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Strategies to Help You Maximize Year-End Charitable Giving


PLEASE NOTE: Because of the many nuances of individual situations and the complexity of the tax code, we highly recommend coordinating with your accountant when considering these tactics. We are also happy to jointly confer with you and your accountant on what makes sense for you.

The holidays are fast approaching, and for many of our clients, the festive time of year is the perfect time to combine their desire to help others with the benefit of saving on taxes. Below are three strategies to keep in mind to help you maximize your charitable gifting this holiday season:

Three Strategies to Keep in Mind When It Comes to Charitable Gifting

1) Instead of giving cash, consider gifting appreciated stocks, bonds, or mutual funds.

Most larger charitable organizations offer donors the ability to give cash or investment securities for larger gifts. A general advantage of donating appreciated securities that have been held for at least a year is avoiding paying capital gains tax while getting the charitable benefit of gifting at current market value. Furthermore, we often can earmark or hold certain high-quality appreciated securities in individual accounts for clients who routinely make significant gifts. If you want to pursue gifting securities, it is a good idea to plan well in advance of the holidays to ensure you meet applicable transaction deadlines imposed by custodians, which tend to fall around mid-December.

2) Set up a donor-advised fund (DAF).

A donor-advised fund can be thought of as a personal charitable savings account with potentially significant tax advantages. You, the donor, create an account with a sponsoring organization (for example, a custodian with a dedicated charitable arm, or a community foundation) and fund the DAF with a gift of stock, cash, or other assets. Your sponsoring organization manages this account over time, but at any time you can work with the organization to facilitate gifts to qualified nonprofits from your account. These donations can be made either right away or months and years down the road, but your tax savings can be immediate based on a deduction for the amount that is gifted when you fund the DAF account.

3) Satisfy all or part of your required minimum distribution (RMD) with a charitable gift.

If you are at least 70½ and have an IRA, you can satisfy your RMD by making a qualified

charitable distribution (QCD). By doing so, you reduce your taxable income. Talk to your CPA or tax professional before employing this strategy to make sure it is right for you, particularly given your specific tax bracket and limits of the annual QCD amounts. Please keep in mind that processing this may take longer than you expect since most custodians will not send checks directly to charitable organizations. Plan ahead!

If you are interested in learning more about the above, feel free to reach out to your relationship manager. Finally, let us know if you would like us to recommend a tax professional to help you decide if any of these strategies are right for you.

Gifting limits for friends and family

Another topic that is top of mind during the holiday season is gifting to loved ones. There are many benefits to doing this, including potentially reducing the size of your taxable estate while simultaneously allowing you to see the impact of your gift before your death. An individual can gift up to $15,000 annually tax-free to any other individual without triggering a reduction in the lifetime gift tax exemption (currently $11.4 million), and, except for certain cross-gifting there is no limit to the number of recipients to whom you may give a gift. This same dollar limit applies, in most cases, to contributing to a grandchild’s or younger relative’s college education fund via a 529 account. Keep in mind that since each individual can gift $15,000 to as many people as they wish, you and your spouse can gift another couple – say, an adult child and son- or daughter-in-law – up to $60,000 without going over the gift tax exemption. Please contact your tax professional or our team if you have questions about your specific situation.

Do you have additional questions about charitable gifting? Please reach out, we would love to chat! 

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