Permanent Value

Week in Review 6/10/13

Bruce Doole
June 11th, 2013


Ohio National Financial Services suggests three routes for managing assets with no cash flow:

1. Keep the Asset

Indefinitely keeping collectibles, antiques, land and other assets with high fair market value but no cash flow, has its risks. Keeping such assets for life may force heirs to later sell the assets at an unfavorable time in order to pay the estate taxes it generates.

2. Sell the Asset

Selling an asset with high fair market value creates an opportunity to reinvest the proceeds toward higher rates of return; keeping in mind that capital gains rates can shrink the asset’s value.

3. Give the Asset to Charity

Giving an asset to charity opens up many opportunities for cash flow. Consider your options: Do you desire an income stream in return for the gift? Do you prefer one large up-front tax deduction, or would you rather allocate the deduction over multiple years? The type of asset being donated is also an important consideration.

4. Outright gifts

Know what types of gifts are appropriate for each asset donation. A no-strings-attached gift is appropriate when giving smaller gifts. When making sizeable gifts, especially large cash amounts by check, alternative assets may be more beneficial. Outright gifts of appreciated marketable securities reduce the cost of the gift by offering the dual savings of a tax deduction while avoiding capital gains tax.

Gifts of IRA assets

Contributing IRA assets to a qualified charity can be considered a charitable contribution. Another example of a taxable distribution from an IRA is a “qualified charitable distribution”, or QCD*:

• To qualify for a QCD, an IRA owner must be at least 70 ½ years old and must pay directly from the IRA to a qualified charity.
• Up to $100,000 of a QCD made in a year may be excluded from the gross income of the IRA owner
• QCDs may be used to satisfy IRA required minimum distributions (RMDs) for the year
• The IRA owner can avoid tax on a RMD by giving it directly to a non-profit entity
*The QCD has been a temporary part of the tax code since 2006

Source: Ohio National Financial Services