Congress wants to lower your clients tax bill (it’s true)!

For most high-net-worth clients, the best way to reduce their tax bill for 2024 is to employ one or more of the many tax-reducing techniques Congress has enacted to promote philanthropic activity.

Ben Franklin said that only two things are certain: death and taxes.

But with good planning, you can help your clients postpone, or even avoid, taxes.

In this blog, we outline some of the highlights of those techniques. For situations you or your clients are actually facing, we encourage you to consult with us at the earliest possible time. (All too often, clients wait too long, and end up paying way too much in taxes.)

Time is Critical

There are only about 6 weeks in the year left to get planning done and implemented.

Here’s how a planning schedule works out in a typical case.

• October 15 to October 30 – discussions, planning, decision

• November 1 to November 20 – entity creation, complete administrative requirements, open accounts.

• November 20 to December 15 – finalize and complete implementation

Key Planning Opportunities

Clients Who ARE Charitable

Contributions to Private Foundations

Clients can reduce their taxes by 20% to 50% by making contributions to a private foundation. Private Foundations can be operating or non-operating foundations. The deduction limitations are as follows.

Deductions are limited to a percentage of Adjusted Gross Income (AGI).

Private Non-Operating Foundations:

Donors can generally deduct up to 30% of their adjusted gross income (AGI) for cash donations made to a private non-operating foundation. For non-cash contributions of appreciated capital assets (e.g. stock or real estate), the deduction is limited to 20% of AGI. A donor can do both, for example contribute 20% of AGI in the form of appreciated capital assets, and another 10% of AGI in cash, and the deduction would be up to 30% of AGI.

Private Operating Foundations:

Contributions to private operating foundations are treated more favorably. Donors can typically deduct up to 50% of their AGI for cash contributions and 30% for non-cash contributions, and can also stack. For example, a client could contribute 30% of AGI in appreciated capital assets, and another 20% in cash, and deduct 50% of AGI.

Donor Advised Fund

For contribution deduction purposes, a donor advised fund has a 60% AGI limit. To qualify for the 60% of AGI, a donor must contribute only cash.

Otherwise, the limit is 50%. Of this 50%, 30% can be appreciated capital assets, and another 20% cash.

The Sterling Donor Advised Fund allows the advisor to continue to manage the assets. In fact, when your client creates a Sterling Donor Advised Fund, you will see those assets as just another account. Unlike most donor advised funds, when your client puts assets into the Sterling Donor Advised Fund, those funds count toward your Assets Under Management. In addition, you can get paid your full fee.

Clients Who Are NOT Particularly Charitable

For clients who are not particularly charitable, we have a box full of other tools that can provide tax deductions while also leveraging the assets for the current or future use of the client and/or the client’s family.

These include various kinds of trusts that can

• Generate tax deductions
• Allow tax-free growth
• Allow tax-deferred growth
• Allow clients to avoid capital gains

And more.

There’s not sufficient space in this blog to go into these planning opportunities in detail.

To learn more, please contact us at 703-437-9720 and ask for Katherine or Connor, or email us at [email protected].

Fee Discount Policy Notice

In years past, we have found that clients too often drag their feet, and put off planning to the last moment. Sometimes they miss the boat.

Because we have limited time and resources, we have found that it is fairest to everyone if we offer discounts for people acting before the last minute. As such, we are maintaining our regular low fees for cases that begin in October and close by the end of November. For cases beginning in November, higher rates will apply, and even higher in December.