Cornerstone Capital Advisors
Lisa Hay is a Lead Advisor with Cornerstone Capital Advisors, a fee-only Financial Planning and Investment Advisory Firm.
Lisa helps bring clarity to the complex world of investing, taxes, estate planning, retirement and other life and career transitions. Lisa coordinates the many different pieces of your financial puzzle – delivering the confidence and peace of mind that comes from having a plan in place.
Utilizing her years of experience as a CPA, Lisa provides integrated tax-savvy solutions for her clients' wealth management needs in areas such as retirement withdrawal strategies, Social Security planning, and charitable giving. Nearly every aspect of financial planning and investing has tax implications, yet most wealth management firms do not have the expertise to integrate the many crucial considerations.
LIsa further enhanced her professional training through her study and attainment of the Retirement Income Certified Professional (RICP®)designation
As an Accredited Investment Fiduciary (AIF®), Lisa is committed to putting her clients best interest first at all times.
Lisa truly cares about her clients – not just their money, but their well-being and fulfillment in life. Limiting the number of people she works with allows Lisa to give each client the attention and care they deserve. She is committed to taking the time to listen carefully to understand what is really important to you: aligning your financial goals and decisions to help you achieve your most cherished life and legacy goals.
In addition to her passion for making a difference in client’s lives through her professional endeavors, Lisa is actively involved in community and church, where she serves on the leadership team of the Generous Life Ministry.
As a passionate advocate of consumer financial education, Lisa has authored numerous books on financial topics related to personal financial management and retirement planning.
BS, Business Administration and Accounting, University of Tulsa
Assets Under Management:
Lisa Hay is an employee of Cornerstone Capital Advisors, an SEC Registered Investment Advisor. Any views or opinions expressed here are that of her own and not necessarily those of Cornerstone, its owners, or employees.
The QCD is a great tax planning tool for those who are taking RMDs - especially in light of the new tax law.
Kudos to you for being proactive in your charitable planning!
If your custodian offers check writing priveleges, you should be able to write the check directly to the Charity. Another option is to set up direct distributions from the custodian to the charity. However, this can result in issues with tax withholding, if you're not careful!
What you do NOT want to do is to take the RMD yourself, and then write a check to the charity from those proceeds.
Two other charitable giving strategies that you might want to consider are Donor Advised Funds and donating appreciated securities.
Let me know if I can help! Helping charitably inclined folks is one of my favorite parts of my job!
First, let me say that helping folks make tax smart charitable contributions is one of the most rewarding aspects of my job and what I am most passionate about! Generosity is a gift that I love to encourage!
Qualified Charitable Distribution (QCD) are one of my favorite tools for accomplishing this, assuming that the client is over age 70 1/2. And under the new tax law, the QCD is often even more beneficial (more on that below!)
I will try to answer each of your questions:
1. Your advisor or the annuity rep should be able to provide the appropriate paperwork for completing a Qualified Charitable Distribution (QCD).
2. You should be able to specify amounts, frequency etc... and discontinue at any time.
3. The amount of the QCD will reduce the amount shown as a taxable distribution and therefore should not be shown as taxable income on your tax return. This would potentially decrease your overall taxable income, but might not specifically reduces the taxes on your SS. (See below for details about how SS is taxed). Also, based on your AGI, you would not owe any Medicare. surcharges whether or not you utilized the QCD strategy.
4. In most cases, it would NOT make more sense to take the full RMD amount and then take the deduction. With the new tax law, the standard deduction has increased to $26,600 for married couples over 50 and filing jointly. So you autotmatically get that deduction, which means that many people effectively "lost" the benefit of deducting charitable contributions.
I hope that this inforamtion is helpful to you and others!
Details about how SS is taxed are included below so as not to bore those readers who might not care to go that deep in the weeds!
Lisa G. Hay, CPA, CFP®, RICP®, AIF®
How SS is taxed:
Each year, the portion of your Social Security income that’s subject to federal income tax depends on your “combined income.” Your combined income is equal to:
- Your adjusted gross income (which you can find at the bottom of the first page of your Form 1040), not including any Social Security benefits, plus
- Any tax-exempt interest you earned, plus
- 50% of your Social Security benefits.
If your combined income is below $25,000 ($32,000 if married filing jointly), none of your Social Security benefits will be taxed.
For every dollar of combined income above that level, $0.50 of benefits will become taxable until 50% of your benefits are taxed or until you reach $34,000 of combined income ($44,000 if married filing jointly).
For every dollar of combined income above $34,000 ($44,000 if married filing jointly), $0.85 of Social Security benefits will become taxable — all the way up to the point at which 85% of your Social Security benefits are taxable.
Thanks for the opportunity to provide some additional insight.
You are correct that Form 709 should be completed for gifts in excess of the annual exclusion amount. This is how the IRS keeps track of how much of a taxpayer's lifetime exemption has been used.
I would strongly advise your parents to maximize the impact of their gifting and minimize the tax implications, by developing a gifting plan in the context of a comprehensive estate, tax and financial plan. Certain types of assets are better for gifting outright during one's lifetime, while some are better suited for going through a trust or estate. If they are charitably inclinded, there are assets that are better for minimizing taxes.
A knowledgable professional who takes the time to understand the client's goals and put together a comprehensive plan, can be invaluable in making these decisions.
I'm happy to answer any additional questions.
Lisa G. Hay, CPA, CFP®, RICP®, AIF®
Cornerstone Capital Advisors
If you were my client, I would want to be clear on a number of questions before I would feel confident in providing an answer to your question.
Assuming you are strictly talking about a checking account, I would agree with other posters. If you are talking about where to keep money which will be needed to cover cash flow needs in retirement (which you should be if only 4 years away), I think your question requires much more detailed analysis.
When you say that you have enough income for retirement, what is the source of that income?
- If based on portfolio withdrawals, what are your assumptions for returns, withdrawal rate, longevity, inflation, future tax rates, etc?
- Guaranteed pension? Does the pension have an inflation adjustment? A joing survivor option?
- Social Security. Have you considered spousal claiming strategies?
- Other annuitized income
- Rental, or other passive income
Finally, what is your overall plan which should include strategies to mitigate taxes, and an asset allocation based risk tolerance and risk capacity?
Hope this provides some additional things to think about.
Thanks for the opportunity to answer your question and kudos to you for carefully considering your options!
I am sorry that you have had a negative experience with a financial advisor. Sadly, that happens frequently. In fact, it was the reason that I left my career in tax and business consulting after seeing so much “financial malpractice” from my clients “financial advisors”. I wanted to do things differently!
I would strongly encourage you to meet with a Fiduciary financial advisor.
A Fiduciary is required to provide advice which is in your best interest. Many advisors are merely product salespeople, which can create a real conflict of interest in the advice that they provide. Sounds like this was your experience. Variable annuities pay some of the highest commission and the salespeople rarely understand what they are selling!
The asset allocation of your portfolio should be integrated with your holistic financial plan.
A good advisor will not provide investment advice until understanding your holistic financial picture: your age, income, net worth, short term and long term goals, risk tolerance and capacity, etc. A tax efficient cash withdrawal plan that considers all of your income sources, as well as a tax projection should be an important part of your holistic plan.
Most of my clients are nearing retirement, or in the early years of retirement. However, their investment allocations are customized to their unique needs and situation.
That being said, most folks need some mix of equities in a portfolio for growth. Unless someone has a significant portfolio, I don't normally recommend individual bonds or stocks. A well-diversified mix of Mutual Funds and ETFs is my usual recommendation provides liquidity and diversification.
One last tip. Please evaluate the credentials of any advisor that you may be considering very carefully! This link to the SEC website and this link to a description of accreditations are good places to start!
All the best,