Year-End Donations & Giving

A list of things to consider as you think about year-end charitable donations

With its blinking lights, family traditions, and festive music, December is the most wonderful time of the year. And according to Charity Navigator, the month of December really is wonderful because December sees approximately 30% of all annual charitable giving occur.

Unfortunately, despite the greatest of intentions, many will inevitably make mistakes in how they give, especially if they wait until the last minute. So, here is a list of things for you to think about as you consider your year-end charitable donations.

Make a Plan
Last year, donations from America’s individuals, estates, foundations and corporations reached approximately $410 billion, according to Giving USA in their Annual Report on Philanthropy. Hoping that 2020 is similar, that means you and your neighbors will donate over $120+ billion dollars in December alone!

How much of this was more impulse-giving vs. a well-thought-out charity plan?

Ideally, at the beginning of every year – with your financial advisor – you would map out a plan to maximize the tax benefits of your giving. Really think through what is important to you and what you want to support. Is it an organization that supports literacy? Or provides food? Or shelter for families? Creating a plan will help you be less reactive and feel less boxed in when friends ask for your charitable support.

Research Your Charity
It’s easy to get fooled by a charity’s name so you need to do your homework. And beware of scam artists pretending to represent an organization that doesn’t exist. Read a charity’s financial statements to see how they spend their (your) money. Even better, volunteer before you write a check.

Donating Stock
If you have owned stock for more than a year and it has appreciated, then don’t sell it first and then give the cash to charity. Those appreciated assets can be donated directly to charity without you or the charity incurring capital gains taxes (consult your tax professional to be sure).

Selling Your Personal Info
Quite a few charities will rent or sell the addresses, phone numbers, email addresses and detailed social media profiles of their donors, which means you might start getting a bunch of unwanted calls, emails and friend requests. Make sure you review a charity’s privacy policy before you give them your information. And many times, you have to actively “Opt Out” to ensure your personal information is not used.

Ask for A Receipt
Remember, for charitable contributions of $250 or more, you need a donor’s acknowledgement letter. And generally it’s a good idea to obtain receipts, especially when donating goods.

Don’t Delay
Shockingly, a whopping 12% of all giving occurs in the last 3 days of the year! But if you mail a check postmarked after December 31st, then you might run into trouble. Make it easy on yourself and don’t wait until the last minute.

Money Can’t Buy Happiness, But Maybe Donating to Charity Can?
Consider research from Elizabeth Dunn of the University of British Columbia, Lara Aknin at Simon Fraser University and Michael Norton at Harvard Business School. Essentially what they found in their study is the following:

  • Spending money on other people has a more positive impact on happiness than spending money on oneself
  • Spending more of one’s income on others predicted greater happiness

Discuss with Your Financial Advisor
If you have any questions or need help mapping out your Charitable Plan, set an appointment to discuss with your financial advisor.

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. 

12 Estate Planning Must-Dos

Many of you already have estate documents, probably executed many years ago. You need an estate attorney to look over your documents every 10 years or so. Here are a dozen points to review.

i. Do you have a will and powers of attorney for health care and property? These are part of every complete estate plan. With health-care power, you choose an agent to act on your behalf if you become unable to make your own decisions. With durable power for property, you select an agent to act if you are incapacitated and can’t sign a tax return, make investment decisions, make gifts or handle other financial matters.

Make sure your health-care power addresses the Heath Insurance Portability and Accountability Act (HIPPA). This Governs what medical information doctors can release to someone other than the patient.

ii. Do you need to change any beneficiaries, executors, trustees, guardians or others named in your documents? Are all still living? Can someone you recently found fill a role better?

iii. Any updates needed to addendums to your will that specify who gets what of your personal property? Often, I read wills that mention addendums for personal property and the addendums don’t even exist.

iv. Did you move to a different state since the execution of your estate documents? If so, seek out a local estate attorney to check any legal differences for planning between your old and new states.

v. Do you still need your trust documents, or can you decant, which allows you to change some provisions? Consider this technique of emptying the contents of an irrevocable trust into another newly created trust if you are unhappy with your irrevocable trust. Not all states allow decanting.

You may also want to discuss possibly moving assets out of a living trust (where a trustee holds them, a technique sometimes used to avoid probate) and holding them in the name of an individual.

This discussion will weigh the income tax benefits of a step-up in cost basis, the original cost of an asset, versus other reasons to keep the trust. (“Step up” means that the cost basis of an asset resets to the fair market value of the security as the date of the holder’s death – potentially a much higher value than when they bought the security.) The higher the cost basis, the less capital gains tax your heirs pay when they sell the asset.

You may also want to see whether you need an irrevocable life insurance trust, a device once used to move assets, typically life insurance, out of a taxable estate. Now that thresholds are higher -individuals can leave $5.34 million and married couples $10.68 million tax-free – you may not need to move assets.

Also check when your life insurance expires. Consider how long to keep it if you think you might outlive the policy

vi. Have your children passed the ages specified in a children’s trust (in which you designate money for such specific purposes as education, home down payments or weddings once the kids reach stipulated ages)? If your estate documents call for a trust to give children access to money at certain ages after you die, you may be able to delete that language if the kids are older than the specified ages.

vii. What happens if one of your kids gets divorced? A trust can help you protect assets for your child or grandchild.

viii. Do you have heirs with special needs? Don’t assume typical estate documents help such an heir. Seek out a financial advisor and attorney who specialize in this planning.

ix. Check beneficiary designations on brokerage accounts, insurance policies and retirement accounts. Anybody you don’t want there?

x. If you filled out a brokerage account application (or any beneficiary designation), understand the firm’s policy when one beneficiary dies before the others. If you want the share of the assets to pass by blood line – to the deceased’s children, for example – you may need to put in language specifying per stirpes (distribution of property when a beneficiary with children dies before the maker of the will).

Otherwise, the remaining listed beneficiaries may simply divide the assets.

xi. Often a parent names a child on a bank account so the child can access or use the money if the parent can’t act. Understand that if you name your child as a joint owner on an account, the money passes to your child no matter what your will dictates. The child splitting the money with someone else constitutes a gift, though one probably not subject to gift tax now that gifts of less than $5.34 million aren’t taxed. Still, think carefully so you keep the family peace.

xii. Do your heirs know where to find all your important information? Let someone know the password to the app where you keep all your passwords – you must remember digital assets now, too.

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. 

5 Avoidable Mistakes in the Will You Write

We have seen our share of client-drafted wills. While most people opt to have a lawyer draft their last will and testament, there is no requirement that an attorney do so. If you do opt to draft your own will, make sure to avoid the following five mistakes that we repeatedly see in layman-drafted documents.

1. No Inclusion of Your Family Tree

The core idea of a will is that you can leave your money to whomever you choose. However, most people don’t understand that your nearest family members are allowed to contest your will in court. Yes, they will most likely lose that contest, but your next of kin do have the right to know that you are disinheriting them, so they must be placed on notice when you dies, and your will is submitted to the court for probate. The court will want to know your nearest heirs, particularly if you are estranged from them, since the court assumes, they are the most likely parties to contest your will. Include the members of your family tree (spouse, children, parents, siblings) who are alive and deceased (so that the court knows that these people do not need to be put on notice) and addresses of where your next of kin reside. If a close family member is being disinherited, make sure to state that in the will. Excluding your next of kin or ignoring their existence does nothing to bolster the validity of your will.

2. Leaving Funds to Beneficiaries Who are Minors

Remember being 13 and receiving $100? It seemed like all the money in the world … until it was spent within one week. Remember: Minors cannot own substantial funds in their own name, clearly with good reason. In the case of any minor beneficiary receiving significant amounts of money outright, a court would be required to hold a guardianship or conservatorship proceeding. A judge would appoint someone to oversee the funds (at your estate’s expense) to safeguard them until the child reaches 18 (at which point the child “buys the fraternity”). This guardian appointment is something you would have no control over, so, while it would be unusual, it could even be the judge’s campaign contributor or golf buddy attorney. Your will can avoid this by not transferring your money directly to a minor. Allow your executor to leave bequests made to minors to a Uniform Transfers to Minors Act (UTMA) account. This allows the funds to be administered by your choice of custodian until the minor reaches 21. Yes, 21 is still a young age to leave significant funds to a child, but UTMAs do avoid court oversight, because the account is not being given directly to a minor. For larger sums, you should create testamentary trusts in your last will and testament (testamentary get it?). These trusts can be as expansive or limited as you want. You can say “funds shall be used for the beneficiary’s health and education until she reaches 30, at which point all remaining trust funds are to be distributed,” or “the Trustee shall have full discretion how funds are used.” Name a suitable trustee (much like you do with an executor, see below), and state who receives the funds if something happens to the beneficiary.

3. Selecting Executors Without Flexibility

Naming an appropriate executor is critical, because this person will be in charge of your estate’s affairs. Your executor “steps into your shoes,” meaning he can enter into contracts, collect your property, pay taxes and creditors, distribute your estate, order financial and medical records … basically everything you can do. You should attempt to name the most trustworthy and capable person you can think of to serve as executor. One mistake people make is naming either too few or too many executors. If you name only one executor and she cannot serve (due to inability, disinterest or her own death) your beneficiaries may wait a very long time for the court to appoint another executor. If you name too many people to serve at one time you risk them disagreeing with one another or not coordinating effectively. Name responsible, reliable individuals as executors; naming at least one or two younger people to succeed your initial choice should ensure your estate is successfully brought to closure without excessive court intervention.

4. Incorrect Will Execution

For people drafting their own wills, this is the moment of truth… and the point at which many well-drafted wills are made completely ineffective. We have seen more self-drafted wills fail due to improper execution than all other reasons combined. Wills require your signature (or someone signing for you at your explicit direction and in your presence) at the end of the will in front of two disinterested witnesses. The witnesses cannot be beneficiaries of your estate. And they may need to sign an affidavit in front of a notary. Failing any of these steps may cause your will to be invalidated. The sole exception is the notary requirement for the witness affidavit: They may be able to sign the affidavit after you die … but your executor will need to be able to read the witness’s names … and 50% of the time their signatures are little more than illegible chicken scratch that looks more like Sanskrit than a signature, meaning you can’t identify the witnesses.

5. Not Finding the Original Will

Finally, you need an original, signed will, particularly if you try to draft your own document. If an attorney drafted the will and it is subsequently lost, the drafting lawyer can sometimes verify a signed copy of the original will in a court during a lost will proceeding. Most states don’t allow these proceedings if no drafting attorney can be found, so when you lose your original will there is no one to question to prove its validity. Just so everyone is clear: An unsigned copy of a will is 100% useless and won’t be admitted to probate. We do not suggest drafting your own will, because what you create is sometimes worse than nothing at all. However, we appreciate that some people sometimes want to take a shot at directing their estate’s destiny. If you are one of these people, take note of these five suggestions before executing your document.

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. 

Should Investors Worry About Impeachment?

Tweets and speeches don’t drive the stock markets – numbers do

It’s now clear that the investigations into President Trump are likely to continue through the 2020 elections. What’s still uncertain is the impact that these investigations will have on the stock market.
After rallying since Trump’s election victory in November 2016, the S&P 500 Index has done pretty well, but it has stumbled at times too:

• Ending 2016 up 9.54%;
• Zooming up 19.42% in 2017;
• Dropping 6.24% in 2018; and
• Up more than 18% so far year-to-date at the end of the third-quarter in 2019.

Although stocks have rewarded investors with healthy returns, investors seem more nervous that Trump will be impeached because not only will his pro-business agenda be stalled, but the chaos could send the markets into a tailspin. At least that’s the worry.
And although no one has a crystal ball to tell us how the Trump investigations will end, investors would be smart to tune them out. Here are a few reasons why.

Economics Matter More than Tweets

Economics and numbers matter way more than politics to the stock market. Trump’s tweets and speeches get all the media attention, and while the market might seem to react a little bit at times, the reality is that boring economic numbers drive the markets one way or the other. And consider these numbers:

• Unemployment is at 3.7%, one-tenth of a percent from the lowest level in over 50 years.
• We have seen 107 consecutive months of job growth, the longest streak ever.
• Wages have risen 3.2% this year, the strongest year in over a decade.
• Inflation has run below the Fed’s intended longer-term 2% target for most of this 10-year expansion and core inflation has averaged 2.1% so far this year.
• Consumer spending came in much higher than expected with a 4.7% annualized growth number, the highest gain in 4 years.

Impeachment is Unlikely Anyway

Investors should remember that impeachment is very unlikely as no U.S. president has ever been impeached and kicked out of office.
Andrew Johnson and Bill Clinton were both impeached, but they were acquitted in the Senate, where a two-thirds majority is required for conviction. Richard Nixon avoided impeachment and conviction only by resigning office.

Earnings Drive Stock Prices

What should investors worry about? Numbers. Specifically, corporate earnings.

It’s an investing adage that earnings are the lifeblood of the stock market. Stocks move in response to real or perceived earnings changes. If you are thinking of owning individual stocks, the trick is to find those whose earnings growth is strong, and should remain strong.
In aggregate, however, investors should worry about the upcoming earnings season as we head into the fourth quarter of 2019. Because according to research firm FactSet, as of September 27, 2019, 113 of the S&P 500 companies have issued EPS (earnings-per-share) guidance for the quarter.

And of these 113 companies, 82 have issued negative EPS guidance and 31 companies have issued positive EPS guidance. For perspective, the number of companies issuing negative EPS is above the 5-year average of 74.

Ignore Tweets and Speeches

Again, Trump’s tweets and speeches will continue to get all the media attention. But if you intend to own publicly-traded companies, make sure you read annual reports and earnings releases, not tweets.

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.