Five Tax Conversations to Have with Clients

Craig Wright, MBA, CFP®, ChFC® | Strategic Financial Concepts, Inc.



Taxes are a top subject people care about when it comes to their money, particularly, how to reduce them. Education is a process and not something that only happens once, especially when laws can change so frequently. Five topics that are important to educate clients on are RMD planning, taxation of social security, charitable giving pre-RMD, charitable giving post-RMD, and the topic of tax laws. One is not more important than the other, and all are applicable to clients at one time or another.


RMD Planning

Having a properly balanced plan is important as people approach retirement. Prior to retirement, there are four main opportunities for deductions: contributions to retirement accounts, charitable giving, mortgages, or child tax credits. Once at retirement age, in most cases, only charitable giving remains as the available deduction. Having a plan helps to reduce the RMDs to maximize the legacy and income now and in the future.


Taxation of Social Security

Most people don’t understand that social security can be taxed as income in retirement. I enjoy educating clients on income levels, provisional income, and the impact of tax on social security as income. So, when it’s time to turn on social security, they can find ways to reduce taxes. Most clients appreciate finding ways to legally pay less in taxes.


Charitable Giving (Pre-RMD)

An alternate to giving cash, and a great opportunity especially after we've had a nice bull market run in the stock market, is to look at any highly appreciated securities and donate directly to a charity. If you want to keep the specific high-performing security in your portfolio, buy it back at the current rate the same day you donate. This allows you to increase your cost basis to the new value while getting the full deduction (if eligible) on the charitable giving without having to pay capital gains tax.


Charitable Giving (Post-RMD)

Now that qualified charitable distributions are a permanent feature, people who don't need their RMDs are able to give them directly to charity. If they don’t want to give the full amount to charity, it’s possible to realize those as income and utilize them for other giving plans, possibly using a life insurance strategy to leverage the charity giving for greater impact.


Education on Tax Laws

No one wants to pay taxes if avoidable. Remaining abreast on the ever-changing laws and educating clients on the changes provides them the awareness needed when situations arise throughout the year. This approach offers clients an overall holistic strategy to maximize their financial potential without letting taxes erode their wealth. Develop a good relationship with trusted CPAs and tax professionals so you can direct your clients to knowledgeable professionals who are eligible to help them directly with their tax situations.


Since we can’t predict what future tax laws will look like, helping clients understand that being flexible and adaptable with tax planning is paramount. The Leap Model makes this process simple and easy for clients to understand by demonstrating the balance between the protection, savings, and growth components.


For financial professional use only.


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