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Retirement and Charitable Planning with the SECURE 2.0 Act

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Retirement and Charitable Planning with the SECURE 2.0 Act

By John L. Jenkins, AEP®, CFP®, CFF®, BPC

Recently, the SECURE 2.0 Act was announced, which expanded Qualified Charitable Distributions (QCDs) allowing a one-time only QCD of up to $53,000 in 2024 (indexed for inflation) to a split-interest entity. Taxpayers age 70.5 or older can use this provision to fund a Charitable Gift Annuity.

If you are like me, I appreciate when things are broken down into digestible, bite-sized pieces of information that I can easily navigate.

So, let’s start with the basics.

What is a QCD (Qualified Charitable Distribution)?

  • A QCD is a direct transfer of funds from your IRA to one or more qualified charities.

Why use a QCD?

  • The payment counts toward satisfying your Required Minimum Distribution.
  • The IRA distribution is NOT included in income. This could keep your income lower for purposes of calculating taxes on Social Security and Medicare Part B and D premiums,
    • Key point: Since most clients cannot itemize deductions, taking a taxable distribution and then making gifts to charities provides no tax benefit. What is even worse is the distribution could increase taxes on Social Security income, increase Medicare premiums, and may trigger the IRMAA penalty. (You know what that is if you’ve triggered it!).
  • QCD transfers are only available to IRA owners or beneficiaries age 70.5 and over and are capped at $105,000 (in 2024) per person, per year.
  • A QCD to a split-interest entity is capped at $53,000 (in 2024).

What type of IRAs qualify?

  • Traditional, Rollover and Inherited IRA, and INACTIVE SEP and SIMPLE IRAs. A QCD cannot be made from any employer plan.

A QCD transfer in excess of your RMD can’t be applied to future RMDs. However, it does decrease the value of the IRA which, in turn, will reduce the amount of future RMDs.

A QCD can satisfy a pledge to a charity without causing a prohibited transaction. However, the donor must receive a written receipt from the charity.

New Split-Interest Gift Opportunity

Here are the basics:

A split-interest entity is a legal entity that allows a donor to receive a benefit during his/her lifetime or for a set term, with the remainder benefiting a charity after the donor’s death.

Qualifying Split-Interest entities include:

  • A charitable remainder annuity trust (CRAT);
  • A charitable remainder unitrust (CRUT); or
  • A charitable gift annuity (CGA)
    • Key point: It is unlikely that it would be worth the cost and work to establish a CRAT or CRUT for only $53,000. These trusts are expensive to set up and administer. Using a QCD to fund a CGA is a strategy that may be attractive to many IRA owners.

With a CGA, the charity promises to make lifetime or set term payments to the donor/client. This could be the gift that “keeps on giving.” How does that sound? Make a charitable gift and receive a lifetime income in return…. smart planning if you ask me!

It is also important to note that the income stream is taxable, but the payment is spread out over a number of years vs. a lump sum distribution subject to immediate tax. Another piece of good news is that the $53,000 QCD counts toward your RMD requirement. 

As you consider these options, I encourage you to remember that time invested up front, planning and strategizing for your own individual and unique scenario can make a large difference on the back end. Having the right strategy that is personalized to your financial goals and needs can help ensure you are working towards the outcome you desire.

Sources:

https://wealthpreservationinstitute.net/

https://irahelp.com/slottreport/secure-20-allows-qcds-cgas/#:~:text=SECURE%202.0%20expands%20qualified%20charitable,(CGA)%20with%20a%20QCD.

Disclosures:

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.  This information is general in nature and should not be considered tax advice. Investors should consult with a qualified tax consultant as to their particular situation.

John L. Jenkins of Asset Preservation Strategies, Inc. offers securities through Arete Wealth Management, LLC, a Registered Broker/Dealer Member FINRA/SIPC/NFA. John L. Jenkins offer Advisory services through Axxcess Wealth Management LLC., an SEC Registered Investment Advisor.

Tax services offered through Asset Preservation Strategies, Inc. Asset Preservation Strategies, Inc., Axxcess Wealth Management LLC., and Arete Wealth Management LLC., are unaffiliated.  John L. Jenkins, CA Insurance License #0647708.

The Link Between Bonus Depreciation and Private Aircraft: Understanding the Tax Benefits

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By Spencer Bloomer

Sales Associate at JetTransactions, an industry leading Private Aviation Sales and Acquisitions Group

For businesses that need to travel frequently or transport goods quickly, owning a private aircraft can be an attractive option. However, the cost of purchasing and maintaining a private aircraft can be substantial, which is why businesses should be aware of the tax benefits of bonus depreciation. Under the Tax Cuts and Jobs Act of 2017, businesses can claim bonus depreciation for eligible assets, including private aircraft, and immediately deduct a percentage of their cost in the year they are placed into service, effectively reducing the amount of taxable income to the business. This tax benefit can provide significant savings for business owners and make private aircraft purchases more accessible.

Bonus depreciation has a long history, dating back to the Economic Stimulus Act of 2008, which introduced a temporary bonus depreciation provision to help stimulate the economy during the Great Recession. Initially, the provision allowed businesses to immediately deduct 50% of the cost of new eligible assets placed into service in 2008. Since then, bonus depreciation has been extended and modified several times. In 2017, the Tax Cuts and Jobs Act expanded bonus depreciation to include both new and pre-owned aircraft and allowed for businesses to deduct 100% of the cost of eligible assets placed into service between September 27, 2017, and before January 1, 2023. Starting in 2023, the bonus depreciation percentage will begin to phase out, decreasing by 20% each year until it reaches 0% in 2027. At the time of writing, bonus depreciation is 80% during the year 2023.

For businesses that own or are considering purchasing a private aircraft, bonus depreciation can provide substantial tax benefits. The deduction applies to the purchase price of the aircraft, as well as any upgrades or capital improvements made to the aircraft after it is placed into service. Additionally, the deduction can be used for both new and used aircraft, as long as the aircraft is new to the business and meets other eligibility requirements.

To be eligible for bonus depreciation, the aircraft must be used for business purposes, otherwise the business risks a reduction in the percentage of the deduction that can be claimed. Additionally, businesses must be the legal owners of the aircraft and use it in their trade or business – meaning that individuals who own a private aircraft and use it solely for personal purposes only are not eligible for bonus depreciation.

Let’s consider an example to illustrate the potential tax savings of bonus depreciation. Suppose a business purchases a Gulfstream G280 private aircraft for $19 million in 2023. Assuming the business meets the eligibility requirements for bonus depreciation, they can immediately deduct 80% of the cost of the aircraft, or $15.2 million, in the year it is placed into service. This deduction can reduce the taxable income of the business by $15.2 million in the first year and provide substantial tax savings for the business owner. In most cases, the remaining 20% depreciation can be taken over the next 4 years.

In conclusion, bonus depreciation is a valuable tax benefit that can provide significant savings for businesses that own or are considering purchasing a private aircraft. However, eligibility requirements must be met, and businesses must ensure that the aircraft is used for business purposes. Additionally, it’s important to consult with a tax advisor to fully understand the implications of bonus depreciation in a tax scenario.

Disclaimer: This article is for informational purposes only and does not constitute tax advice. It is important to consult a qualified tax professional to discuss individual requirements and eligibility.

Jet Transactions

How to Protect Yourself From a Data Breach

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We have the world at our fingertips these days. From the way we conduct business and banking to our entertainment and household needs, we can access the information and services we use with a few quick clicks or taps. But with modern conveniences come modern problems as our personal accounts and the companies we trust to protect our private data are under constant threat.

Data is a valuable commodity for criminals looking for personal information that can be used to steal money, sell on the dark web, or exploit compromised identities through blackmail or extortion. Not only do hackers utilize it to take money directly from accounts, but they also use the information to commit identity fraud, criminal scams, and wreak havoc for businesses and their customers. The right data in the wrong hands can cause a great deal of damage to your reputation and your bottom line.

Understanding what a data breach is, how they occur, and how you can protect yourself can go a long way in stopping hackers in their tracks.

What Is a Data Breach?

A data breach is an incident in which information that should be safe is accessed without authorization. Intentional or unintentional, it involves the release of secure, private, confidential information to untrusted parties.

The more technology progresses, the more data we share, and the more personally identifiable information moves through digital networks. Cybercriminals launch attacks against the security protections placed on databases and data transfer channels to access full names, Social Security numbers, credit card account information, and other personal financial information.

Everyone is vulnerable to hackers, but businesses and financial institutions often become attractive targets because of the large amount of data they house. In one fell swoop, a data breach at a large corporation can compromise millions of customers’ data.

How Does a Data Breach Happen?

Data breaches can be accidental when proper protections are not in place or through human error, but they are typically targeted attacks by fraudsters and highly-skilled cybercriminals. These people find their way into secure networks using creative deception and technical skills in many ways.

Weak Passwords

An insecure or weak user password is one of the most common ways hackers gain access to accounts. People often use words and phrases that are easy to guess, such as their pet’s name or birthdate, or the same password for every account, leaving their data especially vulnerable.

System Vulnerabilities

People often find it annoying or cumbersome to update their devices or software. Sometimes they mistakenly believe prompts to update are just the company’s way of forcing new features into use. But the truth is, using out-of-date systems or software can leave your data unprotected as updates often contain patches and defenses against known vulnerabilities.

Fraud, Theft, or Mishandling of Data

Not every data breach requires high-tech skills. If someone steals or gains access to your computer, phone, or another device, they may be able to get your data directly from the source. A criminal can also scam you into giving them your account information over the phone, by mail, or through an email phishing scheme. A data breach can also occur when employees of the company handling your data misuse it intentionally or share it unintentionally by not following proper procedures.

Malware

Cybercriminals often manipulate users into clicking links, downloading attachments, or visiting vulnerable websites that install malware on computers or devices. Malware can do things like scan your computer’s memory to collect confidential data or capture keystrokes to steal passwords and other sensitive information. By infecting your device with malware, everything you have done or will do on that device becomes exposed.

Criminal Hacking

Criminals are the top culprits behind data breaches. Targeted attacks start with using credentials purchased on the dark web, using coding skills to bypass security systems, installing malware, or using password-generating machines to guess logins. Then, the criminals hack into the organization’s network to steal whatever they are out to get, commit fraud, sell more data on the dark web, or conduct a wide range of further cyberattacks and other nefarious activities. It’s a vicious cycle that proves challenging to stop.

What to Do If You Are Affected by a Data Breach

Whether you get the news from a headline or through official customer communications, learning your information has been subject to a data breach through a company you do business with can be alarming.

It is important that you confirm the breach occurred right away, learn what information was leaked if possible, and take action quickly.

Change your online login and security questions immediately. Choose a complex password that would be difficult to guess for that company’s account, as well as the same for all linked accounts and anywhere else you use a similar login.

Contact all appropriate companies and organizations. If your credit card information was stolen, contact your financial institutions or retailers immediately and request a new card. If your driver’s license information was exposed, contact the DMV so they can flag suspicious activity. If your Social Security number was exposed, get credit monitoring, watch your credit closely, and consider freezing your credit report with all three credit bureaus to make it more difficult for criminals to open new accounts. Also, file your taxes as early as possible to prevent scammers from filing a fraudulent return in your name.

Finally, if the company that was breached offers to help repair possible damage or offers credit monitoring or identity protection for any length of time, consider accepting their help. If it is an otherwise reputable company, chances are their offer may be more robust than what you can do on your own.

How to Protect Yourself From Data Breaches

Consumers should always be proactive when it comes to safeguarding their personal information. Some of the steps you need to take may seem inconvenient, but they can save you a lot of expense and trouble.

Do Business With Companies You Trust

Big corporations tend to make the news when their company’s data is involved in a data breach. Still, reputable businesses are also highly invested in cybersecurity efforts because their bottom line depends on it. Avoid providing your information to companies if you suspect your data might be vulnerable, while also keeping in mind that many small businesses use reputable companies to house their data and conduct digital transactions.

Use Strong Passwords

Keeping track of multiple passwords and regularly updating your passwords might be annoying, but it’s worth it. Make sure your passwords are complex and unique for each one of your accounts. Avoid complete words and phrases and include numbers, special characters, and alternate cases when possible. If you’re avoiding using complex passwords because they are hard to remember, use a good password manager to track everything.

Monitor Your Accounts

Keep a close watch on your bank accounts, credit cards, and credit report. Check everything regularly and be on the lookout for suspicious or unfamiliar activity.

Secure Your Devices

Make sure your computer, phone, and other devices are locked with a complex password or biometric protection. This provides a defense against exposing some of your most sensitive data if anything is lost or stolen.

Browse Safely

Whether you are shopping or filling out information online, make certain you are doing so securely. Never enter your credit card or personal information unless you are on a safe and reputable website with a secure URL, meaning it starts with “https://” rather than just “http://” when you look in your browser bar.

Avoid Oversharing

Be wary of sharing too much personal or sensitive information about yourself to people you may not trust. Particularly on social media, avoid allowing access to too much information or completing quizzes, surveys, and games that reveal details that could be used to answer security questions. Checking in online or tagging yourself when you are away from home can make you vulnerable to burglary and theft of devices with sensitive data.

Use Protective Software and Services

Installing security software on your computer can provide an extra layer of protection to block malware and viruses. Using credit monitoring services and identity theft protection services can help protect against damages caused by stolen identity and protect your personal information against what happens following a data breach.

The Bottom Line

Data breaches occur, no matter how careful you are. From small-time scammers to massive cybercriminal enterprises on the dark web, hacking data is big business, and it’s a lucrative one. The best way to protect yourself is to be aware, pay attention, avoid exposing your personal information as much as possible, and take action quickly when a data breach is suspected or confirmed.

Monica Szakos Cramer is a Senior Financial Adviser and Partner with Asset Preservation Strategies, Inc. (APS) in San Diego, California. Monica specializes in financial planning and empowerment through education. Her expertise revolves around technical and fundamental investment analysis. APS is a financial advisory firm that works with business owners and entrepreneurs, people nearing or in retirement, and strategies for women in wealth. Learn more about them online at asset-preservation.com. 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This material was prepared by Crystal Marketing Solutions, LLC, and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate and is intended merely for educational purposes, not as advice.

Past performance is not an indication of future results. All investments have risk, and are not guaranteed.

End-of-Life Planning: Does Your Family Know Your Wishes?

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One thing we all have in common is that we are going to die. Although death is not something we want to think about, dying is a reality that is best handled when we have planned for it. 

The truth is, most people will become seriously ill or incapacitated leading up to death, and without end-of-life planning, many families are saddled with the burden of guessing how their dying loved one would like to be cared for. So, if you want to help protect your family from wondering, guessing and second-guessing, and maybe even disagreeing about what your wishes are, it’s important to make end-of-life planning a priority.

No matter how well your loved ones know you, your desires for how you’d prefer to die may not be as clear as you would think. By making choices ahead of time, putting them in writing, and discussing your plan with your family, you can help make a difficult situation at least somewhat easier to handle. 

What is End-of-Life Planning?

End-of-Life planning is the process of making critical decisions about how you want your healthcare, medical treatment, and personal care to be handled should you become unable to speak for yourself.

Your end-of-life planning starts with thinking through the who, what, where, when, and how of the care you want to receive, as well as what resources will be available to carry out your wishes. 

Next, you will also want to have conversations with your loved ones about what your wishes are. Then, you will need to get your legal and financial paperwork in order to ensure your wishes are in writing. 

What are Advance Directives? 

An advance directive is a written document, or set of documents, that indicates your choices about medical treatment if you are not able to make the choice on your own behalf when the time comes. Two common types of advance directives are a living will and a medical power of attorney.  

A living will is a written statement regarding the handling of your medical care while you are presumably dying but still alive. The purpose of a living will is to communicate the types of procedures or life-prolonging treatments you want health care professionals to perform (or not perform) if you are in a vegetative state or have a terminal condition. 

For example, life-supporting measures such as CPR, feeding tubes, and breathing machines, may help keep you alive long enough to improve, but these measures could also only slow your impending death, lower the quality of life you have left, and prolong your pain. Some people want to fight with every breath until the end while others would rather not suffer or extend the expense or emotional strain of ongoing efforts on loved ones. Keep in mind, your feelings may change, depending on your age, medical conditions, or other personal reasons. 

A medical power of attorney is a legal document that allows you to appoint someone to make medical decisions for you if you should become unable to make decisions for yourself. This person should be someone you trust, they should be aware of your wishes and willing to take on the responsibility, and they should have a copy of your advance directive documents. 

What Resources Can Help with End-of-Life Planning? 

Although you can work with your attorney to create your living will and appoint a medical power of attorney, you may want additional support in thinking through the process and communicating this information with your family.

When you initiate the process of end-of-life planning, you can think of it as an invaluable gift to your loved ones. No matter how uncomfortable the topic may be, having a plan in place will provide peace of mind and ease at least some of the stress that occurs during the most difficult times.

 

Monica Szakos Cramer is a Senior Financial Adviser and Partner with Asset Preservation Strategies, Inc. (APS) in San Diego, California. Monica specializes in financial planning and empowerment through education. Her expertise revolves around technical and fundamental investment analysis. APS is a financial advisory firm that works with business owners and entrepreneurs, people nearing or in retirement, and strategies for women in wealth. Learn more about them online at asset-preservation.com.

This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.

7 Cybersecurity Tips to Protect Your Personal Data

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Until recently, concerns about cybersecurity were largely limited to IT departments. But over the past decade, and especially in the past few years, public concern about cybersecurity is on the rise — and rightfully so. The vulnerability of our personal data is a legitimate cause for alarm and it’s something that needs to be taken seriously by everyone. 

 

We’ve all seen the headlines about major data breaches at companies such as Facebook and Equifax. We’ve heard the stories about identity theft or experienced it ourselves. Cybersecurity isn’t something anyone can afford to ignore anymore.

 

The reality is your private data is valuable to hackers, and although cybersecurity experts are working around the clock to keep criminals at bay, no company cares more about your privacy than you do.

Unfortunately, it is true that we never have total control of our data once it is shared, but we can be careful to follow best practices and take simple precautions to stay as cyber secure as possible.

 

What is Cybersecurity?

 

To understand what you need to know about cybersecurity as an individual, you need to first understand the cyberattack threats you are facing. 

 

Think of each place where you share data on the internet as a rental home. You feel comfortable storing your valuables, such as your passwords and social security number; and when you leave, you’re careful to lock the front and back doors. Because you trust the landlord, you assume the locks are in working order and expect the house to be secure. 

 

But then, you may discover an intruder has picked the locks, climbed through the windows, or tunneled a hole through the basement floor. As soon as one entryway is blocked another one can always be created. So no matter what the owner does to secure the home, someone can always get in. This gives you an idea of what you are up against.

 

Not only do you need to be careful to protect your bank accounts and investment accounts, but you also need to be careful with your email login, health insurance information, social networking accounts, and even apps such as games you play on your phone. 

 

From a company’s perspective, cybersecurity is about protecting customer or employee data from ever-evolving threats of cyberattacks, and recovering networks, programs, and devices if an attack occurs. From your perspective as a consumer, cybersecurity is about being careful to minimize your exposure.

 

How to Stay Secure While Staying Connected

 

1 – Use Strong Passwords

No matter how challenging it is to remember a long list of complex passwords, it’s worth it. At a minimum, use a combination of at least 10 letters, numbers, and symbols. Avoid repeating passwords on different sites and be sure to change your passwords regularly.

 

2 – Keep Your Software Updated

Be proactive about updating your software and never ignore prompts letting you know an update is available. Allowing outdated versions of applications and programs to run on your systems or devices leaves you open to attacks. Updates are often patching known flaws and potential exploits that have been discovered. 

 

3 – Use Encryption

Encrypt your computer so your data is protected in case it is lost or stolen. Strengthen your home network, or any public Wi-Fi network you use, by having a strong encryption password on a virtual private network (VPN). This way, if your communication line is hacked, the cybercriminals will only be able to see the encrypted data. 

 

4 – Be Cautious

Small mistakes can cause big problems if you are not careful.

Be discreet when entering your pin at a register or ATM, and check for card skimmers before swiping. Avoid sharing personal information on social media—something as seemingly minor as sharing your mother’s maiden name or a pet’s name could be the key a hacker needs to access your account. When you open emails, use good judgment before clicking on links or attachments, which could contain malware or lead you to a phishing scheme.

 

5 – Use a Protection Suite

A comprehensive computer security suite, such as Norton or McAfee, will provide a layered defense against common threats, providing safe browsing, firewall capabilities, anti-virus, and anti-phishing protection, automated updates, and more. 

 

6 – Sign Up for Real-Time Alerts and Identity Protection Services

Start using the real-time notifications and monitoring services offered by your banks and credit card companies, so that they will contact you in the event of any purchase attempt that they deem unusual. For a fee, professional identity protection companies will monitor your credit cards, Social Security number, and other data for unusual activity.

Keeping a close eye on your accounts will go a long way toward limiting any damage that can be done by cybercriminals.

 

7 – Consider Your Entire Household

Talk with your children and elderly parents about how to protect against cyber threats, as they tend to be particularly susceptible to mistakes that can lead to problems.

Also, look around your house to take your personal Internet of Things (IoTs) into consideration — anything that connects to the internet, such as televisions, gaming systems, home security systems, appliances, thermostats, and voice-controlled personal assistants. These devices are particularly vulnerable to attacks, so be sure to unplug them when not in use, change passwords regularly, configure the highest possible privacy settings, and if possible segment them from your home networks.

 

If you do become a victim of cybercrime, contact the companies and banks involved and alert your local police, who may also recommend you report the crime to the FBI or the Federal Trade Commission. 

 

Most importantly, remain vigilant and never let your guard down. It may seem overwhelming at first, but once you learn how to make simple changes and stay abreast of new threats, staying cyber secure will become as second nature as locking your doors. 

 

Monica Szakos Cramer is a Senior Financial Adviser and Partner with Asset Preservation Strategies, Inc. (APS) in San Diego, California. Monica specializes in financial planning and empowerment through education. Her expertise revolves around technical and fundamental investment analysis. APS is a financial advisory firm that works with business owners and entrepreneurs, people nearing or in retirement, and strategies for women in wealth. Learn more about them online at asset-preservation.com.

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.