Important Tax and Charitable Planning Updates: CARES Act and SECURE Act – 2020
CARES ACT of 2020: Special Opportunities for Charitable Planning in 2020
For those who use the standard deduction, an above-the-line reduction of income for gifts to charity up to $300.00 ($600.00 if filing jointly).
For those who intend to itemize deductions, an unlimited deduction of cash gifts to charity up to 100% of Adjusted Gross Income (AGI). Prior law limited deducting cash gifts to charity to not more than 60% of AGI (with carryovers).
Contributions in 2020 to establish charitable gift annuities or to fund charitable remainder trusts will be eligible for deduction up to 100% of AGI for itemizers.
SECURE ACT of 2020: Dealing with the New Retirement Account 10-year Distribution Rules
Inherited retirement account distributions must now be taken within 10 years. Can no longer stretch out the withdrawals and required tax payments on each distribution over the beneficiary's life expectancy.
For those who wish to leave retirement plan assets to children, a charitable remainder trust ought to be considered. The IRA/401(k) assets would be transferred to the trust after the owner's lifetime. Annual lifetime annuity amounts will be made payable to beneficiaries at a qualified fixed lifetime/s rate. Payments will be taxed to the beneficiaries annually.Some of the annual payments may be tax-preferred.