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Journey Financial Consultants: Proving Surplus and Passing the Baton

Tuesday, May 17, 2022 - 15:58

Journey Financial Consultants: Proving Surplus and Passing the Baton
Are you looking for ways to encourage the charitable intentions of your clients?

Financial Advisor Dena DeGroat sends birthday cards when her clients reach age 70-1/2 to introduce the concept of qualified charitable distributions (QCDs). She started sending cards after the SECURE Act of 2019 raised the required minimum distribution (RMD) age to 72.

Dena DeGroat FIC

Dena says, “QCDs are great for retirees, even if they aren’t givers.” She has found that the potential tax benefits of QCDs can be easier for some clients to embrace than the possibility of being more generous than they already are. Among the tax advantages, QCDs can help clients:

  1. Reduce their IRA balances before RMDs start.
  2. Bypass federal and state income taxes thereby lowering adjusted gross income (AGI).
  3. Qualify for other tax reductions, such as healthcare deduction or property tax refunds due to lower AGI.
  4. Reduce taxable Social Security benefits.
  5. Use bundling strategy with charitable gifts.

If SECURE Act 2.0 becomes law as anticipated, QCDs could become an even more strategic planning tool.

Goal setting as part of comprehensive advice planning
The birthday cards give Dena and her partners with Journey Financial Consultants a reason to revisit charitable conversations they start years before. Comprehensive financial planning provides the springboard for those conversations.

James Aman CFP®, ChFC®, CLU®, CASL®, LUTCF®, FIC

Dena says, “We really want to prove surplus to clients repeatedly. Frugal people need permission to do more of what they truly want.”

Financial Advisor James Aman, a partner of Dena’s since 2007, says while helping clients set goals with Money Guide Pro, they’re prompted to think about their needs, wants and wishes.

“We find out what they are passionate about. And if they plan to give beyond gifts to their family, we like to separate charitable giving from expenses as its own goal,” James says.

Once the charitable goal is established, they can start to weave tax-saving strategies into their decision. It depends on the client’s circumstances which solution is best for them and whether they will use cash flow, RMDs or appreciated investments to fund their giving goal.

Using donor advised funds ‘to pass the baton’
Long before clients are old enough for QCDs, James and Dena share the flexible features and benefits of donor advised funds. Clients can create a fund through Thrivent Charitable and make grants to their favorite organizations and causes over time. Families often make grant decisions together and name successors to ensure their fund stays active after the original donors pass away.

James says, “One of the beautiful things about donor advised funds is that clients can use them to pass the baton of giving to the next generation.”