Year-end financial moves to consider now

BILL NORTHEY: Hello, and welcome to our second webinar in our three-part Power of Planning Webinar Series, presented by U.S. Bank Wealth Management. I'm Bill Northey, senior investment director for U.S. Bank Wealth Management, and I will be our moderator for today's discussion. Anticipated tax law changes combined with other challenges and opportunities presented in the wake of the economic reopening in the United States is a wonderful opportunity for us to take a new look at year-end planning opportunities that are important for everyone. For the next 45 minutes, we'll discuss what areas of your financial picture you should be reviewing as we move into this critical time at the end of the year, particularly areas in and around taxes, places where you might have an opportunity to improve your outcome. 
So before we get started, we'd like to go over a few pointers to familiarize you with the webinar platform that we're utilizing today. It should look very familiar to many of you. First, you can customize your screen. 
You can drag any of the windows around to reposition them. You can also make any of the individual windows bigger or smaller by dragging on the corner of those windows. You can hide any unwanted windows by clicking the X in the upper right-hand corner. 
And the buttons along the bottom of your screen give you a variety of controls throughout our webinar here today. You can reopen or reinstate any of the modules that you had previously hidden by utilizing the module controls along the bottom. And importantly-- and we encourage you to take advantage of this-- there is a questions tab that you can utilize throughout our time today. If you click on that tab, you should be able to submit any questions that you have during our time today, and if your question doesn't get addressed by the content of our discussion today, we'll be sure to get back with you after the fact. 
So today, we are joined by Kevin MacMillan, head of government relations for U.S. Bank, and Kate Phelan, managing director of trust advisory U.S. Bank Private Wealth Management. Welcome, Kevin and Kate, and thanks for being part of our panel today. 
KEVIN MACMILLAN: Thanks, Bill. It's good to be here. 
KATE PHELAN: Thanks, Bill. 
BILL NORTHEY: Well, let's go ahead and get started. So today, we'll start with the legislative and policy updates that could impact your finances, including briefly touching on the potential broader market and economic impact, and we'll spend most of our time discussing year-end financial moves that you should consider every year but most importantly this year and some that may be worth considering right now in the current environment. So with that, I'd like to turn our first conversation to Kevin MacMillan, and Kevin, we believe it is important for our clients to be aware of the key legislative and policy developments that are happening in Washington, how those might impact their personal financial situation as well as the market and the economy in general. And I know, given your proximity to Washington, you're following these very closely as they work their way through the legislative process, and would like to invite you in to maybe talk about some of the things that are top of mind, what you're seeing today, and particularly paying some close attention to what are the timelines associated with these congressional actions and how they might impact our audience. So Kevin, thanks for being a guest with us again today, and I'll turn the microphone over to you, sir. 
KEVIN MACMILLAN: Thanks, Bill, and it's great to be with everybody today. It certainly is a very busy time in Washington and across the country. Just this week, we saw the debt ceiling be approved and raised by the House of Representatives. We've got multitrillions of dollars being debated on Capitol Hill as to what to do with infrastructure and other priorities for the administration. And also, don't forget-- William Shatner flew into space today, so there is a lot going on. Let's cover the first two, and we'll skip William Shatner for another time. 
But the debt ceiling is a major, major event that occurred this week. We saw the House of Representatives increase the debt ceiling by about $480 billion. That will allow the government to pay its obligations for the next about a month or a little less of a month, maybe, and that's all pending and will sit for a while until the Congress can work out the key legislative matters that are before it. And that is tax law changes, the reconciliation package, the $3.5 trillion as is currently sitting, the massive infrastructure package, and coupled with all of that is also some health care changes, so a lot going on. And I view it as sort of a stew or, if you're from New Orleans, a gumbo, and you add the spice of political competition occurring on the hill with Republicans believing that they can control the House in the midterm elections and Democrats seeking to defend it, a very narrow majority. 
So if we start with the tax law changes, which I'm sure are on everybody's minds, that's going to be largely what's going to pay for these infrastructure proposals that are on the table and pending before Congress. So there are some things that we can bank on, but there's many more we can't. I've talked to a lot of members of Congress this past couple of weeks, and anybody that tells you that they know for certain what's going to occur is not telling you the truth. They are speculating, but there are some things that are certainly trending in a particular direction. 
So what I'd say we can likely bank on is we'll see an increase in the corporate rate somewhere from probably about 25%, from 21% to 25%. We'll see some limitations on pass-through entities, S corps and what have you, and then on the personal side-- and this is a side I think this audience is most interested in-- we're going to see some changes in the personal rate. For individuals earning more than $400,000 a year, that's likely to go up to 39.6%. 
There's some questions around guarantor trusts. That is still to be hashed out, but it's on the table, so certainly something we need to be paying attention to. Capital gains tax-- definitely on the table as well as carried interest or carried interest for investment opportunities. 
So when I would take all of these together, I look to the two senators that I think probably everybody has heard their names before as we look at this process moving through the year, and that's Senator Sinema from Arizona and Senator Manchin from West Virginia. What are their priorities? My sense is that we certainly have seen Manchin say he is for increasing carried interest or eliminating it and increasing capital gains, so those are on the table. 
Sinema has been a little bit skeptical of estate tax changes or very broad estate tax changes, but I think we will likely see things trend towards a repeal of the Trump-era tax changes in the estate space. And whether they can go further than that is going to be the ultimate question here. So on taxes, the Biden plan is looking to raise several trillion dollars in the tax proposal in order to pay for the reconciliation infrastructure package and the bipartisan infrastructure investments. So there's two pieces here, so let's talk a little bit about them. 
The $3.5 trillion reconciliation bill, which is this large bill that is going to move-- and the question is, how big is it going to be at the end of the day? It has four key components. It deals with families where it seeks to establish universal pre-K, child care benefits, makes community college tuition free for two years, things like that. 
It's got infrastructure or jobs-related items, so it increases investments in public housing, establishes a Civilian Climate Corps, really looks to provide access for immigrant families, definitely a jobs infrastructure families plan. It's got a climate piece to it where it creates a clean energy payment programs. It provides grants for clean energy. It really has a very broad piece there. And then health care-- I think this group is probably heard a lot of the health care provisions in the bill, but they're looking to add dental, vision, and hearing benefits to Medicaid, extend the expansion of the Affordable Care Act, investment in community based services, and things like that. 
So those four component pieces are really what make up the $3.5 trillion package, but they don't have the votes for $3.5 trillion. So back to our Senators Manchin and Sinema, they have said that they don't agree with those numbers. They don't agree with all these programs. 
So where will they get? I'm estimating that they're going to get somewhere between $1.9 and $2.1 trillion of spending. They'll come to that agreement. That agreement will likely come together either early December or late December. I think that's when we'll see it. Then they'll turn their eyes to the tax bill and decide where they can adjust the dials on the tax bill to pay for this package. 
The third piece is the infrastructure bill, the infrastructure and investment bill, or the Infrastructure and Jobs Act I think it's called quite often. That's about $1 trillion of bipartisan agreed-to spending. This is roads, bridges, other major projects, $100 billion for that, $73 billion to upgrade the electricity grid, passenger, rail freight. Joe Biden loves Amtrak, so the rails are going to be taken care of, no doubt about it. 
So we've got a trillion dollars that's definitely going to be spent. We've got a proposal for $3.5 trillion that they would like to spend but is likely going to be more like $1.8 or $2. So we're looking at three in the total package, and that's what they've got to find in the tax bill. 
What I expect is will come to an agreement before the end of the year. They will make these changes in the tax package. The items I said, again, just to highlight-- I think we'll see certainly increase in the personal rate, capital gains being addressed, carried interest, something on estate but maybe not as broad brush as the administration had sought. And then they'll pack it all together, and they'll pass that. And we'll be looking at 2022 implementation for all of these programs. 
BILL NORTHEY: Well, great, Kevin, and I want to thank you for being our resident gymnast here as you were adapting this content just as frequently or as recently as this morning as we've been dealing with the extension of the debt ceiling. So thank you for that meaningful and thoughtful update, and we'll look forward to having you back-- just a tease to our audience-- in November for another update on the legislative agenda. So Kevin, thank you very much. 
So as we start to think about additional topics around year-end planning, it's important to have a sense of what's going on from a market and an economic perspective in conjunction with all of the policy initiatives that Kevin just outlined, and public and fiscal policy can have wide ranging implications for the broader economy and notably for specific sectors and industries, which is why we pay very close attention to the developments and the potential outcomes. As Kevin alluded to, there are a number of very industry- and sector-specific items that are within the infrastructure package. 
A couple of themes that we are paying attention to as we always do in the current environment are really three things that we'd have you focus on-- interest rates, economic growth, and inflation. And the Federal Reserve has demonstrated a very strong commitment to keeping this economy on track in a post-pandemic environment. This includes the zero-interest rate policy in addition to a number of programs that they've put in place around bond purchases. This easy-money policy has been very positive for the capital markets. It has helped to sustain it and drive forward asset prices. 
One of the things that we have to be very cognizant about is that we are approaching an inflection point, and we hear from the Federal Reserve in the form of their minutes almost imminently from the last meeting. But more importantly, we're focusing on what the path looks like going forward as we go through the balance of the fourth quarter and understanding whether the Fed will begin to move short-term interest rates, begin to taper down their bond purchase program, and what implication that will have for broad interest rates across the curve. 
Secondly, economic growth-- the first half of 2021 has been very strong economic growth with two consecutive quarters now producing over 6% real GDP growth. We just got our third revision to the second quarter, which showed a growth rate of 6.3%, but we also understand that as we've been experiencing some of the mitigation efforts that have been put in place in and around the Delta variant of the COVID-19 infection that that has had some implications for how quickly we are we're moving through the expansion in the second half of the year. And there has been some evidence thus far that the growth rate in the second half of the year will moderate from what we have seen in the first half of the year. Additionally, we're seeing a number of factors-- and we'll talk about this a bit more-- in and around the supply chain and supply chain constraints, meaning things like semiconductors or even moving freight through the port system that will have implications on the gross domestic product output for the United States and certainly for the globe. 
And then lastly is inflation. So concurrent with this very strong performance in economic growth that we've seen from the pandemic lows a year ago and through the first half of this year, we've also seen some concerns about rising prices or inflation, and up to now, we've seen both monetary policy that is instituted by the Federal Reserve in the form of interest rates and other mechanics like bond purchase programs but also fiscal policy that Kevin alluded to that have been in place even as the economy has gained momentum. And the Fed has remained steadfast in their support of the economy, viewing some of these inflationary pressures as something that might pass through time. 
Now, as we look at recent inflation readings as recent as today, the September CPI report showed a 5.4% year-over-year jump in prices, and that is above the Fed's preferred range of 2% that they target over time over the course of an economic cycle. And so we're monitoring the implications of inflation quite closely and determining whether these factors are, in fact, transitory or temporary as the Fed has described them or something that may embed themselves in inflation expectations and prove to be a bit more durable, things that start to elevate prices into the future. And we know that if that were to transpire, that would have some potential implications for capital markets on a go-forward basis in the next months and quarters ahead. 
So from a market perspective, some of the trends that we're focusing on right now is the stock market has proven very resilient through this period of time, associated with the growth that we have seen in the global economy. Through the first nine months of this year, through the first three quarters, the S&P 500, a broad measure of the US domestic stock market for large-company stocks, is up over 15%, and we are just a mere 4 and 1/2% off of all-time highs achieved last month in September. If we look at the breadth of the market, all 11 economic sectors of the S&P 500 are positive for the year, and nine of those 11 sectors are up 10% or more. The notable exceptions are consumer staples and utilities, which tend to be more defensive in nature, and it's not lacking customary nature to have those lag a bit when we have a very strong economic performance and market performance, in fact. Notably, small-company stocks here in the US also producing positive results, developed international markets also producing positive results-- so we've seen this phenomenon expand around the globe, though not to the same extent as we've seen out of the domestic large cap space. 
It's important to note that many factors can really drive the equity markets. These can be fundamental factors, things like revenue growth or profit margins or earnings. They can be technical factors, price patterns, or even sentiment that can drive short-term market performance. And the legislative actions-- like Kevin just alluded to and talked about and will update us again in November, so come back-- have really been all factors that have been impacting the equity markets in the near term. 
But what has primarily driven that is the upward movement in corporate earnings. As it stands right now, 2020 earnings per share for the S&P 500 are expected to grow 43%, recognizing that's an easy comparison relative to the prior year, which was pandemic affected. But notably, estimates are for another 10% growth in 2020, so primarily, what we view has been driving the equity markets has been the impact of the fundamental growth in underlying earnings. The S&P 500 is currently trading at 22 times as a PE multiple, a price-to-earnings multiple on 2021 estimated earnings and 20 times the 2022 estimated earnings. And while we view these levels as somewhat extended, they are short sort of extremes. 
The third-quarter earnings reporting is kicking off in earnest this week. We've seen already some companies beginning to report their earnings. We'll be paying close attention to things in and around the supply chain disruptions where we're seeing shortage of semiconductors that impact everything from auto manufacturing to consumer electronics, the port congestion, which we saw an announcement for the California ports today now operating 24/7. But those higher labor costs, the transportation costs, strong demand does have an implication for inflation and cost pressures, so it could have some implications for corporate profits as well. 
And then lastly, bond market yields-- the cornerstone of modern finance is the 10-year treasury, and we started this year with the 10-year treasury at below 1%. It reached a high of 1 and 3/4% earlier this year and has since moderated back down to where we find ourselves today, just north of 1 and 1/2%. But as we evaluate the impacts of the Federal Reserve's change in monetary policy that should be forthcoming in the fourth quarter, that can have some implications for those interest rates and certainly the returns that we can see to bond investors. 
Riskier bonds, things like corporate bonds, high-yield bonds, have been performing better than the Treasury market, so we've seen that there have been inherent returns to taking a bit more credit risk, lending to riskier institutions, and, despite those credit spreads or the incremental yield that you can earn, being somewhat low on a historic basis. Things like high-cash balances, strong profits have absolutely been helping to keep those credit spreads low and provide a good outlook for credit losses going forward. Notably, the same implications are present within the municipal market, where we've seen strong tax revenues and strong federal support for the budgets of local municipalities. 
You can always get our most up-to-date views by going to usbank.com/marketnews, and I would encourage all of you who are participants on our webinar here today to take advantage of that. We have lots of episodic and timely economic views that are communicated at that site. But for now, let's go ahead and turn to Kate and bring her in to talk about some of the year-end planning considerations-- tax planning, estate planning, charitable contributions, and investments. Kate, you have a full plate, and we look forward to hearing what you have to share with us today. 
KATE PHELAN: Thanks a lot, Bill, and hi, everyone. It's wonderful to be here today. Like Bill mentioned, we're going to talk about some year-end tax-planning considerations. 
I'm going to start with what I would characterize as a tried-and-true list. These are things that you should be thinking about year in and year out. Then we'll move to some considerations that are particularly relevant this year as we contemplate some of the changes that Kevin discussed as well as the low interest rate environment. 
So let's start with that perennial list of things to do, starting with checking your paycheck withholdings. You want to make sure that you are withholding the right amount. This is something that, in my view, is really a matter of preference. If you take too few allowances, you're going to end up having a refund. If you have too many, on the other hand, you'll end up with taxes due come April. Again, that's really just a matter of preference. 
The IRS does provide an online calculator, and you can use that tool to tinker and make sure that you're taking the amount of allowances that make sense for your circumstances. And keep in mind that if you do determine that you need to make some adjustments, you'll need to file a new W-4 with your employer. 
OK, these next two deal with retirement accounts. So we're going to move from one end of the continuum, folks who are still putting money in those accounts, and then we're going to move to the other end, folks who are taking money out of them. So item 2, maximize your retirement account contributions. It's a great idea to try and do this. 
Tax-advantaged retirement accounts are a really wonderful tool. They're funded with pretax dollars, and then they grow tax free until you take the money out. So the opportunity to enjoy this kind of compounded growth is really a unique investment in your future so that you have the kind of cash flow that you're going to need in your future golden years when you retire. 
All of that said, of course, there are limitations to how much you can put in these accounts. For 2021, the limit is $19,500 unless you're over 50, in which case you can contribute as much as $26,000. The IRS gives you a little bit of extra contributions in your later earning years. For a traditional IRA, those limits are $6,000 and $7,000 respectively, again, looking at age 50 at the litmus. 
Now, if your cash flow is such that you can't maximize out your retirement accounts, of course, that's OK. I would recommend, however, that you do your best to contribute at least enough to receive the match that your employer is willing to give. If you don't do that, in a lot of ways, you're really just leaving compensation on the table. 
OK, like I said, moving to the other end of the continuum, folks who need to take money out of these accounts-- for those of you who are age 72 or older, you will need to take what is called a required minimum distribution. This is an amount that the IRS requires that you take out of your retirement accounts every year. It's calculated on your age. It's calculated on your life expectancy, and it's based on the account value at the beginning of the year. 
So this is, as I mentioned, when you take money out of your retirement accounts, taxable income-- kind of a bummer. But if you fail to take your RMDs, the IRS is going to hit you with a 50% excise tax on the amount that you should have taken, so you really want to make sure that you stay on top of getting these RMDs out of your account when you hit age 72. Your first withdrawal needs to be made April 1 after you turn 72, and then after that, it's on an annual basis before December 31. For those of you who don't need that cash flow out of your IRAs or maybe you don't want to trigger additional taxable income, you may want to consider making a qualified charitable distribution directly to a public charity. And I'm going to get into the details around that in a little bit when we talk about charitable planning, so keep that in mind if that piques your interest. 
OK, moving now from your retirement accounts to a traditional investment account, which is, of course, a taxable portfolio, the first thing we're going to talk about here is harvesting investment losses. So nobody worry. I'm not here with any farming advice, although I'm sure my grandfather would be really pleased if I was. Harvesting is a technique where you intentionally trigger capital losses, and then you use these losses to offset realized gains in your portfolio. Ultimately, you reduce the amount of capital gains that you have and the corresponding capital gains' tax due, so this can be a really powerful strategy to use in your portfolio. 
If you have a year where your losses exceed your gains, you can use $3,000 or up to of your losses to offset other income, or you can carry the losses forward. So as I mentioned, it's pretty powerful. It also requires a significant amount of due diligence, though. 
It requires that you are, of course, tracking those losses throughout your portfolios, and it really requires that you're tracking market movements, so something you need to stay on top of. It can be done throughout the year, although I really recommend looking at it around this time as you're contemplating the year end to make sure you've really maximized that strategy. This is something that I would definitely consider talking about with a financial professional as well just to make sure that you're really maximizing kind of the ins and outs of that strategy. 
OK, the next one-- bunching. There's a lot of fun terms in tax planning. I don't know why everyone says it's such a dry topic. Bunching has to do with your itemized deductions. So there are certain expenses that can become an itemized deduction on your taxes. These include things like medical expenses, charitable contributions, certain taxes, qualified mortgage interest that you paid, et cetera. 
However, these expenses can only be an appropriate itemized deduction if they reach a certain threshold, which is generally a percentage of your adjusted gross income. So for example, let's say we look at medical expenses. In order for medical expenses to be appropriately itemized deductions on your taxes, those expenses have to be 7 and 1/2% of your AGI, your Adjusted Gross Income. 
Let's say that this year your expenses are going to be about 5% of your AGI. To the extent that it is practical or appropriate or, in this case, safe to do so, you may consider delaying certain of those expenses until next year so that you can increase the amount of expenses you have next year, hopefully getting you closer to that 7 and 1/2% threshold of your AGI. So this is something that, again, you can tinker with. It's not always going to make sense but can have some power to say, instead of spreading expenses over two years, I'm going to bunch them into just one year. 
OK, let's see. What is next? Finally, let's talk about your FSA accounts. Your FSA account is essentially a bank account that is earmarked for health care expenses. 
It's funded with pre-tax dollars, so it can be very advantageous in that regard. It reduces your taxable income, and then it's earmarked for medical expenses. Unfortunately, you pay taxes on any of the funds that are still in the account on 12/31, so you want to make sure that you use these up before they become taxable and you potentially lose them at the end of the year. So you want to schedule any last-minute checkups, eye exams. You want to fill prescriptions for you and your family and consider making some purchases for things that are qualified, like contact lenses and bandages. 
OK, if I could have the next slide, please. Great, thank you. All right, preparing for the potential tax law changes-- I have a feeling this is probably why most people are here today. It certainly has taken a lot of my time lately, talking about speculating, planning for what may or may not happen out of Washington DC this year. 
As we've mentioned, as you've probably garnered from the news and from Kevin's conversation earlier, this is a pretty unique tax year. We don't necessarily know yet what is going to happen, but we've got a reasonable amount of confidence that something is going to happen. And for certain people, it could have a materially negative impact on their tax situation, so before we come to the end of the year, we're probably going to want to implement certain strategies. 
I do want to just take a pause here and remind folks on the line that this is a pretty personal topic. This really depends on what your own circumstances look like. It really depends on what your comfort level is. 
So as we talk through some of these ideas, keep in mind that they're not right for everybody, and for some people, they're not even relevant. So this is something where you're really going to want to talk with a financial professional, talk with an estate-planning attorney, and make sure that your considerations are being met. Again, this is not one size fits all. This is just kind of a broad-strokes review of the things that we're thinking about right now as we face the end of the year. 
So let's start with leveraging your annual exemption and using up your lifetime exemptions. So the gift and estate tax or transfer tax system has two parts to it. The first is the annual exclusion amount, which is $15,000 a year. You can give $15,000 a year to every person in Los Angeles if you wanted to, and there would be no tax implications. That's an annual exclusion. I recommend that people who want to reduce their estate and be making gifts to family really make sure that they're taking advantage of that. 
Right now, we also have the highest lifetime exemption rate in history, but it's set to sunset. So even if nothing happens in Washington, which I think we all find to be unlikely, there will be a reduction in the estate tax exemption. So right now, you have a bit of a bonus exemption, and we're recommending that people take steps in order to leverage it. This includes things like outright gifts to family or loved ones, and it also includes moving assets to an irrevocable trust. 
There's a variety of trusts out there, things like the spousal lifetime access trust, qualified personal residence trust. The amount of acronyms in estate planning is really a little bit mind-bending, so let's not get too far into those. But just keep in mind that it's something that should probably be on your radar if you're thinking that you either have a taxable estate now or may have a taxable estate when that exemption comes down from $11.7 million to probably closer to $5 per taxpayer. 
Next, we want to leverage the low interest rate environment. This is something that we've mentioned a couple of times on this call, and I think we think a lot of times about low interest rates really being about our mortgages and things that our private bankers are thinking about. But in fact, a lot of estate-planning techniques are premised on introducing a transaction that, instead of being characterized as a gift, is characterized as a sale or a lending tax transaction. So naturally, these types of transactions are going to make a lot more sense and have a lot more value to them in a low interest rate environment. 
So when I say transactions, I'm thinking about things like installment sales to an intentionally defective grantor trust, a low interest rate loan to family members, grantor-retained annuity trust, charitable lead annuity trust, things like that. Now, it's beyond the scope of our conversation today to get into the technicalities of some of those techniques, but it's important to keep in mind that concept of low interest rate also leads to a really advantageous estate-planning environment, which is really great for us right now as we're also thinking about a reduced exemption amount. So the stars are kind of aligning in that regard. 
Next, thinking about income tax, you're going to want to accelerate income and defer deduction, again, to the extent that this is appropriate or possible for you. As Kevin mentioned earlier, we're looking at that largest marginal tax rate probably going up, which means that to the extent that you can take income this year at a lower rate, you're going to want to consider doing so, and you're going to want to consider deferring any deductions that you can into next year when you'll need them a little bit more if you're able to do that. So that's really an income tax planning. It's not all about the transfer tax. You want to make sure that you're really taking care of both sides of the equation there. 
And then finally, leverage the current capital gains rate. Kevin talked about this as well. This is one that I feel reasonably confident may come to pass, and that's the notion that, right now, capital gains are subject to a more advantageous 20% at the top and then an additional 3.8% for earners who are making more than $200,000 or $250,000 as a married couple. So that's really advantageous right now. 
But what is on the table is that the capital gains rate would be changed so that it is the top marginal rate of 39.6% in addition to that 3.8%. So that's a really material change. So for those of you who have appreciated assets that you're thinking about selling, you may want to take steps to sell those assets now while the capital gains rates are still relatively low, considering that they may as much as double by the end of the year. OK, shall we move to some charitable planning? 
BILL NORTHEY: Yeah, yeah, and I think that's a good idea, Kate. And just a reminder to our audience that this is wonderful information is that here at U.S. Bank Wealth Management, we're not tax advisors, but we do work closely with your tax advisors and certainly encourage you to include them in your conversations as you're getting to year end here. So yes, let's move on to some of the charitable giving strategies that might help as we approach year end, Kate. 
KATE PHELAN: Great, and this is an area that's particularly near and dear to my heart. And I think that this time of year, a lot of people start to feel more charitable. We're heading into the holidays, and I think we all know that being charitable is not only good for our communities. 
It can also be really good for your bottom line when it comes to taxes. However, I think it's critical that we keep in mind that not all charitable strategies are built the same, and there are different techniques that you may want to consider. This is not necessarily exhaustive, but just some things to pique people's interest with regard to charitable giving. 
So let's start with bunching. I talked about this concept earlier. I think it's particularly relevant when it comes to charitable giving. If you know that you're going to make a large gift to an organization or you're going to gift to them year in and year out, there's a lot of validity to saying, I'm going to make one larger gift in one year so that I can get my charitable deductions up to a point where I can itemize it as opposed to the same amount of money across two years. 
Next, using a donor-advised fund-- a donor-advised fund is a great vehicle. For those of you who have questions about it, I would definitely advise that you call your advisor about them. They are really wonderful. They are particularly great for accumulating assets so that you can essentially save up for a large gift, so if you know that you want to make a large one-time gift to a charity, you can use the donor-advised fund to accumulate the funds. The funds in a donor advised fund are also invested, so they are growing, thus increasing the amount of assets that you have available to give out to charities at the time that you want. 
Next, I did mention earlier the notion of a qualified charitable distribution. This is where you make a distribution directly from your IRA to a public charity, and when you do that, it's limited to $100,000 a year. But when you do that, you avoid the tax in having taken the money out of your IRA. Now, you don't get the corresponding charitable deduction, but this can be a nice technique for making a charitable contribution and avoiding that increased taxable income. 
The next technique to talk about is giving long-term capital gains assets. I think a lot of times, we talk about donating cash to charities, writing a check to them, but the concept of giving an appreciated asset to charity is really wonderful for you as a taxpayer. You avoid the capital gain on the transfer, and you get the charitable deduction for the fair market value of the asset that you contribute to them. So this, to me, is a great technique that I think sometimes people forget about. 
The next technique is really just kind of dialing that concept up. It's this notion of charitable swapping or charitable rebalancing. You do the whole concept I just described where you contribute assets to the charity. And then you go back, and you buy the exact same assets, so in this case, a block of stock. You go back, and you buy that exact same block of stock and start all over again with a higher basis. So for people who are both charitably inclined and are looking to mitigate some capital gains, these can be really great techniques. 
BILL NORTHEY: Great, thank you, Kate. And we've offered up a tremendous number of things to talk about here today, all of which importantly ties back to having a comprehensive financial plan. And we know that there are a lot of moving parts in everyone's financial life, and getting them to fit together in a way that makes them all move forward towards goals that are important to each of our clients is incredibly critical in the way that you develop those plans. And your tips and tricks here are something that people should certainly consider as we get towards year end. 
So as we get to the end of our time here today, I did want to share a number of final resources and steps that you can take if you're interested in learning more about our approach to wealth management or some of the topics we shared today. So keeping track of your financial picture is incredibly important as we reference, but you can do that in one safe, secure location. So if you're an existing client of U.S. Bank Wealth Management, this is a snapshot of some of the online planning tools and portal that you have available to look into all of your accounts and actually look at your financial plan that you've developed with your advisor itself. 
The online planning tool is also a great way to look at testing things like what-if scenarios, factors outside of your control, such as a potential downturn in the market or cuts to social security. Importantly, there's a confidence meter, and this is something that we hear from our clients that they really enjoy the opportunity to look at to say, how close am I to meeting where I need to be today and importantly where I need to be into the future? So it helps you focus on the things that you can adjust to make sure that you have the confidence to move through your financial plan. 
So if you're an existing client of U.S. Bank Wealth Management, don't hesitate to reach out to your Wealth Management team member with any questions. Importantly, if you're not a Wealth Management client but you're interested in knowing how to apply more of the insights that we've talked about today to your personal financial situation or just want a second opinion on your existing financial plan, we would invite you to connect with a member of our Wealth Management team, and you can see a number of ways to do that up on your screen. You can call the number that's listed under item 1, 844-233-5836. 
You can go to our website, usbank.com/advisor, to find a banker or advisor closest to you. Or if you would like to have someone contact you, I hope everyone was following the instructions at the outset. There is a Contact Me tab in the panel down below at the bottom of your screen, and if you fill out that Contact Me tab, we'll have a team member reach out to you directly. 
So finally, we'll be sending out a replay of this webinar very soon, and you can see the link posted at the bottom of this slide. It'll be on our website. And this is the second of our three-part Power Planning Webinar Series. So I alluded to the fact that we're going to have another coming up in November, and I'll be again joined by Kevin MacMillan as well as our Chief Investment Officer Eric Freedman on how to proactively prepare your finances as well as your investment portfolio based on the upcoming legislative changes and the current state of the market and the economy. So please be on the lookout for that. We look forward to having you join us again. 
So finally, let me thank my guests, Kevin MacMillan, Kate Phelan, for your wonderful insights here today. It's always great to get this group together and be able to share some of the thoughts that are coming out of U.S. Bank Wealth Management with our clients and guests. So thank you to both of our panelists today, and thank you most importantly to our audience for sharing your valuable time with us for this discussion today. We wish you a wonderful, healthy, and happy Wednesday, and we'll look forward to seeing you again in November. Bye-bye.