby they can generate the income tax deduction now while they’re alive.

“Charitable bequests may still be important to some clients," Morrissey points out, "but you can still reduce your taxable estate and garner the income tax benefits while you’re living.” His parting thought: “Charitable giving makes a lot of sense.”


Reprints Discuss this story
This is where the comments go.