Dr. Jay Zigmont, CFP®: Welcome back to Childfree Life by Design. Today, we’re talking about tax planning and what it means for people who are building a Childfree life on their own terms. I’m Dr. Jay Zigmont here with Scott Barnes. In this episode, we tackle the most common tax questions we receive from Childfree clients and break down exactly why conventional tax advice fails for them. Most mainstream financial advice operates on autopilot, assuming you’re married with kids, saving for a 529 plan, and leaving an inheritance. But when you’re Childfree, running on a standard family advice can cost you a fortune. So we’re throwing that out. We’re gonna give you real intentional answers on how to design your own tax breaks from navigating pre-tax versus Roth 401K decisions to considering back-door Roth contributions, and a whole bunch of other things. I’m gonna promise, we’re not gonna put you to sleep with the tax rules. We’re gonna talk about how do you use it and make it work for you. So if you’ve ever wondered how to make taxes work for you, this conversation will give you the clarity and tools to make an intentional decisions that support the life you want.

Intro: From Childfree Insights, this is Childfree Life By Design, the go-to resource for building the Childfree life you want. Every episode gives you practical guidance, clear direction, and meaningful conversations to help you live intentionally and design a future on your terms. This podcast is for educational and entertainment purposes only. Please consult your advisor before implementing any ideas heard on this podcast.

Dr. Jay Zigmont, CFP®: Scott, before we dig in here, I gotta give a disclaimer a little bit. I don’t think you can talk about taxes without talking about politics because tax law is designed to encourage certain behaviors, and I don’t think people always catch that. So when people are like, Childfree people are taxed a whole lot more,” that’s ’cause we don’t get the child tax credit, the other things. And that’s intentional because they’re trying to encourage certain behaviors. Does that make any sense?

Scott Barnes, CFP®, TPCP®, CLTC: That’s 100% correct. And all of our tax system is [00:02:00] really based and functions in that way to really encourage people. It’s basically a pro-natalist type of thing. They want people to have children, and they encourage people to do that through those child tax credits, through head of household credits and different things like that. And it really changes the way everything looks from a tax perspective in this country.

Dr. Jay Zigmont, CFP®: I’ll start with an example. And I was gonna hold this to the end, but I’m gonna move it around for a reason. And by the way, we have a script on how we follow this, but when we start talking about taxes and politics and other, it can be very easy to get super dry on taxes and talk about that or super excited on the politics side, so I’m gonna try to balance the two. But let me talk about a great example, which is the classic American dream says you have to own a home. So there’s a lot of different tax laws around owning a home. Well, If you’re gonna rent, you don’t take advantage of those, but that may or may not be a good thing. And one of the big ones that I’m gonna start with for Childfree people is we’re not passing on money, so we’re not gonna get what’s called a step-up in basis. The game on real [00:03:00] estate is you hold the real estate forever, it goes up in value, and then when you die, your kids, which is technically us paid, might get it for free essentially. It resets it. Can you talk about that step-up in basis, Scott?

Scott Barnes, CFP®, TPCP®, CLTC: That is a big thing that happens, and it’s not just with property, it’s also with assets like mutual funds or stocks or bonds and different things like that. But essentially what happens is when somebody passes away, let’s say that the person bought their house back in 1980 for $50,000, but now they live in California, now the house is worth $2 million, because that’s the type of thing that’s happened over the past 40 years. When that person passes away at death, that value is now $2 million, their beneficiaries or heirs that would receive that property, they’ll get a full step-up in basis, meaning that their basis in the property is now $2 million. So if they sold it the day after that person passes away and they’ve received that asset, that $2 million they received is now completely tax-free. [00:04:00] If they sell it a year or two down the road and it’s gone up to say, $2.1 million, they’ll owe taxes on that $100,000. But it’s a big thing for anybody that owns property, for anybody that has stocks, bonds, mutual funds. Those are in brokerage accounts. IRAs are completely different. We’ll get into all that, too. But those are the big things that happen when you see people pass away and when they pass those assets down to the next generation.

Dr. Jay Zigmont, CFP®: At the federal level, the estate tax exemption’s about 15 million right now. So you can actually pass $15 million, get a step up in basis, so the person getting it gets $15 million 100% tax-free. I mean, that’s a huge number. People talk about inequalities in wealth and all that, and I’m like, there’s a whole can of worms there. But here’s what happens. When you see influencers talking about, “Oh, you should own real estate and rent it out and be a landlord,” they’re assuming they’re gonna pass on that money at the end and never have to pay taxes on it. You’ll see these things in commercial properties called 1031 [00:05:00] exchanges, like I take this property, I transfer it into this property, and it just keeps rolling and rolling and rolling, and then when I pass it on, the tax disappears. Well, as soon as that’s not the case, the math changes. What do you think, Scott?

Scott Barnes, CFP®, TPCP®, CLTC: It definitely changes when you’re no longer doing those 1031 rolls. And it becomes an avalanche. If you continue to do that over time and continue to roll over time, the amount of gains that you keep deferring just keep getting bigger and bigger. And if you ever do decide to cash out from rental properties or whatever investment properties, that’s gonna be a big tax bill that you’re gonna ultimately end up having to pay.

Dr. Jay Zigmont, CFP®: And that’s part of the reason why I tell Childfree people, “Don’t be landlords.” It just doesn’t work. By the way, it’s a lot more work than you think it is. It always is, even if you have a management company helping you. What we do though, and I’m using this as an example because what you’re gonna see is the tax rules change some of the financial planning and the life planning that we do. So somebody has a property, [00:06:00] and what happens in real estate, if you’re a landlord, it keeps depreciating. The price you paid for it effectively keeps going down, and you have to pay the difference. So what happens is you may have property that’s got a million dollars in appreciation. When you go to sell that, you’re gonna be paying capital gains tax and so a little bit more, plus estates. You’re paying 20%, maybe more depending on what it is, that day. That 1031 exchange allows you to kick the can down the road. If you’re trying to die with zero, that doesn’t work. What we do for Childfree people is say, “Okay, there’s alternative structures,” there’s a thing called a CRUT, a charitable remainder unit trust, where you can give the property to charity. They get the property at the end, essentially. You can then sell the property and diversify, and you get income coming off it for the rest of your life. It’s actually capital gains in most cases, but it’s a way to make this work, and you get the charitable bonus, and you get income for life, which actually matches the Childfree person’s life. It’s essentially a die with zero plan. You’re essentially making your own annuity [00:07:00] because you’ve got this income coming in and you’ve made a charitable deduction. And I bring this up as an example because when people think about taxes, they think about like, “How do I save taxes this year?” I’m trying to think about it and say, “How do you use it to get the life you want and get the most out of?”

Scott Barnes, CFP®, TPCP®, CLTC: I think that’s a great point. I mean, using the charitable remainder unitrust is a great way to turn it into that whole idea of dying with zero. If your goal is not to leave behind a bunch of assets, again, like rental properties or whatever that may be, and be able to use that money during your lifetime and benefit a charity, it’s a great solution for a lot of folks. We definitely see where this can fit for everybody, but it’s not going to be a fit for everybody. But it’s one of those things that when you’re looking at it, it’s another tool in the toolbox for Childfree people that steps outside of the norm of what we typically see. As you said, Jay, the fact that so many online influencers, TikTokers, all these folks are always talking about these passive income [00:08:00] streams using investment properties to do that, and they come out and say, “I have 50 investment properties.” And hey, that might work for some people, but if your life is not built around managing properties or dealing with that type of thing or wanting to deal with that type of thing, it might not be the right fit for you. So that’s why we say, “Hey, don’t use this as the go-to for generating these types of incomes if you’re really interested in that.” So it ends up being, like you said, way more hassle than it’s worth for most people.

Dr. Jay Zigmont, CFP®: What you’re gonna see is a common theme throughout this. We’re gonna talk about some tax opportunities, ways to save money. But again and again and again, we’re gonna say, if it doesn’t fit your life, don’t let the tax laws, determine what you should do. We’re gonna try to save as much money as we can. And by the way, when we’re talking about tax law rules, the general rule I follow is we pay IRS what’s owed. We don’t give them a tip. So there’s ways we can shift how we pay the money and when and what form. We’re always gonna pay. We’re not gonna talk about, how do you [00:09:00] offshore your money and do some sketchy things. My general rule is if you talk to a CPA or a tax professional and their firm’s named, like, Creative Tax Planning, Innovative Tax Planning, the answer’s no. We’re not gonna be creative or innovative. We’re just gonna try to pay as little as possible. And one of the things you’re gonna find as listeners is Scott and I may differ on some of the answers we’re gonna give here, and that’s okay, ’cause the answer is always, “It depends.” It depends on the client, it depends on the situation. So none of what we’re talking about should be taken as hard and fast rules. The one on real estate and landlord, it’s probably one of the hardest ones where I say, like, I don’t really see being a landlord unless it brings you joy somewhere else.” It’s just kind of the balancing act. And anyone that says that’s passive income, it’s not. It’s not passive. There’s work. So you’re gonna see us differ. That’s not because one of us is right or wrong. It’s just because it always depends. All right, Scott, so let’s talk about 401Ks and this pre-tax versus Roth. And I want to be clear here. We’re gonna [00:10:00] talk about 401K Roths. There’s always something clients get stuck on, which is, “I make too much money. I can’t put in a Roth.” Well, Roth 401Ks are not based on income, your employer’s giving you that option, and there’s not the same limits like there is for an IRA. It’s the 401K limits. But the question becomes, Scott, is the answer always to put in Roth or always to put in pre-tax?

Scott Barnes, CFP®, TPCP®, CLTC: As you said, Jay, and as certified financial planners that we are, it depends. But in general, what we can say is that if you are in a lower tax bracket, if your income is putting you into a tax bracket is that 10, 12%, or 22% tax bracket, oftentimes it makes sense to contribute into the Roth 401k version. As soon as you get into that 24% bracket, that’s the medium zone there, or if you’re in the 32, 35, or 37% bracket, it almost always makes more sense to go to pre-tax contributions at that point. And this is one way to look [00:11:00] at it, whether you choose Roth or pre-tax, you are gonna end up paying taxes at some time. Either you’re paying it upfront with the Roth or you’re paying it later on with the pre-tax. And the later on will potentially be a big number. And this is where we’ll probably have a little bit of disagreement, is that if you’re in the 24% tax bracket today, and when you retire, you’re in the 24% tax bracket, the amount of money, whether you did it pre-tax or you did it Roth, the ultimate end amount of money after you take the taxes out will end up being the exact same. If the tax rates are the same today and in the future, the amount of money that you have at the end is exactly the same. It just depends on when you’re paying those taxes. And the question is always, the way I look at it is, in your high earning years, you’re making big money or good money, you’re paying all that on earned income. The minute you retire, that earned income is gone. So if you were making $300,000, [00:12:00] the day you retire is now zero, and you’re gonna be taking distributions from assets like brokerage accounts, savings accounts, from IRAs and everything like that. So what tax bracket are you likely to be in when you retire? More than likely, because it’s not earned income, you will be in a lower tax bracket. And that’s the argument I make of saying that pay the tax now in the pre-tax, and then when you retire, you’re likely to be in a lower tax bracket. Will that change in the future? It certainly could. But we’ve also seen a situation where for the last 40 years, everybody’s been saying, “Income tax brackets are at their lowest they’ve ever been.” That OBBA thing that they just passed last year has extended the current tax brackets into permanence, which means that it’s gonna take somebody else to come in and then actually make Congress do something that will end up raising rates in the future. I don’t know what any of that’s going to be, but I still say because you don’t have earned income, you’re likely to be in a lower tax bracket when you retire and you start drawing out your assets.

Dr. Jay Zigmont, CFP®: [00:13:00] The truth is, neither of us know. I don’t know what tax rates are gonna be. I don’t know what you’re gonna be in. I think where I differ a little bit is if you have enough money that you can max out your 401K and then you have extra you’re gonna put in your taxable brokerage, I tend to go towards the Roth because it now is growing tax-free. You’re right on the math equation if it’s the same amount of money we’re putting in either way. Effectively, when you put it in Roth, you are prepaying the taxes, where in the traditional you’ve got a tax burden. So essentially, if you’re in the 24% bracket, you end up being able to put more money away to grow tax-free. It’s a little weird math, but just go with me for a second. It’s the question of do you have extra money that you’re also going to invest? So it does shift that. The other one I’m gonna challenge and this is a little spin, but just want you to walk it through, is it depends to me on which state you’re in. So let me use California and Tennessee. Why? ‘Cause I’m in Tennessee, and for some reason people go back and forth between those two [00:14:00] states. I’m in Tennessee, there’s zero income tax. I’m more likely to do Roth right now because if I move out of Tennessee, there are more states that have income tax than don’t. On the flip side, if I’m in California, I’m better off doing the pre-tax ’cause I’m gonna save there, and there’s probably most states are gonna be less tax when I take it out. And it may not sound like a lot, but from Tennessee to California, we’re talking about 10% difference or more. So I think the state matters, and it also matters if you have student loans. If you have student loans, that pre-tax is gonna bring down your taxable income, gonna have an income-driven repayment plan, but you have to know where you’re going. Now, one caveat, because a lot of our clients wanna move internationally. Some international countries, a lot of them actually, tax all of your retirement income the same. They don’t care if it’s pre-tax or Roth. So where you are today and where you are in the future, same with tax rates, physical location, is actually gonna determine this, [00:15:00] but do you have a clue where you’re gonna end up 10 years from now? I don’t know.

Scott Barnes, CFP®, TPCP®, CLTC: Without a doubt. It’s a difficult decision to know, and if you ever have any idea of potentially wanting to relocate abroad, that will be a huge factor in it because like you said, Jay, there’s really very few places that recognize the tax-free aspects of the Roth. There are some, but there are a lot of countries that do not. And as you know, Jay, one of the funniest things is that all these rules, especially for overseas stuff, were drafted with tax treaties that we put in place with these countries 40, 50, 60 years ago, and Roths weren’t a thing until the ’80s. So it’s one of those things that, again, they just don’t recognize it because they haven’t had a tax treaty update since they’ve put those in place.

Dr. Jay Zigmont, CFP®: There’s ways around it. So for example, if you’re leaving the country, you can pull everything out of your Roth and now it’s not retirement income, it’s now a brokerage. There’s games. And I’m gonna tell you, if you’re getting to that point, you’re working with a professional. You wanna work with a CFP® on your tax plan and work that through.

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Dr. Jay Zigmont, CFP®: So let’s keep going on Roth for a second. And you’re gonna see a lot of debates about taxable brokerages and 401s, traditional and Roth. And the reason we’re having that discussion is it changes the way you’re taxed, when you pay the tax, and how. I wanna give you one, Scott, it’s a client. And this client every year around November says to me, “Should I do a backdoor conversion or a Roth conversion?” By the way, they always mix up terms, backdoor Roth or Roth conversion. But this is the standard. They read an article that I should do more Roth. They’ve got a couple million dollars in their IRA, a traditional IRA, [00:17:00] and they’re like, “Should I convert that to Roth because I’m in the lower tax bracket,” ’cause I am, and then go. And every time I have the same conversation, because every year about November, there’s a Wall Street Journal article or something saying you should do Roth conversions now. And one of the things I’ve been having a discussion with them is, look, they’ve got a net worth, I don’t know, north of 10 million. I’m like, “The money you’re converting to Roth, you’re never actually gonna spend. So you’re spending money on taxes you’re never going to actually have to pay. You’re gonna give away your traditional IRA to charity.” But it’s really hard for people to understand that while it makes sense on paper that maybe I do this, it’s not really gonna work. How would you address that client who’s like, “The article says I should do this Roth conversion”?

Scott Barnes, CFP®, TPCP®, CLTC: In that situation, I mean, it is a conversation that needs to be had in the sense of, “Okay, here’s what this means to do this. These are the taxes that you will be paying, and when that’s converted to the Roth because you [00:18:00] have so much money, that’s money that essentially is going to be passed on to the charities.” The Roth, when, the charity receives that, well, it’s obviously tax-free. When the charity receives a pre-tax retirement account, it’s completely tax-free as well because it is a retirement account and they are a charity. But the charity’s the only time that IRAs or traditional IRAs or traditional 401s, pre-tax 401s do not receive any taxes. When you leave those to charities, they do not get taxed on that. So they’re really for them, like you said, there really isn’t much of a difference there. I think you could potentially still make an argument for it is if they do plan to leave money to someone, so instead of leaving it to a charity, if they are leaving it to somebody when it’s coming from the Roth is much more efficient than if they do it pre-tax. So that’s where, again, I would just have to find out exactly where that client is, if they are planning to leave money to anybody whether that’s a friend or family [00:19:00] member, whatever it may be and what that means. ‘Cause again, the Roth will be much more efficient for that client or that person when they receive it than a traditional IRA would be.

Dr. Jay Zigmont, CFP®: If you’re gonna inherit something from a family member, so you’re giving something to a family member, you want to inherit the Roth. But if I’m gonna give my Roth to my nephews, ’cause that’s who’s getting my leftover money, that means I want to pay out-of-pocket taxes today so they get less tax in the future. I’m like, I like them, but I’m not sure I like them enough to pay extra taxes.” That’s that balancing act. And I agree with you. When we meet with our clients’ parents, we will have discussions about which money do you give to who and how does that work and when. I mean, there’s a whole lot that goes into it if you’re trying to pass on money to the next generation. If you don’t, if you’re giving it to charity, no, it changes a whole bunch of rules. So let’s keep going on the Roth, and this one’s another one that it’s a little bit pet peeve of mine. So that same article that says you should do conversion to Roth says you should do backdoor Roths. And that’s why people always mix the terms up. So backdoor Roths, by [00:20:00] the way, just for everybody listening, means I make too much money to make a normal Roth contribution. I make a traditional contribution, and then later I roll it in my Roth. And by the way, the steps you take are really important. Technically, the backdoor Roth itself doesn’t exist. It’s a name for a process that we follow. But here’s the thing, and Scott’s gonna go to the tax actual argument in a minute. My argument is every client I’ve seen do a backdoor Roth on their own has screwed it up somehow. They’ve missed the step or a piece of paper or, they didn’t calculate this. And I’m like, okay, for a $7,000, for that much paperwork and confusion, I’m not even worried about the tax benefits. It’s, you’re going to mess up the paperwork somewhere, so let’s not do that. Now, technically it could be a good thing to do, but it’s just so easy to mess up. So Scott, talk to me about should I put it in a brokerage, backdoor Roth, the math of this.

Scott Barnes, CFP®, TPCP®, CLTC: [00:21:00] When I’m talking about that, should I do a backdoor Roth or should I do brokerage? Ideally, you do both, but let’s talk about how that works. And like you said, the amount of times that Jay mentioned that he sees people that mess up the backdoor Roth is very high. I’m right there with him. I have seen many people screw this up but I do have some clients that have actually done it correctly. It’s just very specific in how you have to do that correctly, because what you’re doing, again, as Jay said, it’s called a backdoor Roth, but you’re making a non-deductible contribution to a traditional IRA. And then shortly after you make that non-deductible contribution, you then turn that back over and convert it into a Roth. And the goal there is this year, $7,500 is the amount of money that you could put into a non-deductible contribution toward a traditional IRA, and that’s the same amount that could go into a Roth IRA if you qualify. But you take that 7,500 and as soon as possible, you move that over and put that into the [00:22:00] Roth account. So if there’s any gain that happens in there, like if there’s any interest that’s earned, so you have 10 or $15 worth of interest, you go ahead and convert all of that. There will be a small, tiny tax and small, tiny penalty, but then you have to make sure that you file a specific form. It’s form 8606, and if you do not file that form, all of this goes out the window. And that’s where we usually see people screw up, is they don’t file the form or they let money sit in the non-deductible traditional IRA for multiple years and haven’t done the backdoor Roth conversions over that time, and that’s where they screw up. So oftentimes it will make more sense for a lot of people, if they wanna make their lives easy, maybe look at doing a brokerage account instead. Between a couple, so a married couple could only do $15,000 total in 2026 for this. If $15,000 is all you want to put into a brokerage account, that’s fine, but you’re not limited on a brokerage account. If you have an extra [00:23:00] $50,000 that you could contribute to a brokerage account, you can put that in there. There’s no limit to amounts that you can put in there. And ultimately, those monies that will come out will be taxed at long-term or short-term capital gains rates that come out of the brokerage account. And the goal will be to hopefully get it into long-term capital gains treatment and potentially even be able to get that money out with potentially no tax if we’re lucky at all. But there are a lot of neat ways to do this, but many times the backdoor Roth does end up not being the way to move forward in many cases.

Dr. Jay Zigmont, CFP®: It’s just gotta be done right. That’s the reality. People are playing games with their taxes, and up until last year I had a lot of folks try to pay as little tax as possible so they got the healthcare subsidy. And when I say up to last year, it’s because this year once you’re over the cliff, you lost it, and most people just aren’t gonna get a subsidy. And one of the things that I’ve been trying to explain to people, and maybe you can help with, is paying less taxes this year down to [00:24:00] zero, which you actually can, is not always the best answer. And the reason I say that is if I have a year where I have no income maybe I would take a sabbatical, I’m doing my thing, that’s years I wanna do Roth conversions or we could do tax gain harvesting. There’s some other tricks we can do where I kind of want you to always be paying taxes, which sounds weird. And it’s also when sometimes I’ve gotten to battles with CPAs ’cause they’re like, “Well, if we do this move, it’s gonna lower their taxes.” And I’m like, “you’re correct, it will, but it’s gonna hurt them in future years.” So how do you find that balance, Scott?

Scott Barnes, CFP®, TPCP®, CLTC: It’s interesting trying to find that balance. Again, you can potentially get away with paying zero in taxes, for the purposes of qualifying for the current ACA subsidies, which is 400% of federal poverty level, you do have to have some income that is taxed. So it really is a balance of making sure if you can stay within those limits, great, but after the changes last year, it has become much more difficult to stay in those ranges to make sure that you can [00:25:00] qualify for the subsidies that are available. And those are really only gonna be available to people that have retired. I mean, if you are a working person, there’s almost no chance that you will be able to qualify for those ACA subsidies at this point. You have to have a very low income either if you’re a solo person or if you’re in a couple, you have to have very low incomes in order to even qualify. It is a balancing act. I would say that it’s another one where it depends, but you definitely want to be aware of that and make sure that if you are trying to stay within those limits, especially if you retire early, if you retire at 50, you’re gonna be paying health insurance premiums for a good 15 years because you don’t qualify for Medicare till 65. So if you can qualify for those subsidies, then we’re gonna be working to help try to figure out a way to make sure that you qualify and that you do have some income you’re paying taxes on in order to even qualify. ‘Cause if you have no taxes, no income that’s being taxed, then you’re not even gonna qualify for the subsidies.

Dr. Jay Zigmont, CFP®: And doing it to stay under the [00:26:00] subsidy limit is gonna hurt you in other years. So you might save some money on healthcare this time, but the future years. So I had a client I did this with, and they’re very smart. They had worked through all of it, and they had paid just enough to get the subsidy each year. And I’m like, “Great. You know this giant gain you have over here in taxes?” He had a million dollars gain in his brokerage. I’m like, “You could’ve actually cashed out some of that and paid zero taxes.” There’s actually a capital gains bracket for zero. It’s one of the few times you can pay zero. And he was like, “You’re joking, right?” And I’m like, “Nope. You could’ve just sold that stock and put it on a piece of paper and never paid taxes.” He’s like, “Well, why didn’t I do that?” And I’m like, “I don’t know.” “Don’t ask me.” But people don’t understand these things. And when we’re doing tax planning, we’re looking at saying, “How do we keep the bill the least possible over time for you?” So that’s that balancing. All right. So let’s shift for a second, and let’s go [00:27:00] to charities, and I want to do giving. So a lot of our Childfree clients are charitably minded. And so you’ve made a bunch of income this year for whatever reason. I already talked about we could do this crut thing that gives to charities for properties. But one of the big tools we use frequently is called a DAF. It’s a donor-advised fund. We’ll talk about the specifics on giving in a second. But I want to give a little caveat on this, and unfortunately going to get political again. So some of the old-fashioned DAF companies Fidelity, Schwab’s, a few others, are starting to limit who the money could go to as far as charities. We saw this with reproductive rights for a minute. Now the Southern Poverty Law Center’s another one they’re not giving money to. So what a DAF does is you give money to an organization. It’s actually a charity. They invest it, and then you can give money out afterwards, but you have to be sure that they’re gonna give to the places you want to give to. It’s why I tend to recommend Daffy as one of those examples. But it’s a great tool to take highly appreciated stock and other things and then get a tax break. So how do you [00:28:00] use DAFs with your clients, Scott?

Scott Barnes, CFP®, TPCP®, CLTC: It’s one of those situations where when we’re looking at donor-advised funds, it’s for people that, again, want to be able to make a contribution and then potentially spread it among multiple charities, and also be able to stack their contributions. So what I mean by that is, let’s say that you give a couple thousand dollars a year to your favorite charity. Well, instead of giving that just each year, you maybe say, “Okay, I’m gonna pre-fund this for the next five years, so I’m gonna put $10,000 into this donor-advised fund.” And then that way you can make that contribution the year that happens, you get a deduction for that $10,000. But layering those and lumping or turning those annual contributions into one bigger contribution can really provide tax benefits because for most people, if you’re only making $1,000 or $2,000 a year contribution to charities, that’s really not gonna do anything for your taxes. There is a new law that went into [00:29:00] place for this year saying that for a married couple, you can have up to $2,000. For a single person, it’s $1,000 that will automatically, it doesn’t matter if you itemize your deductions or anything like that, that you’ll be able to get that as a charitable deduction on your tax return. If you are doing bigger contributions, so let’s say it’s $4,000, if you don’t stack those, potentially if you are not already itemizing, you will not get that deduction, and that’s what that stacking of the contributions really does to really benefit you for that donor-advised fund.

Dr. Jay Zigmont, CFP®: And it’s about being intentional. The bonus with a donor-advised fund is you can give small checks, big checks, whatever you want over time, but it allows you to pick which years you’re getting the tax benefit. And that’s that balancing act. What I love doing is, you’re in your last year before you retire, you got a big income bonus year, that year we’re definitely gonna give to a DAF because I’m gonna see the benefits. There’s games to play [00:30:00] there. All right, Scott, we spent the last half an hour talking about taxes, and I’m sure people’s eyes are rolling by now. But if they could take away only one thing from this from you, what would it be?

Scott Barnes, CFP®, TPCP®, CLTC: When we’re looking at all this stuff is, I hate to say it in many regards, a lot of this, especially if you have a high income or you have a lot of complications in your life as far as incomes and different accounts and different stuff like that, is to work with a certified financial planner professional and a CPA. A lot of this stuff takes some coordination, and yes, you can do some of this on your own, but you need to be very diligent from this when you’re doing that because there are too many ways to screw this up, and working with somebody that does this on a daily basis, working with clients whether that be your CPA or a CFP® professional, that’s really gonna make a big difference in trying to help you lower your overall tax burden over your lifetime.

Dr. Jay Zigmont, CFP®: I’m gonna second that. There’s a lot of things in here. And [00:31:00] by the way, we’re giving a snapshot of today in 2026 rules, and next month it might change. I mean, it’s literally that fast. And I give tax planning advice to a lot of folks and work that through, and I still will reach out to Scott. I’m like, “Scott, what do you think about this?” And he’ll go, “Ah.” And then every once in a while he’ll go, “Let’s call our friendly CPA. What do you think about this?” And I’m amazed. One of the things that I did not understand before I became a financial planner is how much gray there is in tax planning and tax rules and tax structures. It’s hard. You’re like, “Well, this gets you a benefit now, this gets a benefit later. Wait.” And I had a CPA that we both were trying to do the right thing by the client, and we had a half-an-hour fight about what to do. And by the way, we were both right. He was trying to do it for this year. I was trying to do it for future years. And the answer is, I finally said to the client, I’m like, “Pick one of us. I don’t care which one of us you go with, you have to listen to one of us.” And that’s just the nature of it. My general rule and my [00:32:00] take home from this is, and if you’ve read my book you’ll see this, investing itself can be very simple. A three-fund portfolio, set it, forget it, no big deal. Tax planning, where you buy the investments, how you move the money, is complex. It just is. I can’t make it simpler. We had Cody Garrard on here. He had written a book on tax planning through retirement. You can take a look at that episode. It goes more in detail. But that’s a giant tome of stuff. And it’s interesting, as CFP®s, we actually read it as a group in our company, and we’re debating some of the stuff in there, too. It’s never black and white. It’s mostly it depends. Now, the reality check is, from a political standpoint, Childfree people, we’re always just gonna do what we do and not get the tax breaks. But we can set up a plan that creates our own tax breaks. Well, that’s it for this episode of Childfree Life by Design. Remember, intentionally choosing to invest in moments of joy is just as important as investing in your future. Until next [00:33:00] time, happy designing.

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