Are You Planning to Pop the "Will You" Question In January?

Savvy advisors are already practicing the question they intend to pop to their clients. They can be found looking in the mirror, intently into their own eyes, while bending down on one knee. They are asking the question in the shower. They are asking their dog. They are almost ready. What about you? Are you gearing up to pop the “Will You” question after the New Year holiday?

Of course, we are referring to the question, “Will you... be planning to sell anything soon?”

You want to know way ahead of time if your clients are planning to sell something that has highly appreciated in value. Especially, if they plan to share the proceeds with charitable organizations they support.

Why? So that you can get ahead of their liquidity event and help them reach their financial and philanthropic goals in a manner that allows them to pay significantly less in taxes and have more discretionary income left over—to invest with you.

Sadly, according to the annually published IRS Statistics on Income, wealthy, charitably minded individuals (who can afford the best advisors) pay unnecessary capital gain taxes in the same year that they also make charitable gifts of cash. Usually the advisors are understandably more focused on other issues. The obvious benefits of giving assets like stock, instead of cash, are overlooked. The result is that the client pays significant and unnecessary taxes, and the amount of their leftover discretionary income is severely impacted.

Given the opportunity, even clients who are not charitably inclined may be interested in choosing how to spend their “social capital.” Ordinarily, these clients don’t think of looking at charitable giving options because it is counterintuitive to their financial planning. Wouldn’t a charitable gift be an unnecessary planning cost? However, depending upon how the sale proceeds will be used, if you advise your client that they are about to take a tax hit, and then you tell them they have a choice between paying those taxes or giving that tax money to charities they can choose, how do you imagine your client will respond?

Isn’t it wise to take time to compare what is leftover for the client, in the form of discretionary income, if he or she decides to include or exclude charitable gift planning?

After you pop the question, why not also talk to your client about what they have in their attic, or their basement and from sea to shining sea? Many individuals own very valuable items that no longer hold an emotional or sentimental connection, like dusty collections from a long-forgotten hobby. What about that vacation home that no one in the now grown up family uses anymore?

Charitable gifts of assets can relieve pressure on the client’s cash flow. For example, if your client is already paying quarterly estimated taxes, a large charitable income tax deduction for a substantial asset gift may yield an immediate tax savings on the next scheduled tax payment.

Why leave smart and complimentary charitable planning options on the table—especially when they yield your client significant leftover discretionary income and give them a choice between paying avoidable taxes or making meaningful charitable gifts—from money they cannot keep personally—but still have legally permissible say over how it is given away?

By: Dan Rice, Co-founder of CTAC

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