Professional Advisors | Phoenix Children's

Register now for the Professional Advisor Summit

Registration is now open for Phoenix Children’s inaugural Professional Advisor Summit, a new professional development opportunity focused on wealth preservation strategies through tax optimization using philanthropic legislation.

Date: September 12, 2023
Time: 7:30 to 11:30 a.m.
Location: Arizona Country Club, 5668 E. Orange Blossom Lane, Phoenix
Registration fee: $75 through July 31; $95 starting August 1
CEU hours: 3

At the summit, you will:

Hear from Phoenix Children’s leadership about how philanthropy helps sustain the hospital’s mission.
Participate in educational sessions on tax optimization and wealth vehicles with Reynolds Cafferata, partner at Rodriguez, Horii, Choi & Cafferata LLP.
Network with like-minded professionals who share a commitment to Phoenix Children’s and our community.

New Developments in Retirement Planning: Secure 2.0 Act of 2022

The SECURE 2.0 Act, signed into law in December 2022, has many changes designed to improve retirement savings options and encourage charitable giving, including:

Qualified charitable distributions enhanced

The IRA charitable rollover or qualified charitable distribution (QCD) limit of $100,000 for 2023 will be indexed for inflation starting in 2024. Individuals ages 70 1/2 or older are permitted to make distributions from their IRA directly to charity and avoid recognition of income.

Charity as remainder beneficiary

The SECURE 2.0 Act allows a one-time rollover of up to $50,000 from an IRA to a life income gift. This QCD is permitted on or after January 1, 2023. A life income plan can create a diversified life income gift and charitable contributions.

Although spouses, individuals with a disability or chronic illness, and a few other exceptions may take IRA distributions over their life expectancy, the majority of heirs will be limited to 10 years. To help replace the stretch distribution for other heirs, involving a qualified charity and life income vehicle may be a solution.

Preserving Capital Gains: Spotlight on Bargain Sales

When an asset has increased in value and liquidation would attract capital gains, integrating philanthropic vehicles can be of benefit to you and your client. Since real estate is the most prolific asset, it is helpful to know Phoenix Children's has tools to assist with preserving wealth.

One method is to tap into the value of real estate through a bargain sale. With a bargain sale, a property owner sells the property to a charitable organization for less than fair market value. The seller receives the cash and a charitable deduction for the difference between the market value and the purchase price.

Benefits of a bargain sale

A bargain sale to Phoenix Children’s will allow your client to:

Avoid paying capital gains tax on the gift.
Take a deduction that will provide valuable tax savings.
Reinvest cash from the sale to create more income from the gift.
Support the lifesaving work of Phoenix Children’s.

How a bargain sale works

The following fictional scenario illustrates the potential benefits of a bargain sale.

Bill and Sue bought a lovely home in a very good neighborhood 20 years ago for $300,000. They now are retiring and want to sell their home, which currently has a fair market value of $1.5 million, and move to a retirement community. They would like to explore the possibility of selling the home to their favorite charity.

Their goals are to sell the home, receive sufficient funds to buy a new property and enjoy additional liquidity for their retirement security. Since they haven’t used their $500,000 exclusion on their home, they are interested in receiving $800,000 or more in cash.

The charity agrees to pay $1 million for the home, which will allow Bill and Sue to claim a charitable deduction for the $500,000 excess value. This appreciated-property-type deduction is usable to 30% of adjusted gross income this year, with a carry forward for an additional five years.

Bill and Sue receive $1 million in cash, which equals two-thirds of the total value of the property. With the allocation of two-thirds of the $300,000 basis, or $200,000, plus their $500,000 exclusion for the sale of their principal residence, their adjusted basis is $700,000. They then have a taxable long-term capital gain of $300,000.

However, in their income tax bracket, the potential tax savings over the six years on the $500,000 is substantial. They are therefore able to receive $1 million plus have potential additional net tax savings.

Bill and Sue benefit from a sale with substantial cash transfer and no net tax cost. In addition, they feel good about making a major gift to their favorite charity.