Every December, our attention turns to holiday celebrations and gift-giving, and while the pandemic may impact family gatherings in 2020, it’s still a wonderful time of year.

It’s also a natural time to be thinking about money moves that families can make to transfer wealth, to reduce taxes, or to support charity organizations. Here are a few things investors and their extended families should be thinking about this month.

Make charitable gifts from IRA accounts. 

If you are over 70 ½, you are eligible to make charitable contributions from your IRA accounts up to $100,000 per year. This reduces future ordinary income taxes on IRA balances and allows for a charitable deduction (for those taxpayers who itemize deductions). 

If you are considering large gifts and you’re able to use your IRA, there’s no more tax-efficient gift you can make. 

Note that the deadline to take advantage of this for 2020 is December 31st–not the tax deadline in April.

Convert IRAs to Roth IRAs.

For so many Americans over age 72, the required minimum distributions (RMDs) weren’t enforced in 2020 due to pandemic-inspired legislation. That means many seniors will have abnormally low taxable income in 2020. 

If that describes you, you may want to consider making Roth conversions of some of your IRA balances to take advantage of lower taxable income, the lowest federal income tax rates in modern history, and the waived RMD to lock-in and pay the taxes now. Read more about Roth IRA conversions in my previous article.


The deadline to convert is December 31st.

Take some capital gains.

If you have gains in your non-qualified accounts, this may be the year to recognize some of them for tax purposes. Capital gains tax rates are at modern-day lows and possibility of the loss of stepped-up basis upon death is greater than in past years, so this is an opportunistic time for seniors to take some of the gains. You can learn more about saving on capital gains tax on my podcast.

It’s also nice to make charitable gifts with highly-appreciated securities. Either of these decisions must be made by December 31st.

Consider monetary gifts for children and grandchildren.

If you aren’t yet funding college savings plans, whole life insurance policies, or Roth IRAs for your children or grandchildren, now may be a great time to find ways to move funds from one generation to another in the most tax-efficient way possible. 

Some strategies have December 31st deadlines, while others have April 15th deadlines next spring.

Beneficiary check-ups.

There has never been a better time to verify beneficiaries on retirement plans, IRAs, life insurance policies, and other accounts. 

Instead of looking at the gross balances being left to heirs upon your death, start thinking about the net amounts. If you have multiple children or grandchildren, they may be in very different income tax brackets, and in many cases their taxes may be higher than yours. You have worked a lifetime to build your wealth and to protect it from unnecessary taxation, and you can do planning now that could have a larger impact on your heirs than you might expect. 

If your tax bracket is 15% and your kids’ is 36%, you can make decisions during your lifetime to avoid the excess loss of family wealth. Likewise, if one of your children is in a 10% federal income tax bracket and in a low-income tax state of residence and another is in a 36% federal income tax bracket and lives in a high-tax state, there are strategies which can maximize the impact of your wealth to your family and to minimize the loss to taxation.

While there is no deadline for these decisions other than your own mortality, the holidays can be a great time to hold candid family discussions which can make a huge difference in the long-term.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regards to your individual situation. Comments concerning the past performance are not intended to be forward looking and should not be viewed as an indication of future results.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Brotman Financial Group, Inc. and BFG Financial Advisors are not affiliated with Kestra IS or Kestra AS.

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