Congress has passed a sweeping new tax law known as the One Big Beautiful Bill Act (OBBBA), which is already reshaping the financial landscape for families, retirees, high earners, and business owners.

At Briaud Financial Advisors, we’ve reviewed the fine print to help you understand what’s changed, what new opportunities are time-sensitive, and what may require strategic planning over the next several years.

Major Tax Law Changes in the One Big Beautiful Bill Act

These are the key permanent provisions in OBBBA that will have long-term implications for estate planning, income taxes, and overall financial strategy.

Estate Tax Exemption Increased to $15 Million Per Person

The estate tax exemption has increased to $15 million per person, or $30 million per married couple. This is a major shift from the expected rollback to $7.14 million, offering a valuable opportunity for estate and business succession planning.

2017 Tax Cuts Made Permanent

Provisions from the Tax Cuts and Jobs Act (TCJA) of 2017 have been made permanent. These include:

• Lower marginal income tax rates across all brackets
• A larger standard deduction, increasing to $31,500 for joint filers and $15,750 for single filers in 2025
• Continued elimination of personal exemptions

Child Tax Credit Increased

Beginning in 2026, the Child Tax Credit increases to $2,200 per child, and will be indexed for inflation going forward.

Mortgage Interest Deduction Cap Made Permanent

The cap on deductible mortgage interest remains at $750,000 of principal and is now permanent under the new tax law.

Time-Sensitive Tax Planning Opportunities (2025–2028)

Several provisions of the One Big Beautiful Bill Act are temporary and expire after 2028, so it’s important to evaluate whether they apply to you and take action accordingly.

New Senior Tax Deduction

A new deduction of $6,000 is available to taxpayers age 65 or older with income below:

• $75,000 for single filers
• $150,000 for joint filers

This deduction is available even if you take the standard deduction and applies from 2025 through 2028. It begins to phase out above these income levels.

Temporary SALT Deduction Increase

In 2025, the SALT deduction limit increases to $40,000 for households with modified adjusted gross income (MAGI) of $500,000 or less. This enhanced deduction phases out gradually for incomes between $500,000 and $600,000. For those with MAGI over $600,000, the SALT deduction remains capped at $10,000. This increase is temporary and reverts back to $10,000 in 2029. 

Tip Income Deduction

From 2025 to 2028, workers in tipped industries can deduct up to $25,000 of tip income. The deduction begins to phase out above:

• $150,000 for single filers
• $300,000 for joint filers

Auto Loan Interest Deduction

If you purchase a new vehicle with final assembly in the United States between 2025 and 2028, you may deduct up to $10,000 in loan interest—provided your income is under:

• $100,000 for single filers
• $200,000 for joint filers

This deduction begins to phase out after these modified adjusted gross income (MAGI) levels.

Charitable Deduction for Non-Itemizers

Starting in 2026, taxpayers who do not itemize can still deduct charitable contributions of:

• Up to $1,000 for single filers
• Up to $2,000 for joint filers

This deduction applies to eligible charitable contributions and offers a new incentive for philanthropic giving.

New “Trump Accounts” for Children

US children born between 2025 and 2028 may qualify for a federally seeded savings account with a $1,000 government contribution. 

• Contributions of up to $5,000 may be made annually, increased in the future for inflation. These contributions are NOT tax deductible by the donor.
• Investments are limited to equity investments in primarily United States based companies, and earnings grow tax deferred.
• No distributions are allowed before the child turns 18. 

Future Tax Law Changes That May Require Planning

While many of OBBBA’s provisions reduce taxes in the near term, others may introduce limitations or tax increases—especially for higher earners—starting in 2026.

Itemized Deduction Limits Return in 2026

Itemized deductions will be limited to the 35% tax bracket. This may reduce the effectiveness of certain deductions for high-income taxpayers.

New Floor for Charitable Deductions

Starting in 2026, only charitable donations that exceed 0.5% of adjusted gross income (AGI) will be deductible—unless made via Qualified Charitable Distributions (QCDs) from an IRA, which are fully deductible for those age 70½ and older.

Repeal of Green Energy Tax Credits

OBBBA rolls back several tax credits from the Inflation Reduction Act, including:

• Electric vehicle tax credits
• Residential energy efficiency incentives

This may affect return on investment (ROI) for upcoming green energy upgrades.

What You Can Do Now

The One Big Beautiful Bill Act opens the door for both near-term tax savings and long-term strategic planning. Consider taking action if you are:

• Updating your estate plan to reflect the higher exemption
• Gifting assets to children, grandchildren, or charitable organizations
• Planning for future retirement income or Required Minimum Distributions (RMDs)
• Reviewing your business entity structure or compensation strategy
• Preparing for future care needs or benefit eligibility

Ready to Make the Most of These Changes?

Whether you’re thinking about updating your estate plan, adjusting your tax strategy, or planning for long-term care, the One Big Beautiful Bill Act presents both opportunities and challenges.

At Briaud, we specialize in guiding clients through complex transitions like this. We’ll help you understand how these new tax rules apply to your specific situation—so you can move forward with clarity, confidence, and a plan that aligns with your goals.

Let’s talk about how these changes fit into your bigger financial picture and how we can help you make the most of them.

Ahead of you lies a future filled with the possibilities of someone who may not yet have been ready to perform in their last act on this stage. In our last blog, we talked about the emotional and pragmatic considerations of reaching this precipice. Now, with nothing but opportunity ahead – and a mind swirling with ideas, plans, and next steps – it’s time to make sure your financial future is equal to the task.

Whatever familial or professional aspirations beckon, one thing is true today: You’ve accepted a package which certainly includes a finite amount of compensation, likely includes some health insurance for you and your partner – and that’s it. 

So, how do you make that package work for you? Particularly, how do we make those resources last the longest, mitigate the tax ramifications of the lump payment, and set yourself up for that bold future ahead?

The good news for those in the academic profession: You have an expanded variety of options to cut taxes, invest wisely, and make your buyout work over time. 

In this blog, I hope to introduce you to some common ways that we can help make that happen.

Tax Mitigation 

You’ve likely been offered a lump sum of up to a year’s worth of your annual income, and it will be paid concurrent with the salary you earned in your final year of work. Without proper preparation, this windfall can create a massive tax liability for you in the upcoming year. Fortunately, you have some great options to shelter that income from the government’s hands.

First, as an academic employee, you likely already know you have the 403b retirement and 457 deferred contribution plans – which allows for healthy contributions under normal circumstances but adds extra savings power for those over 50 and/or within three years of retirement. In some cases, you can take advantage of the “super catch up” which will allow you to stockpile an extra $3,000 in your 403b (if you’ve been with the institution for 15 or more years) and a total of $41,000 in your 457 if you’re three years away from retirement.  

Here’s how this looks in practical terms, for the 403b:

And, with the 457:

Of course, if you have consulting income on top of your salary and buyout, you can create a SEP to defer a portion of that income as well. One caution – you likely won’t want to do a Roth IRA conversion at this time, but you’ll want to work with your tax planner to maximize Roth conversions over time after your high income years, especially if you retire before age 72, the mandatory distribution age. 

Here’s what the totality of the IRA picture looks like:

One note: SEP IRAs do not require any employee contribution, so for professors with consulting income, this is a great way to put away additional money up until their tax return is filed —even past year end.

One vehicle not listed above, the Solo 401k, allows professors to contribute the $27,000 employee plus 25% of income, if they have enough consulting to do this. But, you cannot contribute the employee part to both a 403b and a solo 401k, so this works quite well for someone who has gone part time, is just consulting, or has “unretired.”

Income Right Now

If you anticipate needing access to the income in the coming years through regular distributions, you still may want to consider using the tax deferred vehicles if the payout is coming at the end of the year. Moving taxable income scheduled for December into January can significantly reduce your taxable income. One note – if the VSP payout is due to you prior to the end of the calendar year, you can defer it using retirement vehicles or you may simply ask to see if there’s any “wiggle room” to put off the payout until January 1 of the year that follows, to minimize the tax hit. 

Another benefit of shifting your payout may seem counterintuitive: You actually don’t want to have a “zero” tax liability in the year that follows. Consider that it would be quite inefficient to pay taxes at a high bracket like 37 percent one year, and zero the next year. If you are getting a large flow of income, spreading the tax burden into a second year will reduce your tax liability substantially in BOTH years. We call it “relocating” the high-cost dollars into a lower-cost bracket.

Future Considerations

Showing an abnormally high level of income in one year could have effects that stretch beyond tax liabilities. That’s because the government determines your wealth on return data only, and will use that multiplier to compute things like Social Security payouts and future Medicare rates. Note that if you do end up with a very high-income year and a high Medicare bill, you can complete a Medicare Challenge with Social Security and possibly get that income adjustment reduced to what your taxable income should be going forward. 

With tax mitigation plans in place, you can now look at additional investment vehicles that fit your level of risk and your time horizon. Whether it’s the need for an ongoing monthly stipend, or to fund future business plans, or to ensure you have enough of an estate to pass along to future generations, you’ll have a variety of options that can help you live your next chapter in relative comfort.

In fact, you have several choices to weigh in on at this juncture – and getting them right can help not just with making this decision, but with determining your financial viability for the months and years to come.

In this two-part blog series, we hope to help you make the important near-term decisions associated with accepting the offer; next, we’ll discuss the tax and investment decisions you can make to stretch those departure dollars as far as possible.

But first, Day One – the opportunity has been presented. In most instances, the decision to extend a VSP has been motivated by cost-cutting, resource repurposing, or just trends in student population. Invariably, the offer includes a significant payout at the end of the transition period; though this likely will be at the end of the academic or calendar year. In some cases, there may be a phased time horizon over multiple years.

This is the time to put the emotions aside to ensure you make the best decision on this opportunity. We have worked with other university professionals who have arrived at this crossroads and successfully navigated this transition. Here are the key considerations, both emotional and pragmatic, that typically shape the outcome:

What Am I Looking For In the Offer?

You may receive a payout offer of between one and two times your annual salary – this is standard and fair. In some instances, you will be able to retain your university health insurance, and in some cases, the spouse also can remain on the policy for an additional expense. Depending on your age at the time of the VSP, you might also qualify for enrollment as a retiree on their health insurance program, which would give you the chance to retain it in perpetuity.

Is This Enough to Retire On?

In our next blog, we’ll talk about how you can take steps from this moment forward in order to ensure you minimize your tax liability and maximize your investment potential from this windfall. One tip we’ll mention now: It doesn’t hurt to ask them to pay the buyout amount after the first of next year, in order to spread out the liability. But more on this later.

When you talk to an advisor who is skilled at serving professionals in higher ed (like those of us here at Briaud), we will look at the totality of your retirement picture. Likely, you have socked away money into your 403b, 457, and other plans. You may also participate in a defined benefit (pension) plan. And we’ll definitely want to look at how this early retirement will affect the calculations for your Social Security payout later on.

Is Any of this Negotiable?

Aside from asking to delay the payout (noted above), these offers are fairly rigid – designed to be fair for all those who are offered the VSP.

I Can’t Help but Think That I’m Not Ready to Retire.

This will be the biggest intangible discussion you’ll want to have with your family and advisors. With so much of your identity wrapped up in your work, you’ll need to figure out how to fill the time with something equally rewarding. While you know full well what you will be retiring from, it is just as important to know what you are retiring to. Hobbies, volunteering and travel are always options, but will they truly fill the time/intellectual gap you may experience with leaving your profession.

Though your VSP likely will preclude full-time employment within your state’s university system, you may have the option of lecturing, or coming back on a contract basis. Of course, if you currently provide consulting or other outside work, you can devote more time to that effort. Long story short – you will have opportunities to continue to keep your academic brain at work. But talk to your advisor to make sure that whatever you choose, you don’t adversely affect your retirement standing or benefits.

What’s Next?

If accepting the offer is your decision, it’s time to make sure you protect as much of that nest egg as possible. Stay with us for our next blog, where we dive into the details of sheltering and investing for retirement success.

Are you interested in knowing more about how a Voluntary Separation Program would affect your long-term financial plans? We can help. Contact Briaud Financial Advisors for a free analysis and consultation.

If you are age 65 or older and retiring this year, you will need to sign up for Medicare Parts A (hospital coverage) and part B (medical insurance) through the Social Security Administration. You will also need to sign up for Part D (prescriptions).  This will be done through an insurance provider. Medicare Part A is free. The standard Part B premium for 2022 is $170.10 for participants with income up to $91,000 for individuals and $182,000 for married couples. Medicare Part D varies by insurer. However, if you have earnings higher than $91,000 single or $182,000 married, you will be charged an income-related monthly adjustment amount (IRMAA) by Medicare for Parts B and D, as shown in the table below. 

To calculate your premiums, the Social Security Administration (SSA) uses the modified adjusted gross income (MAGI) from the most recent tax return the IRS has provided them.  For 2022, that is your 2020 tax return that was filed in 2021.  For 2023, the SSA will use your 2021 return. MAGI is the total of your adjusted gross income plus any tax-exempt interest you received.

As you can see, higher incomes cause your Medicare premiums to increase by an Income Related Monthly Adjustment Amount from $80.00 to $486.10 additional per month.  That’s $960 to almost $6,000 additional annually.  Total premiums ranging from approximately $2,600 lowest to roughly $6,800 per person annually. 

At this point you are probably thinking, ‘Okay but my income will be lower in 2022 and 2023 due to my retirement.  Do I still have to pay the higher premiums?’ This is where the Medicare Challenge comes in.  The Social Security Administration will consider adjusting your Medicare premiums if your income will be lower due to one of the following life-changing events.

• You married, divorced, or became widowed.
• You or your spouse stopped working or reduced your work hours. 
• You or your spouse lost income-producing property because of a disaster or other event beyond your control.
• You or your spouse experienced a scheduled cessation, termination, or reorganization of an employer’s pension plan.
• You or your spouse received a settlement from an employer or former employer because of the employer’s closure, bankruptcy, or reorganization.

If your 2022 modified adjusted gross income (MAGI) will be lower than your 2020 or 2021 MAGI due to retirement (or one of the other causes listed above), you can file Form SSA-44 Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event to request a premium reduction for 2022.  Note however that if your 2022 MAGI ends up being the same or higher than 2020 (or 2021 if that is the higher year), they will make you pay back any premium reduction you received. Also note that if you are married and both covered under Medicare, each of you will need to file the form with Social Security.  You will also need to provide documentation supporting your projected 2022 and 2023 MAGI. Supporting documentation would include the date of your separation from work/retirement date and a reasonable calculation of your expected income for 2022 and 2023. 

As an example, let’s look at a Bob and Jane. Bob, a professor, retiring at the end of spring semester, May 31, 2022 and will be age 70 at the time. Jane retired several years earlier.  He and Jane were covered by the university health plan and did not need to sign up for Medicare until he retired.   Their MAGI from their 2020 tax return was $242,495.  Using the 2022 premium table, their part B premiums would be $340.20 per month per person. They would also pay an extra $32.10 per person on top of their premium for Medicare Part D due to the high income.  For the two of them, the total monthly part B premiums would be $680.40 per month, $8,164.80 annually and the total monthly part D surcharge would be $64.20 per month, annually $770.40.

Assuming that Bob and Jane make below $182,000 in 2022 given his retirement in May, by filing Form SSA-44, we are able to save Bob and Mary $340.20 per month, $2,041.20 total in 2022 (6 months of premiums). 

Even though Form SSA-44 will ask for your income in 2022 and 2023, you will need to file a second Medicare Challenge for 2023 if your 2021 MAGI has you in a higher bracket than your expected 2023 MAGI would.  Social security only takes into consideration one year at a time for a Medicare Challenge.  

As such, we filed a second Form SSA- 44 for Bob and Jane to adjust their 2023 Medicare premiums.  In 2022 Bob had 5 months of salary.   Bob had no wages in 2023 which further reduced their income due to the life-changing event in 2022. If we had not filed the second form it is likely that SSA would have calculated their 2023 premiums based on the 2021 MAGI, $246,548.  

This is one of many ways we help our clients. If you would like to learn more about how we can help you with your financial future, give us a call 979-260-9771 or click here to schedule your free consultation today.

Tax Management – Retirement Savings

One of the great benefits of university systems, in general, is the ability to defer more money into retirement than the average worker. Public universities often offer the following:

ORP vs. TRS – We have more information in this article, but if you are enrolled in ORP, make enough money and have enough service years, you may be eligible for the SORP which allows you to defer even more. It is worth your time to check with your HR department.

Voluntary 403b – In addition to ORP or TRS, you can contribute up to $20,500 if you are younger than 50 years old and $27,000 into a supplemental tax deferred or Roth account if you are at least 50.

457 – This a deferred compensation plan that allows you to defer another $20,500 under 50 and $27,000 over 50 into tax deferred or Roth accounts depending on what the plan offers. In many cases, these plans can offer unlimited investment options as well. Note that if you haven’t previously contributed or contributed very little to a 457, at some schools you might be eligible for a super catch-up amount of $41,000 ($20,500 x 2) instead of $27,000 if you are within 3 years of retirement eligibility.

SEP IRA, Solo 401k – If you have any consulting income, you can contribute an additional employer amount of 25% of your net consulting income into a SEP IRA or solo 401k.

In essence, the sky’s the limit as far as deferrals are concerned, so you don’t need to worry about not having enough saved in tax-deferred or tax-free places.

About 10 years ago, Texas A&M University announced that they were going to give tenured staff the ability to retire and receive 1-2 years of pay as an incentive. Many took this benefit but the tax consequences were great for those who didn’t plan appropriately.

Our clients who received the buyout chose the pre-tax option to maximize contributions to the 403b and or 457 accounts and then had the ability to distribute that money (or do a Roth conversion) the following year at much lower tax rates.

Loans – Why pay a bank when you could pay yourself? Whether you have a mortgage, credit card debt, or any other form of loan, you could use your 403b or 457 to pay yourself instead of paying a third party. At some universities, not all, you can take a loan of up to the lesser of 50% of the account balance or $50,000 for a very low fee. You then pay yourself back the principal plus required interest via your paycheck. Note that if you leave, retire, or are terminated, you’ll owe the entire balance of the loan immediately, so it is important to plan for that potential downside.

Debt Forgiveness

If you are just starting out working for a public university and you have student loans, consider following the rules to have your loans forgiven. It does require working for a non-profit for 10 years, and you cannot make too much money, but it is worth exploring especially if you have a significant amount of student loan debt.

Retiree Benefits

Many university systems are cutting back on benefits, but there are still some that maintain great retiree benefits. It is important to know what they are so you don’t leave anything on the table accidentally.

A big one is health insurance. In Texas, if you were employed for 10 or more years, have an active ORP or are eligible for TRS benefits, you are eligible for retiree health insurance for life. In Ohio, the system is less generous, you have to be employed for 20 years and there is no guarantee of health insurance when you retire. Still, other universities require you to be employed there for a specified number of years and reach a certain age. No matter the requirements, it is important to know what they are.

A prospective client called me having just retired with 9 years of service at a public Texas university and needed help with investing her retirement funds. My advice, consider going back to work for a public Texas university for one year to get the extra year of service to qualify for health insurance for the rest of her life.

On another note, there are some benefits that seem like obvious choices, however, you might want to review them to see how much they really benefit you.

Dental Insurance

Monthly premiums for an individual can range from $20 to $40 per month. That’s $240 to $480 annually. For a family, the range is around $750 to $1,500 annually. The average cost of a dental exam ranges from $130 to $200 without insurance. Check with your dentist to see what their non-insurance prices are and compare that to what you pay for insurance plus any required copays/deductibles. If you’re one of those people/families who doesn’t need a lot of dental work, you may save money by paying out of pocket and using your flexible spending account for reimbursement.

Disability Insurance

If you are 35 years old, according to the Social Security Administration tables you have a 26.8% probability of becoming disabled as opposed to a 12.5% probability of dying before retirement age.This suggests you’re twice as likely to become disabled before you reach retirement as to die during that time frame.

Long-term disability insurance is a major component of financial stability during your working years. Most universities and employers offer group long-term disability policies at very inexpensive rates. Our recommendation is to take full advantage of the maximum coverage you can purchase, usually 60% of your salary.

If you pay the premiums, any benefits you receive are tax-free. However, if your employer pays the premiums, those benefits are taxable income to you. If your premiums are paid by your employer, ask about the possibility of paying them yourself and your employer applying that money to premiums for another benefit.

Life Insurance

Most employers offer a group life insurance option. Premiums are normally based on age, and they are inexpensive in the early years. However, they increase over time, usually in 5-year increments: age 25, 30, 35, 40… These increases steepen around age 45. If you are currently enrolled in a group life policy, you might want to get an outside quote for the same coverage in level term life insurance to compare.

Based on Texas A&M’s group policy as of September 2021, $500,000 of coverage at age 35 for a non-tobacco user would cost $360 annually. At age 40 it increases to $420, at 45 to $720, at 50 to $1,200, at 55 to $2,160, and at 60 the annual cost is $3,360.

Assuming you are a 35-year-old man in good health and want $500,000 of level term life insurance for 30 years (to age 65), the estimated cost per Nerdwallet is $41 per month, or $492 annually. Let’s compare the employer group coverage to the level term policy. With the group policy above, over 30 years you would pay $41,100 for insurance. With the level term policy, you would pay $14,760. That is a pretty significant savings. Term policy insurance premiums for women are generally lower so the savings would be even greater.

Understanding Your Benefits

It can be difficult trying to identify and understand all of your benefits, let alone how to get the most out of each one. If you would like more information on how to maximize your benefits and ensure your financial house is in order, give us a call 979-260-9771 or click here to schedule your free consultation today.

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With 2021 rapidly drawing to a close, the clock is ticking for you to align your tax benefits and retirement plans for the year to come. As expected, there are several new programs, planned increases, and cautionary tales that constitute the financial landscape for 2022. 

One thing, however, you may NOT have expected: That inflation you likely have experienced at the gas pump, grocery store – and pretty much everywhere else – in 2021 actually has delivered a boost to contribution limits for tax-deferred programs.

If you have not checked in with your investment advisor, you may want to pay them a holiday call and make sure you’ve done the necessary maintenance on your holdings to maximize the benefits available to you — so you can reap rewards once you decide to pull down your shingle for the last time. Do it now – if you wait until after the new year, you’ll likely miss a pay cycle (or two) to take full advantage.

Here’s a rundown of the most important things to get done before year-end:

1. Supplement Your Retirement: With the boost to contribution limits, it is time to up your contributions to 401(k) and 403(b) plans since limits are swelling by $1,000 (up to $20,500 per vehicle). And, if you happen to be employed by a university, you can potentially drop another $20,500 into a 457 account – for a total of $41,000 tax free toward retirement in 2021. (By the way, come retirement time, the 457 payout horizon for professors is far longer than the five years mandated for most in private industry). Note that those 50 and older are eligible to contribute an additional $6,500 to both a 401k/403b and a 457b.
2. Double Up to the Finish Line: For those in academia especially, if you haven’t maximized your contributions to a 457 and anticipate retiring in the next three years, you may be allowed to double your contribution over that three-year span. That means in 2022, you could ultimately squirrel away $61,500 into your tax-free retirement nest egg. Note that those older than 50 cannot do the additional $6,500 plus the “super catch-up” outlined here.
3. Max Out that IRA: Though the 2022 contribution limit for IRAs (including Roth IRAs) will remain at $6,000 per person (or $7,000 if you’re over 50) in 2022, it’s important to get the full benefit of this tax-advantaged account as well. And for employees in Simple IRAs or self-employed (SEP) IRAs, there are similar benefits to be had – including catch-up contributions for those over 50.
4. Back-Door Your Roth IRA One Last Time: It appears likely that Congress will soon shut the door to this beneficial program. For the uninitiated, a backdoor Roth IRA is a way that high-income individuals can contribute an after-tax maximum to a traditional IRA, then quickly transfer it into a Roth – where the money will deliver tax-free earnings in the future. Though the IRA contribution limit mentioned above still prevails, it’s a great way for those who have phased out to still reap a tax advantage later (as Roth distributions are taken tax-free).
5. Take Out Those Mandatory Distributions: If you’ve hit the magical, government-mandated age of 72, you once again are required to take distributions from your IRA (or face a whopping 50 percent penalty). Though the government hit pause on this mandate in 2020 (to help with the economic effects of COVID), there is no such waiver for 2021. If you are reading this with a quizzical expression now, call your advisor immediately and make plans to do what is necessary to mitigate that 50 percent levy. If you truly don’t need the distribution for sustenance, you can donate the amount to charity (and gain another tax advantage in the process).
6. Take Advantage of Rising HSA Contributions: Contribution limits to Health Savings Accounts also increase for 2022. The maximum contribution for individuals increases from $3,600 to $3,650 and for family coverage from $7,200 to $7,300. If you have not yet specified your payroll deduction for your HSA, hurry!
7. Get Your FSA to Work for You: Don’t forget to spend your Flexible Spending Accounts (FSAs) for 2021 and increase your FSA for 2022! Any amounts deducted from your paycheck for 2021 for your Flexible Spending Account may need to be used by year end. An FSA allows you to pay expenses pre-tax (income and payroll) but they are directly deducted from your paycheck and if you don’t use it, you lose it. In 2022, the amount you can contribute to an FSA is now $2,850, up $100 from last year. Dependent care, however, drops from $10,500 to $5,000 – back to the pre-COVID levels — in 2022. So, these should definitely be used by end of 2021.
8. And Challenge those Medicare Hikes!: Medicare premiums are slated to swell by 15 percent in 2022. And, if your income in 2020 was abnormally high, this means you’ll feel the full brunt of this increase. However, if you retired, got divorced, or had another qualifying event associated with a decrease in income this year, you would likely have a basis to challenge your Medicare premiums – and get them lowered for 2022.

Though December is a time when we’re all focused on holiday cheer, don’t let the government Grinch bite off a piece of your future. Your financial advisor can help you make sure you approach 2022 with the optimal mix of benefits for your particular situation.

Who Knew?

For me, one of the most devastating aspects of COVID-19 was those early months when we continuously heard the increasing number of residents in long-term care facilities becoming severely infected, and on too many occasions losing their lives. The interviews and videos shown on the nightly news were heartbreaking – family and friends on the outside unable to hug or hold the hand of those on the inside.

Those numbers caused me to wonder how many people reside in long-term care facilities and how can we change the way we provide these services to avoid this happening in the future.

According to the Nursing Home Abuse Center, 1.4 million people live in nursing homes. When you include assisted living facilities, hospice, and other sources, it is estimated 1% of our population is receiving long-term care. That amounts to 3.3 million people.

In my search for better ways to deliver long-term care, I found an article on the Health Affairs website, The Big Idea Behind A New Model of Small Nursing Homes. It discusses the issues with large nursing homes and presents an example of how we can deliver care better. If you are interested in this topic, it is worth your time.

What You Need to Know

We tend to think of people in long-term care as the elderly with chronic or terminal illnesses, dementia, or Alzheimer’s disease. However, many people in long-term care are recovering from strokes, crippling diseases, or severe accidents that can happen at any age.

Statistics from the Nursing Home Abuse Center show:

• 15.5% of the nursing home population are younger than age 65
• 16.5% are between 65 and 74, and
• 26.4% between 75 and 84.

Based on these numbers, almost 60% of the nursing home population is younger than 85.

What are Long-Term Services and Supports?

A study by the Department of Health and Human Service — What Is the Lifetime Risk of Receiving Long-Term Services and Supports? — shows 70% of adults who survive to age 65 will develop severe LTSS needs before they die, and 48% will receive some paid care over their lifetime.

Of those requiring paid care, 19% will need it for 1-2 years, 21% will require 2-5 years of care, and 13% will receive paid care for 5 or more years.

So, what are long-term care services and supports? The National Institute of Health defines them as “a variety of services designed to meet a person’s health or personal care needs…. that help people live as independently and safely as possible when they can no longer perform everyday activities on their own.”

These everyday activities are also referred to as activities of daily living (ADLs), and they include bathing, dressing, grooming, toileting, eating, and transferring (getting out of bed and into a chair). The services can be provided in the home, by community-based organizations, in an assisted living facility, or in a nursing home.

As a financial planner, I also know that the costs of long-term care can be financially devastating for an individual or family. And, no matter your circumstances, you need to have a plan for “What if this happens to me or a loved one?”

Planning and Paying for Long-Term Care

Anyone planning for retirement should consider the possibility that long-term care services might be needed in their future and plan for how that care will be provided. As we have seen above, long-term care might be needed before one reaches the age of 65 and can be required for several years.

The costs of paid care can be prohibitive for many families, whether the care is provided in your home, in an assisted living facility, or in a nursing home.

Below are the median annual costs from Genworth’s Cost of Care Survey for 2020.

Home Care: 44 hours per week

• Homemaker Services $53,768
• Health Aide $54,912

Assisted Living Facility: Private, One-Bedroom $51,600

Nursing Home: Private Room $105,850

Costs for nursing home care range from just under $80,000 to over $200,000 per year, depending on where you live. The average cost nationwide for a semi-private room is $7,700 a month, or $92,400 a year. You can check the current costs in your area when you visit the Genworth site. You can also see what costs will be in future years based on annual inflation rates from 1% to 5%. The calculator provides median annual costs.

I used the calculator to check College Station, Texas, median annual costs for 2020 and 2040, assuming a 3% annual inflation rate. Here is what I discovered:

What are the Options for Covering Costs of Long-Term Care?

Medicare: Many people have the misconception that Medicare pays for long-term care. It does pay for short-term residential care if certain conditions are met.

• You had a recent prior hospital stay of at least 3 days.
• You are admitted to a Medicare-certified nursing facility within 30 days of your prior hospital stay (not all facilities are Medicare-certified).
• You need skilled care, such as physical therapy or skilled nursing services.

If you meet ALL these conditions, Medicare pays 100% of the costs for the first 20 days. For days 21-100, you pay your own expenses up to $176 per day and Medicare pays any balance. After 100 days, you are responsible for the entire cost of care for each day you remain in a skilled nursing facility.

Unpaid Care: Due to the high costs of care, many adults who need long-term care are cared for at home by an unpaid family member. This is a heavy responsibility that can have a high cost for the caregiver. These “costs” include stress on their personal relationships and finances, as well as the loss of current or future career opportunities.

Out of Pocket: Those with significant wealth might choose to cover long-term care costs from cash flow or savings. Just remember, for a married couple, in addition to the long-term care costs, you also need to cover living expenses for the spouse. There is also the possibility that both spouses might need care.

Medicaid: Eligibility is based on income and personal financial resources. Requirements vary by state. In Texas, the income limit for the individual applicant is $2,382 per month and countable assets are limited to $2,000. The personal residence and one automobile are not considered countable assets.

If your income or assets are too high, once you have spent down your assets to the required limit, you might qualify for Medicaid coverage. But don’t think that you meet that goal by transferring ownership of your assets. There is a 5-year look-back period, and any money or assets gifted (paid or transferred) to family or friends during the 60 months prior to the application will penalize you from receiving benefits.

The length of the penalty is determined by the amount given and your state’s “penalty divisor.” As an example, say you deeded your home worth $300,000 to your son during the look-back period. Your state’s penalty divisor is $4,000, so this means your penalty period would be 75 months.

Note: Medicaid can recapture the benefits paid for care from the estate at the death of the recipient or, if married, at the death of both spouses.

Long-Term Care Insurance (LTCI): Insurance can be used to pay for care provided at home, in adult daycare, in assisted living facilities and nursing homes, or skilled nursing facilities. Most policies cover costs for modifications to the home that will make it easier to remain and receive care there.

Policies require annual premiums that are based on age, gender, health, and marital status. The cost is also determined by the monthly benefit amount and the benefit period you choose. The maximum benefit you can receive is determined by the daily or monthly benefit amount and the benefit period. Monthly benefits generally fall in the $3,500 to $6,000 per month range. A policy with a monthly benefit of $4,500 and a 3-year benefit period would have a maximum benefit of $162,000. The maximum benefit is the pool of money available to cover the cost of care. If you spend less than $4,500 per month, your benefits last longer. If you only needed $3,000 per month, your 3-year plan would last 4.5 years.

By adding an inflation rider to your policy (for most policies it is 3% or 5%), you increase your benefit and your benefit pool. For the $4,500 benefit above, with a 3% inflation factor, in 10 years the benefit grows to $6,048 per month and the pool to $217,715. In 2020, the average cost of a 3-year plan with a $150/day benefit and 3% inflation rider for a 55-year-old man was $1,700. Premiums for women are generally higher.

When Should You Purchase Long-Term Care Insurance?

You might be asking when is the best time to purchase LTCI? The general consensus is between the ages of 54 and 64. You don’t want to pay premiums longer than necessary, but you also don’t want to wait until you might have health issues that cause you not to qualify for insurance, or be subject to the highest rates. Initial premium rates also increase at a higher rate once you reach age 65.

Pros

• Flexibility – can be customized to fit your needs
• Tax-free benefits
• Premiums might be tax-deductible
• Affordable
• Might qualify for your state’s “partnership” program.

If you have a “partnership policy” (usually requires an inflation factor) and use up all of your long-term care benefits and need to go on Medicaid, in addition to the $2,000 of assets you are normally allowed to keep, an amount equal to the benefits paid out by your long-term care policy is also protected from Medicaid’s asset limit. The protection is also transferrable to other states with partnership programs.

Example: Your policy paid $250,000 of benefits for your care before you needed to apply for Medicaid. With the Texas partnership program, instead of just $2,000you get to keep $252,000 of financial assets – a “dollar for dollar” resource protection.

Cons

• Health requirements for underwriting
• Premiums are not guaranteed and could increase
• You might never need the benefits

For couples, it is often more cost-effective to choose a linked or joint policy.

Linked policies

A policy is purchased for each spouse or qualifying partner and riders are added to the policies that allow the couple to share both benefit pools. Using the example above, each person buys a policy providing a $4,500 per month benefit. By linking the policies, the first spouse to require care can draw from the other spouse’s pool if his or her benefit pool is exhausted. They each would have a benefit pool of $162,000, creating a total pool of $324,000 available, if needed. Adding an inflation rider to the policies would increase the pool, making even more overall funds available if both should require care.

Pros

• Doubles the money available for one of the insured
• Funds are available for both insured if needed

Cons

• All of the cons above apply here, as well
• Requires purchasing two separate policies and riders to link them.
• The first-person needing care could exhaust the entire pool

Joint policy

A single policy that is equally owned by the husband and wife, or qualifying partners. It creates one pool of money to be used by both policy owners. While it is unlikely, both spouses can make a claim and receive benefits up to the monthly maximum until the pool of benefits is exhausted. With a joint policy, you should consider including a higher benefit amount and an inflation rider so that the pool of money remains adequate.

Pros

• Lower premiums due to only one policy

Cons

• If both need care at the same time the amount of insurance purchased might not be sufficient.

Annuities and Hybrid Life Insurance

Both have policies that offer riders you can purchase that will allow you to draw from the policy to cover qualifying long-term care expenses. However, both require large upfront payments or payments over a number of years. Additionally, the more long-term care coverage you want, the deeper your pockets need to be. They might also have a requirement that the policy be in force for a certain period of time before benefits will be paid. If you currently own an annuity or whole-life policy you might be able to trade it for this type of coverage through a tax-free 1035 exchange.

Annuity: A rider allows you to draw benefits to cover costs of care, avoiding any surrender charges that might be in force. The amount you can withdraw is usually a multiple of your normal monthly income stream. With some policies, you pay a lump sum for the annuity and it provides double or triple the premium amount in long-term care benefits for a stated period of time. Distributions for care will reduce the amount of the annuity.

Hybrid Life Insurance: This is a whole-life insurance product that creates a separate pool of money for long-term care expenses, or accelerates death payments to pay for care. The owner can choose a fixed monthly benefit or an acceleration percentage of the policy’s face value (usually 2 – 4%). Benefits paid for long-term care are generally tax-free.

There are some hybrid life insurance policies that have annual premiums, but you will likely pay more for these than you would by buying separate life and long-term care policies.

Pros

• Guaranteed benefits
• Easier or no health underwriting

Cons

• High upfront or ongoing costs.
• Might not provide enough coverage for long-term care needs
• Do not qualify for state long-term care insurance Partnership Plans

Hopefully, we will all stay healthy and never need long-term care. But we need to plan for the possibility. And the best time to plan for long-term care is long before you need it.

Any Questions?

At Briaud, we understand long-term care can be complicated. One of our advisors will be happy to help you understand this topic better. If you have any questions, feel free to call us at (979) 260-9771 or send us your questions via our website.

Given the Democrat’s narrow control of the House and Senate, if there is an opportunity to pass a tax bill, it would be in the current window before the mid-term elections in 2022, especially if the Senate removes the filibuster. So we would assume that if a bill passed, the new rules would start in 2022 or 2023.

Hurry Up: Near Term Considerations

Higher Corporate Tax Rates

The first bill to watch regarding tax policy is the Infrastructure plan working its way through Congress. The package, if passed, will increase the corporate tax rate to 25% from 20%.

While this proposal targets large publicly traded C-corporations, it does impact small businesses organized as C-corporations. Those businesses will want to review their corporate structure with their CPA to determine if the entity type should be changed—especially when you can benefit from the benefits of the 20% pass-through deduction on S-Corporations.

Given the tax benefits of an S-Corporation when paired with the 20% pass-through deduction, it is worth revisiting now, even if the infrastructure bill fails to increase Corporate Tax Rates.

Higher Individual Tax Rates for those Making over $452,700 (Single) or $509,300 (Joint)

Additionally, we know that the Biden Administration is focusing its proposed tax hikes on taxpayers with over $452,700 single/$509,300 joint income. However, we are still unsure of the income limits as the amount has changed, but the income tax rate increase has consistently targeted those making over $400,000.

There are a few ways taxpayers who make more than $400,000 will see their tax liability increase:

• Increase in Social Security Taxes
  • Social Security taxes would be paid up to $142,800 and then again on any income over $400,000.
• Increase in Tax Rates
  • Changing the top income tax rate from 37% to 39.6%
• Decrease in itemized deductions
  • For taxpayers above the 28% tax bracket, they will see their itemized deductions reduced as the new proposal calls for capping the deduction at 28%. Those above 28% will not get a deduction for income at the higher rates.
  • The tax proposal brings back the ‘Pease Limitation,’ which reduces taxpayers’ total itemized deduction if their income is over a certain income threshold.
• Capital Gains rate
  • Increasing capital gains rate from 20% to 39.6% for capital gains over $1M

Win/Win Planning Considerations

When planning for anticipated tax changes, taxpayers should take measured actions. It can be easy to get carried away with complex modifications to be ahead of the curve. But, on the other hand, planning too early can waste time, money, and energy, as the proposal never looks like the final bill.

There is a win/win opportunity here for those looking to lower their taxes. Below are some considerations that could reduce your tax bill no matter what happens.

Increase in Social Security Taxes

For those who are an owner or looking to change to an S-Corporation, it will be worth checking with your CPA if you could lower your wage income and increase your profits. The benefit is that earnings from S-Corporations are not subject to FICA taxes.

Increase in Tax Rates

With the potential for the top tax rate to increase from 37% to 39.6% (43.4% including the Medicare Tax), it could make pre-tax contributions to retirement plans less attractive today with the lower rate (37%) and much more attractive in 2022 at the higher rate (39.6%).

In this scenario, Roth contributions would allow the taxpayer to pay taxes now and have them grow tax-free for the rest of his/her life while still contributing to their retirement.

Even if the top tax rate does not change, you still put money away in an account that will grow tax-free for the remainder of your life.

Decrease in Itemized Deductions

The tax proposal includes language about capping the dollar amount of deductions a high-earning taxpayer can take. Knowing this is a possibility, it may be worth making charitable contributions into a Donor Advised Fund, which allows the deduction today (at a higher rate) rather than later at a possible lower rate.

Capital Gains Rate

With the capital gains rate potentially increasing from 20% to 39.6%, it makes selling assets such as a closely held business or real estate more attractive sooner than later. The change is so dramatic that it is worth serious consideration now, given the dollar amounts and how long it might take to sell illiquid assets.

With the combination of low rates, pending higher capital gains rate, and the baby boomer generation looking to exit their businesses, we might see a perfect storm creating an uptick in business sales in the next 12 to 24 months.

Additionally, contributions of appreciated stock or other assets to a Donor Advised Fund is a strategy worth considering now and in the possible higher tax future. The ability to avoid the capital gain AND get a deduction for a charitable contribution is a double tax win for the donor.

Wait – No Action Until a Bill is Passed

Three outstanding proposals seem unlikely to pass, and we are currently waiting to see how these ideas play out:

• Reducing the estate exemption from $11.7M per person to $3.5M per person
• Repeal of Step-Up in Basis
• Retroactive Capital Gains Tax in which the new (higher) rate takes effect 4/28/21.

Why are we waiting on these? Of all potential changes, these are the most unlikely to make it into the final bill.

The estate tax has only increased over the last 20 plus years with one minor exception (when it was repealed in 2010, then back in 2011). With several members of Congress personally impacted by the change, will we see members of the House and Senate vote against their own interests and reduce the estate exemption?

Additionally, the repeal of the step-up in basis is an extraordinary step in estate taxes. While several developed countries do not have a step-up in basis, it has been a core principle in the U.S. tax code. While certainly possible, it is not worth liquidating a position within a portfolio based on the information we have right now.

Finally, the retroactive capital gains tax is a new approach to avoid a massive sell-off. It attempts to avoid having investors sell positions at year-end to avoid higher tax bills starting in 2022. However, this type of legislation is unprecedented and highly unpopular, so we don’t see a strong likelihood that it survives to the final bill. Beyond the unfair idea of changing the game after it is played, it sets a problematic precedent for tax legislation moving forward.

Hurry Up When We Know More

Once Congress passes the bill, it will be time to hurry up once again. Considerations will need to evaluate for your tax returns, portfolios, and estate plans.

In preparation, we encourage all clients to have an updated net worth statement, ensure all cost basis is reported within their brokerage account, and determine if and how much they wish to give to the charity(ies) of their choice in the next 1, 3 and 5 years. Having this information together will help you make the changes that might be necessary with the upcoming tax changes.

If you want to discuss how the Biden tax plan will impact you or discuss ways to save taxes no matter if the proposals pass, please contact us. We would love to discuss how we can help minimize your taxes.

Editor’s note: This information was current as of June 14, 2021.

If you are in this situation, you are probably being bombarded with “information” on Medigap policies and Advantage plans (often referred to as Medicare Part C, however it is provided through insurers).  Of course, this is an important decision you will need to make.  However, another factor to consider as you retire that gets little mention – What will your actual Medicare premiums be?

If you are age 65 or older and retiring this year, you will need to sign up for Medicare Parts A (hospital coverage), B (medical insurance) through the Social Security Administration.  You will also need to sign up for part D (prescriptions). This will be done through an insurance provider.  Medicare part A is free. The standard Part B premium for 2020 is $144.60 for participants with income up to $87,000 for individuals and $174,000 for married couples, and Medicare Part D varies by insurer.   However, if you have higher earnings, you will be charged an income-related monthly adjustment amount (IRMAA) by Medicare for Parts B and D, as shown below.

Calculating Medicare Premiums

To calculate your premiums, the Social Security Administration (SSA) uses the modified adjusted gross income (MAGI) from the most recent tax return the IRS has provided them.  For 2020, that is most likely your 2018 tax return that was filed in 2019.  For 2021, that would likely your 2019 return. MAGI is the total of your adjusted gross income plus any tax-exempt interest you received.

As you can see, higher incomes can cause your Medicare premiums to be increased due to the Income Related Monthly Adjustment Amount by $70.00 up to $423.40 per month.  That’s $840 to over $5,000 annually.  Total premiums ranging from approximately $2,600 to $6,800 per person annually. 

At this point, you are probably thinking, “OK, but my income will be lower in 2021 due to my retirement.  Do I still have to pay the higher premiums?” This is where the Medicare Challenge comes in.  The Social Security Administration will consider adjusting your Medicare premiums if your income will be lower due to one of the following life-changing events.

• You married, divorced, or became widowed.

• You or your spouse stopped working or reduced your work hours.

• You or your spouse lost income-producing property because of a disaster or other event beyond your control.

• You or your spouse experienced a scheduled cessation, termination, or reorganization of an employer’s pension plan.

• You or your spouse received a settlement from an employer or former employer because of the employer’s closure, bankruptcy, or reorganization.

Understanding the Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event form

If your 2021 modified adjusted gross income (MAGI) will be lower than your 2019 MAGI due to retirement, you can file Form SSA-44 Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event (link) to request a premium reduction for 2021.  Note, however, that if your 2021 MAGI ends up being the same or higher, they will make you pay back any premium reduction you received. Also, note that if you are married and both covered under Medicare, each of you will need to file the form with Social Security.  You will also need to provide documentation supporting your projected 2021 and 2022 MAGI. Supporting documentation would include the date of your separation from work/retirement date and a reasonable calculation of your expected income for 2020 and 2021. 

As an example, let’s look at Bob and Jane. Bob, a professor, retired at the end of the spring semester, May 31, 2020, and was age 70 at the time. Jane retired several years earlier.  He and Jane were covered by the university health plan and did not need to sign up for Medicare until he retired.  Their MAGI from their 2018 tax return was $242,495.  Using the 2020 premium table, their part B premium adjustment would be $289.20 and $31.50 per month, respectively. For the two of them, the total monthly part B premiums would be $578.40 per month, $6,940.80 annually, and the total monthly part D surcharge would be $63 per month, annually $756.

Assuming Bob and Jane make below $174,000 in 2020, given his retirement in May, by filing Form SSA-44, we can save Bob and Jane $352.20 per month, $4,226.40 total in 2020 (6 months of premiums). 

Even though Form SSA-44 asks for your expected income in 2021 and 2022, you will need to file a second Medicare Challenge for 2022 if your 2020 MAGI puts you in a higher bracket than the expected 2022 MAGI would. Social security only takes into consideration one year at a time for a Medicare Challenge.  

As such, we filed a second Form SSA-44 for Bob and Jane to adjust their 2021 Medicare premiums.  In 2020 Bob had 5 months of salary.   Bob had no wages in 2021, which further reduced their income due to the life-changing event in 2020. If we had not filed the second form, the SSA would likely have calculated their 2021 premiums based on the 2019 MAGI, $246,548.  That would have resulted in their total 2021 premiums increasing by over $4,000 for 2021, based on 2020 Medicare rates.  2021 Medicare rates will not be available later this month.  

This is one of the many ways we help our clients. If you would like to learn more about how we can help you with your financial future, give us a call at 979-260-9771 or click here to schedule your free consultation today.

As is often the case around this time of year, many of us are more mindful of the things we are thankful for. We also start to think about gift-giving to our family and friends but also to the causes that are near and dear to our hearts. 

While this year has been challenging in many ways, there are some unique opportunities for charitable giving in 2020. 

No Required Minimum Distributions (RMD)

As we discussed in a previous blog post, the CARES Act that was passed by Congress in March 2020 brought about several changes to tax and charitable decisions for this year. One of the most significant changes that impact our clients is the suspension of required distributions for 2020.

While this provides a great opportunity for many to accelerate income through Roth conversions or harvesting gains, it doesn’t prevent you from donating to your favorite causes. If you are at least age 70 1/2, you are still allowed to give to 501 (c)(3) organizations directly from your retirement accounts and you do not have to pay taxes on these distributions.

However, if you are looking to make a charitable donation this late in 2020, you might consider delaying your charitable giving to 2021 when RMDs will most likely be back again. This allows your gift to count toward the 2021 requirement and gives you more flexibility around taxes in 2021.   

We certainly understand this year has been tough on many businesses and individuals, including non-profits, so if you choose to give, please do not misunderstand you will still have the benefit of a tax-free distribution and the knowledge that you helped those in need. We realize that tax savings are a benefit, but not necessarily the reason we give to charities. 

100% of Adjusted Gross Income

Another provision of the CARES Act temporarily increases charitable cash contribution limitations for taxpayers who itemize their deductions from 60 percent of adjusted gross income (AGI) to 100 percent of AGI. If more than 100 percent of a taxpayer’s AGI is contributed, excess contributions may be carried forward to future years, so you do not need to worry, you will still get a benefit in the future. Please note, this new deduction is only for cash gifts that go to public charities; it does not apply to contributions made to a donor-advised fund or non-operating private foundations. 

For Those Who Take the Standard Deduction

The CARES Act allows all taxpayers to take a charitable deduction of up to $300, even if you do not itemize. In other words, if you donate up to $300 in cash to a qualified organization, your AGI will be reduced by up to $300 and you can still claim the standard deduction which is $12,400 for single filers and $24,800 for married filing jointly. Note that this $300 is per tax return so you get the same amount whether you are married or single. While it may seem that this is a small amount, a gift of this size could go a long way in supporting a cause you are passionate about. 

Qualified Charities

If you’re planning to make a tax-deductible contribution to an organization in 2020, it’s important to determine whether the organization is a qualifying organization according to the IRS. Some organizations not considered qualifying organizations fall into categories like political organizations, lobby groups, social clubs, most foreign organizations, and individuals. A word of caution: while there are many worthy causes on crowdsourcing websites, not all organizations listed on those sites are qualifying organizations. The IRS has a handy tool, Tax Exempt Organization Search, to help taxpayers determine whether their contribution will be tax-deductible.

Life-Income Charitable Vehicles

The SECURE Act was passed in late 2019, not 2020, but it had one significant change to IRAs – the elimination of the “stretch IRA.” Previously, IRA account holders were able to give their retirement accounts to non-spousal beneficiaries and that beneficiary would be able to “stretch” the required IRA withdrawals over their lifetime. The SECURE Act forced beneficiaries to complete withdrawals in 10 years. 

One way that some people with significant charitable intent have found to reduce the tax burden on their non-spouse beneficiaries is by designating a life-income charitable vehicle as the beneficiary of the IRA. An individual can name a charitable remainder trust or a charitable gift annuity as the beneficiary and potentially provide lifetime income for a younger family member and make a significant impact on a charity. 

Donating Appreciated Securities/Donor Advised Funds

While many people have seen their incomes drop in this crazy world that is 2020, there are those who have benefited from this “new normal.” For those people, and perhaps those of you with significant gains from the 2008-2009 recession, you might want to consider donating investments that have increased in value directly to a charity. You don’t have to pay capital gains on the investment and you get a full charitable deduction for the value of the asset donated. If the charity of your choice doesn’t accept non-cash assets, you can use a donor-advised fund to receive the donation, turn it into cash and then send it on to the charity in cash. Please note that most custodians only donate to 501(c)3 organizations, not private foundations. 

Need More Advice About Charitable Giving in 2020?

If you would like to learn more about charitable planning and how it fits into your overall financial plan, give us a call at 979-260-9771 or visit Briaud.com to schedule your free consultation today.