Advice in the Age of Pandemic: Part II
The world is experiencing a public health and economic crisis unlike any other in modern times. We are in uncharted territory. While the COVID-19 pandemic will leave an indelible impact on many aspects of life, Lake Street is pursuing opportunities in this moment to take advantage of the unique, if unsettling, circumstances we are all experiencing:
- April 15th filing and tax payment relief. After an initial extension of only the tax payment deadline (up to $1 million) received significant pushback, the government has granted both filing and unlimited tax payment relief for 2019 returns and 1Q2020 tax estimates until July 15th. Many states are following suit and adjusting their dates for 2019 individual returns (including MA, NY, and CA). Gift Tax Return filings and payments have also been extended to July 15th. While more clarity is needed, it is expected that second-quarter estimated tax payments for 2020 (typically due 6/15) will also be extended to July 15th.
- CARES Act. The final version was signed into law on March 27th. While the bulk of the provisions impact businesses (large and small), there are a few things that pertain to our clients:
- Rebates. The law provides $1,200 per adult + $500 per child but is phased out to $0 for couples whose income is over $200k based on 2018 Tax Returns (or 2019 if already filed).
- IRA RMD. For those over 70.5 years old, there is no required minimum distribution from IRAs in 2020. For charitably inclined individuals, we still recommend taking advantage of the QCD (Qualified Charitable Distribution) that allows a distribution of up to $100k directly to charities without recognizing any income on the distribution.
- Increased charitable deductions. For 2020, cash donations to public charities are deductible up to 100% of AGI, raised from the standard limit of 60% of AGI. Donations to Donor Advised Funds and Private Foundations do not benefit from the increased deductibility limit. Further, there is no increased limit for deductibility of appreciated stock. Lastly, the increase in deductibility limits does not allow for faster absorption of charitable contribution carryforward from a prior year.
- Helping those in need. Many clients have asked where they might make the most impact in helping people deal with the devastation that the virus and economic fallout have caused. A number of trusted organizations have compiled lists of charities that we are happy to share:
- Fidelity Charitable Gift Fund
- The Philanthropic Initiative
- Arabella Advisors
- Boston Resiliency Fund
- The Boston Foundation
- NH Charitable Foundation
- If the desire is to help individual family or friends, clients can also support them with tax-free gifts of up to $15,000 per person using annual exclusions, and can pay unlimited medical expenses as long as they are paid directly to the medical provider.
- Updating estate documents. The reality of a deadly pandemic is an effective impetus to review estate plans and documents. At a minimum, we want clients to review their Health Care Proxies and Durable Powers of Attorney to make sure the right people are appointed and successors are named. This goes for adult children as well. Upon attaining age 18, medical professionals are not allowed to share information with parents without authorization from the adult child.
- Fraud vigilance. Every day, fraudsters seem to find more and more sophisticated ways to prey upon the public. Times of crisis exacerbate what is an already bad situation. Please be extra vigilant when it comes to emails, phone calls, and websites. For emails, check the sender’s address and if it involves money movement, follow up with a phone call to the person.
It is important to remain disciplined and steadfast during a market disruption like that which we are currently experiencing, yet still be nimble and proactive with the unambiguous opportunities we see before us. While the ultimate economic impact of this crisis is not yet known, we encourage everyone to proactively adapt and respond to the current situation.