Commentary: ACT: Start Tax Planning Now

Commentary: ACT: Start Tax Planning Now

Two ideas that can make life easier now and later.

The bulls have been running on Wall Street this year leaving many investors with the happy problem of strong returns and capital gains. Add to that the uncertainty of upcoming changes in the tax laws and now is a very good time to look over your investments and consider what actions fit best with your own financial plans that can help save you tax dollars and benefit you in the future.

Donating appreciated assets such as stock you own that has increased in value is a time-honored tax strategy for avoiding capital gains tax. But donating stock can be cumbersome when you want to give varying amounts to a number of worthwhile causes. The better plan is to consider establishing a donor advised fund and depositing that appreciated stock there. Then you get the tax deduction this year and can give out donations to nonprofits when you are ready and for any amount you decide. Your professional advisor can continue to manage the funds you deposit into the Donor Advised fund and making donations is as easy as making a phone call, sending an email or going online. Best of all, next year when it comes time to gather all your tax records all you need to report on your tax return is the donation to your donor advised fund. Nice and simple.

Maximize donations to you and your children’s IRA/Roth IRA. This is an excellent time of year to fully fund your retirement savings for the year. Your investments have had a good year so think of that increase in value funding these contributions. It is also a great time to encourage your kids to contribute their earnings into an IRA no matter how young they are. I personally have offered to match my kids (all 20-somethings out of college working) and I contribute a $1 for every dollar they contribute. It is a great lesson in saving. They will be very thankful in coming years for both my encouragement and the money saved in the IRA/Roth IRA. It is the gift that keeps on giving.

I am not a tax advisor but these are two tips that make good financial sense and the best tax planning happens long before the year ends.

Betsy Micklem is a former vice president, Investments with Morgan Stanley. Now retired, she works at ACT for Alexandria, the local community foundation. To learn more about donor advised funds, email her at