Estate Planning Blog

Five Things You Must Do to Maximize 2020 Giving and Minimize Tax Liability

It may seem hard to believe, but what has almost certainly been the longest year in human history is finally nearing an end. And while you might not want to add tax planning to your 2020 To-Do List, thinking strategically now may allow you to turn some of those leftover lemons into lemonade by minimizing your tax liability for the year. Don’t miss the following tips to get a jump on those returns.

1. Make cash gifts to public charities.

The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act established a one-time tax deduction available in 2020 for cash gifts to charities up to 100% of your adjusted gross income.

2. Take advantage of the expanded estate and gift tax exemption—currently $11.58 million per person—before it sunsets.

The 2017 Tax Cuts and Jobs Act doubled the base exemption amount for the estate and gift tax. In 2020, up to $11.58 million per person may be gifted before a 40% tax is imposed.  The act also doubled the amount of exemption that may be rolled over to a surviving spouse. These provisions will sunset in 2026, however, spurring many to claim any unused portion of the exemption now.  There is also some chatter on the street that the 2020 elections could lead to a change in the limits prior to 2026, which makes gifting now potentially much more important.

3. Leverage lower asset valuations to maximize the future value of gifts.

The current value of many assets—from property to portfolios—is generally lower than usual due to the economic impact of COVID-19, which caused a decline in the value of stock and other assets. Consequently, gifts given now will go further as valuations rise.  This is true for outright gifts and for charitable lead and remainder trusts.

4. Pay now, save more later.

Decreased asset values also mean now is a good time to convert regular IRAs to Roth IRAs. Since the taxes you pay at conversion are based on the current value of the account, the 2020 tax bite will be relatively low.

5. Share the wealth!

Because current applicable federal interest rates (“AFR”) are so low, related party gifts and zero- or below-market-rate loans will carry interest at very low rates.

If you have questions about any of these items or would like to discuss implementing any of them, please contact the attorneys at McBrayer.

Ivan Schell is a Member of McBrayer PLLC. His multifaceted legal practice includes estate planning and administration, private foundation and public charity formation and planning, physician practice consultation and healthcare law, employee benefits law, and closely-held corporation planning transitions. He can be reached at ischell@mcbrayerfirm.com or by calling (502) 327-5400, ext. 2351.

Services may be performed by others.

This article does not constitute legal advice.