Inheritance, Estate Planning and Charitable Giving: 4 Strategies to Reduce Taxes Now

MarketWatch recently published a great opinion piece entitled “Inheritance, estate planning and charitable giving: 4 strategies to reduce taxes now.” This article summarizes the strategies share in the article, but the full text can be found at this link:  


  • Offsetting Capital Gains


  • Capital gains are profit you make from selling an asset that has appreciated since you first obtained it.
  • These gains are taxed.
  • If you hold the asset more than a year, they are taxed at a rate lower than ordinary income. 
  • Losses on your assets can help reduce tax liability. 
  • Take away:  Do not wait to look strategically at how to harvest tax losses to offset gains until the end of the year. Engage in proactive review of your stocks throughout the year to evaluate the best course of action and to see if there are ways to take advantage of market volatility during times of decline.



  • Evaluating Roth Conversions


  • A Roth IRA conversion changes when the taxes are due and Roth IRA conversions are becoming increasingly popular. 
  • With a tradition al 401(k) or traditional IRA, the taxes are paid on the back end when you withdraw the money. 
  • With a Roth IRA conversion, you owe taxes on the amount you convert up front, which is difficult, but then the converted amount is able to grow tax free and you do not pay taxes at the time of withdrawals. 
  • Example from the MarketWatch article:  A client had 1 million dollars in a traditional IRA. She converted it to a Roth IRA, which required her to pay $500,000 in taxes on the front end instead of paying taxes when she taxes a distribution or when her beneficiaries inherit the account. But now, the 1 million in the Roth can grow tax free, which is an asset she can lean on during retirement of pass on to heirs. (Noe, a Roth IRA must be open for five years and the individual must be at least 591/2 years old to take the money out tax free). 
  • Take away:  Evaluate what taxes you can afford to pay up front and determine whether a Roth Conversion makes sense for your goals for retirement or for your goals for your heirs. 



  • Maximizing Charitable Giving


  • There are many ways for clients to be charitable and use new tools for tax exemptions.
  • “DAF” – Donor Advised Funds are third-party funds that are created for the purposes of giving to charity.
  • “RMD”-Your required minimum distribution, “RMD”  is the minimum amount you must withdraw from your Traditional IRA each year. You can give this to charity and reap tax benefits. 
  • Take away:  Consider how charitable giving can accomplish your altruistic objectives while taking advantage of tax exemptions.  



  •  “Giving While Living” to Family and Friends


  • Giving while living is a popular estate planning tool.
  • You can give up to $16,000 to any other person, that money is not taxed, and the person who receives it gets the full amount of the gift
  • Take away:  Giving to family and friends while you are alive is a way to enjoy estate planning while you are around to see the joy that your gift brings to your loved one. 

Consult the Law Office of David Knecht

Connecting with professionals who understand tax saving tools, who can explain the options to you, and who can create the right plan for your needs and goals is essential for effective estate planning.  Property and debt division is one of the most important aspects of a divorce for most people. Please contact us at the  Law Office of David Knecht. We have extensive experience with estate planning and can create a customized and effective estate plan just for you. Call us at 707-451-4502.