Tips to Get the Most out of Charitable Giving this Holiday Season

“It is perhaps a bitter irony of economic downturns that charities can fall on hard times when their missions are most important,” said Andy Oakes, financial planner at LeConte Wealth Management.  “Unfortunately, it appears that charitable donations are projected to be down this year.”


LeConte Wealth Management suggests donors who are motivated and financially able to be charitable this year, should add a “charitable checklist” to the year-end tax plan to make sure that the charitable donation does the most good for the charity and for the donor’s taxes.  These tips for a charitable checklist include :


  • Know your charity. Make sure that the causes you support are accountable in how they pursue their mission.  You might ask what percentage of donations goes toward administrative expenses.  Any rate beyond 20 percent may indicate a lack of fiscal discipline.  Verify their status as a “qualified” charitable organization, which can be denoted by a 501(c)3 designation.  This can make a difference in how much you can ultimately deduct for tax purposes.


  • Be a “deliberate” donor. Maximizing tax benefits takes careful consideration in how and what you donate.  For example, rather than simply writing a substantial check, you could donate highly appreciated stock, which might be deductible at the fair market value of the investment and avoid capital gains taxation.  Some arrangements like a charitable remainder trust allow you to benefit from an income stream generated by an asset that will ultimately go to charity.  As with other financial planning considerations, charitable donations should be approached holistically in order to ensure that they properly coordinate with your overall financial picture and optimize any applicable tax benefits.


  • Put your accountant on your Christmas card list. Most of us do not think of our tax advisers until March or April, but by then, it can be too late to meaningfully take advantage of tax saving strategies.  Before the end of the year, ask your accountant to help you construct a projection of your tax liabilities along with some advice about year-end planning to reduce taxes, increase deductions, etc.  You also should verify how your charitable donations will be treated for tax purposes to determine 1) how much is deductible, 2) what documentation of the gift the IRS will require, and 3) from where the gift should come within your financial resources.


“At a time of year that promotes reflection on the blessings we have and charity for those who have not, be sure that your gifts don’t leave you owing more than you should to your least favorite charity, the IRS,” said Oakes.


Adjusting Your Plans

If the future was certain, life would be boring. Whether it’s the sudden departure of a controversial college football coach or an early snowfall in the Smoky Mountains, unexpected moments make each day worth living. While we enjoy many of these unexpected blessings each day, we also have our share of undesirable circumstances that cannot be ignored. They push us into decision- making time. 

How do you handle and adapt to the financial and economic surprises that arise? Some investors keep their unopened account statements in a drawer and only give them a passing glance a few times a year. Other investors install finance applications on their smart phones to stay plugged in 24/7. When uncertainty strikes, many investors overreact to the greed and fear swirling in their heads.  How do you filter through the near constant financial chatter on cable and the web to discern what is important and what isn’t? Do you look for the proper response to these situations with calm and reason or do you ignore the problems and hope for the best outcome?

In the book, 7 Habits of Highly Effective People, author Stephen Covey categorizes the events of life as four related quadrants. He first categorizes events as either urgent or not urgent. Then, he further categorizes them as either important or not important. If your doorbell rings, that would be something urgent because it requires your immediate attention, but depending on who is at the door, it may or may not be important. At LeConte Wealth Management, we incorporate Dr. Covey’s time management concepts into our practice, because they help us allocate our time and resources productively. We adapted our work routines around Dr Covey’s structure and committed to spend most of our time on important, not- urgent activities.

Having a prudent system in place to manage your time is the first step in making good decisions. If investors are forced into making a quick decision, they are prone to let their emotions exert undue influence over their decision. Investors who have the freedom to ponder their choices and potential outcomes have a better chance to keep their emotions in check. Having time and taking time to process decisions is critically important to your financial future. Time gives you an opportunity to develop clarity and to assess the real impact that your decision might have on your everyday life. Time gives you an opportunity to pursue an intelligent answer even if you have to look elsewhere for the intelligence.

 If you follow Dr. Coveys time management approach, you should be able to free up time by minimizing the urgent and non-important activities that waste time. Redirect that free time to focus on the important/not-urgent questions in your financial future. Let’s look at a couple of examples.


LeConte Wealth Management Recognized with Chamber Business Excellence Award

LeConte Wealth Management accepted a business excellence award from the Blount County Chamber of Commerce at a recent awards ceremony. LeConte Wealth Management was nominated by other chamber members and won an award in the “5 Under 5” business category.

Hoy Grimm and Kevin Painter, AIF®, co-founders and managing partners, accepted the award on behalf of the company. “Our clients know and appreciate that our company prides itself on honesty, integrity and professionalism,” said Grimm. “It was great to be recognized by the local business community and the chamber for our business practices.”

The criteria for the “5 Under 5” award included that the business must:

  • Have five employees or less
  • Demonstrate exceptional customer service practices
  • Exhibit a concern for the community
  • Be clean and attractive in appearance
  • Have a knowledge of products and services
  • Display professionalism in all transactions
  • Demonstrate honesty and integrity in their business practices

 In addition to Grimm and Painter, LeConte Wealth Management employees include Andy Oakes, director of financial planning as well as Donna Bowman, office manager and client services.

The Business Excellence award is not indicative of account performance and does not guarantee any future experience.


One Size Does Not Fit All in 2011 Tax Season

An unfortunate casualty of this year’s mid-term elections is the uncertainty regarding what awaits tax payers in the coming year.

You may not have heard of Dan Duncan, but rest assured the IRS has.  Duncan was  No. 30 on the Forbes Fortune 400 list in 2009 with an estimated net worth of $8 billion. On March 28, 2010, Duncan died.  With the estate tax on hiatus for 2010, you can imagine the broad smiles spread across the faces of his heirs after their tears, given that much of what Duncan built may not end up being lost to estate taxes.  But, even if you are not a billionaire, there is much to lament in this uncertainty.

First, let’s be clear on what actually is happening with the estate tax.  Until 2009, the value of one’s estate protected from federal estate taxation had been rising, reaching $3.5 million last year.  With proper planning, that meant an individual potentially could shield up to $3.5 million with married couples able to protect up to $7 million.  The same legislation that established these limits abolished them altogether for tax year 2010, but allowed them to revert to $1 million in 2011.

So who does this really affect?  Generally (I say generally, because personal tax situations are very unique), any individual with a net worth of greater than $1 million or married couples with net worth exceeding $2 million, could be affected.  But, what does this mean for your situation, and what, if anything, should you do before the end of the year?

Gifting may allow you to reduce the value of your eventual estate by transferring assets to heirs now.  Keep in mind that gift taxes may apply to any gift of more than $13,000 in value.  But, consider if a married couple wanted to gift to one of the children who was married, each spouse might give $13,000 to the child and their spouse for a total of $52,000.  For those with substantially larger estates, they might consider gifting this year beyond those limits, creating a gift tax liability taxed at 35 percent if they believe the estate tax will be reinstated with rates up to 55 percent.


Beware of the Wolf in Sheep’s Clothing

Are you confused about what kind of advice you’re getting from your insurance agent or investment adviser? A recent survey by the Consumer Federation of America and AARP revealed that investors are confused about who is held to a fiduciary standard, meaning financial professionals are required to put their client’s best interest ahead of their own. Three out of five mistakenly think that insurance agents have a fiduciary duty to their clients, and two out of three incorrectly think that stockbrokers are held to that same fiduciary standard. At the same time, 91 percent think that a stockbroker and a fiduciary adviser should have to follow the same investor protection rules. Ninety-six percent agree that the fiduciary requirement should extend to insurance agents. And, most importantly, 97 percent of those interviewed believe that a financial professional should not only put the client’s best interest before their own, they also should tell clients upfront about any fees, commissions or conflicts of interest that might influence their recommendation.

On July 21, 2010, Pres. Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law. This monumental piece of legislation will change the financial regulatory environment dramatically and affect almost every element of the U.S. financial system. This new law also charges the Securities and Exchange Commission to compile a report on creating a universal fiduciary standard for any broker, agent or adviser who gives investment advice.   A fiduciary standard for the financial industry would require financial salespeople to put their client’s interest ahead of their own.


Third Quarter Market Commentary

Equity markets finish third quarter strong

Equity markets reversed their August losses, moving sharply higher for September and for the quarter. The Dow Jones Industrial Average, posting its best September since 1939, was up 7.85 percent for the month and up 11.13 percent for the third quarter. The S&P 500 Index gained 8.92 percent in September and 11.29 percent over the quarter.

 The September gains moved both major U.S. indices back into the black for 2010, as the DJIA is up 5.57 percent and the S&P has gained 3.89 percent year-to-date. Markets reacted favorably to further speculation that the economy would not slide back into recession. Although recent economic data has been weak, the reduced threat of a double-dip recession put many market participants at ease.

 Overseas markets also rallied after the August slump, with most major markets again looking past lackluster economic data. The MSCI EAFE Index gained 9.80 percent for September and 16.48 percent for the quarter, as investors’ appetite for risk pushed markets higher. A taste for risk was particularly evident in the emerging markets, which were up 10.87 percent for the month and 17.16 percent for the quarter.

In the commodities space, investors continued to demonstrate an insatiable appetite for gold, based on concerns over currency devaluations and the potential threat of future inflation. In late September, gold closed above $1,300 an ounce for the first time ever, and investor interest went unabated. The spot price of gold, as indicated in Figure 1, has increased 18.91 percent year-to-date.


Figure 1. Gold Spot Price: April 2007–August 2010

Source: Bloomberg


Fixed income flows help support bond prices

Flows into fixed income continued at a record-setting rate throughout the third quarter, helping to support bond prices, while equity flows have been negative for six of the last nine months.

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