James Lavorgna discusses strategies for tax mitigation
James A. Lavorgna has published a compelling new article focusing on charitable tax strategies to mitigate taxes. His expert analysis highlights two favored approaches: the reversionary charitable lead trust and the charitable bargain sale. The article provides real-life examples demonstrating how these strategies can be effectively used for tax planning and wealth management.
Tax Mitigation Using a Reversionary Charitable Lead Trust
When individuals with substantial retirement accounts consider converting traditional IRAs to Roth IRAs, they often face significant tax liabilities. James A. Lavorgna explains how utilizing a reversionary charitable lead trust (CLT) can strategically mitigate this tax impact. The tax deduction earned by funding a CLT can offset the income recognized during a Roth conversion. This deduction can be carried forward for up to five years under current IRS rules, applying to all charitable deductions.
Example 1: The Robinson Family
The Robinson family, with a large traditional IRA, decided to convert $500,000 to a Roth IRA, increasing their taxable income. Simultaneously, they set up a CLT with $1 million, specifying an annual payout of $40,000 to their favorite charities for the next 20 years. This setup allowed them to claim a charitable deduction for the present value of the expected payments, potentially offsetting $300,000 of taxes in the year of the conversion. The remaining assets in the CLT pass to the Robinsons’ beneficiaries, providing tax-efficient growth and minimizing future estate taxes.
Example 2: The Joan Hansen Family
Joan Hansen, in a lower-rate tax state, regularly donates to her church and local charities. She set up a CLT with a charitable distribution of $15,000 per year over a 14-year term, resulting in approximately a $200,000 charitable deduction. This deduction offsets distributions from her Roth conversions over the next six years. The portfolio will revert tax-free to her children at the end of the term, allowing her to maximize future donations and leverage the dollars she plans to leave to her children.
James shared: “I feel that this article demonstrates the power of forward-looking holistic planning, providing business owners and individuals with innovative strategies to manage their wealth and taxes efficiently. My book, “Wealth Unleashed: Navigating Wealth and Taxation for Business Owners, Wealthy Families, and Their Advisors,” offers further insights into these strategies and more.”
About James Lavorgna
Mr. Lavorgna started in the insurance business in 1976 and has been in the financial services industry for 45 years. He earned his Certified Financial Planning designation in 1984. He also has earned a Bachelor of Science in Finance, Juris Doctor (Litigation), Master of Laws in International Tax and Offshore Planning, and Master of Laws in Wealth Management and Private Banking. He has been in and associated with the investment industry since 1979. And is currently an Investment Advisor Representative of Forsyth Wealth Management, Inc., a fee-only Registered Investment Advisor and licensed insurance agent.
He is also the Managing Member of Spencer Advisory Services, LLC, and a Certified Team Based Model Consultant.
He has spent his career consulting with successful business owners and high-net-worth families
Learn More: https://spencervfo.com/
Spencer Advisory Services, LLC (SAS) is not offering tax, legal advice or investment advice and is for educational purposes only. We strongly encourage you to seek advice from qualified tax and/or legal experts regarding the best options for your particular circumstances or hire the services of SAS. Investment advisory services are only offered through Forsyth Wealth Management, Inc. (FWM). www.forsythwms.com. Life, long-term disability, long-term care, or other non-variable insurance products are offered individually through licensed insurance producers. Any U.S. tax advice contained in communication was not intended, to be used and cannot be used, by the recipient for the purposes of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax laws.
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