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  • Writer's pictureMeredith Schneider, CFP®

Two Heads are Better Than One

Updated: May 19, 2023

A recent experience with clients reminded me of how having a second set of eyes working on your behalf can work in your favor.

Charitable Contributions:

Clients who are motivated to make charitable contributions can do so in a way that provides a financial benefit to a charity as well as a tax advantage to themselves depending upon the method of gifting.

Recently a client couple wanted to make a $100,000 charitable contribution to an organization near and dear to their heart.

In a conference call with the client and the client’s CPA, the CPA suggested a Qualified Charitable Distribution (QCD) from one of the Client’s Inherited IRA as this client needed to take a distribution this year. Now in theory this could have been a great idea, but this client was not old enough to take advantage of a QCD. I asked the CPA about the client’s eligibility given that the client was younger than 70 1/2 and QCD’s are for those over age 70 1/2. The CPA confirmed indeed a distribution from the IRA would have no tax advantage given that the client was not eligible due to their age below 70 1/2, and he then rescinded his suggestion. I suggested a gift of stock with embedded capital gains. The CPA agreed.

I was surprised that the CPA suggested the QCD in the first place given that the client was not eligible. This is a very good CPA, and he normally provides excellent sage guidance. But the tax code is 6,000+ pages, and there is a lot to remember, so even the best professionals with lots of experience might have a blind spot. When a client has both their tax and investment advisors working together, there is a much lower chance of things getting overlooked.

In the end the client did make the gift of stock. Doing so this way enabled a tax savings of around $18,000. Had the client taken the initial advice of distributing from their Inherited IRA, it would have been a lovely donation to the charity, but it would not have had any corresponding tax benefit.


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