Certifying the Plan as Acceptable (CPA) … The Role of Accountants

In navigating the last lap of the journey to a completed gift, the accountant looms prominently. Long regarded as the trusted advisor, the accountant, especially one with a financial planning practice, often has the entire picture of the donor’s cash flow and assets. The accountant often answers one or more of the following questions: Should? When? How? Which? And what if?

Should the gift be made? If the potential supporter has a good handle on their assets and income, their accountant is merely confirming the obvious capability. But the accountant’s role is to raise concern if a gift will disrupt future plans, cash flows or the margin of safety in maintaining the desired lifestyle.

When can the gift be made? Because the Tax Cuts and Jobs Act of 2017 dramatically expanded the standard deduction, more donors are considering the bunching technique in order to secure the tax benefit of charitable giving. Charities may need to wait longer as the donor makes, in effect, a balloon “pledge” payment.

How can the gift be made? Because the benefits from charitable giving are less widely available, donor advised funds will become an increasingly considered source of giving. Those trying to improve their cash flow will weigh other options, such as life-income gifts through annuities and trusts.

Which asset(s) should be given? Often in concert with a financial advisor, a donor might decide to give publicly traded securities with the most appreciation and perhaps diminished prospects for future at the same rate of growth. When more unconventional assets are being evaluated, the accountant’s analysis will be sought.

What Ifs … what can go wrong? In the case of life-income gifts, questions of exposure to inflation, sharing in market fluctuations and risk of nonpayment are predominantly featured in conversations. Additionally, for both life-income and outright gifts, the calculation of any carryforward and the likelihood of all of it being used over the five-year carryforward period must be thought through.

By Professor Chris Woehrle, Chair & Professor of Tax & Estate Planning Department, College for Financial Planning, Centennial, Colorado

 

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