As we work our way through the holiday season, it’s a great time to think about your year-end charitable goals. With a little planning, you can make your giving more efficient for both you and the charities you wish to help.
You’ve heard of Black Friday and Cyber Monday, but you might not have heard of Giving Tuesday, which falls on November 29. Founded in 2012 as a movement to celebrate and support giving and philanthropy, Giving Tuesday is the perfect opportunity to discuss charitable giving with your children and family. Children whose parents discuss charitable giving are 20 percent more likely to make charitable gifts themselves, according to a study by the Women's Philanthropy Institute at the Indiana University Lilly Family School of Philanthropy. You might also set aside time on Giving Tuesday to make your own charitable gifts before the year-end chaos hits.
Regardless of what day you decide to do your year-end giving, it’s worth talking to your tax or financial advisor to see whether you can make your giving more tax-efficient. One fairly simple type of tax-efficient gift is appreciated assets. Giving appreciated stock allows you to avoid paying gains taxes on the stock while receiving a charitable deduction for the full fair market value of the stock.
If the charity you support is small and unable to accept gifts of stock, a donor-advised fund might be a good solution that also makes tax reporting more efficient. Many people engage in checkbook giving, which is writing multiple donations of appreciated checks each year to various charities and then keeping track of all the receipts (be sure your charity is a qualified 501(c)(3) and that they provide you with a receipt). You can consolidate this type of giving through a donor-advised fund, which allows you to make a gift of cash, appreciated securities, of other appreciated assets to the charitable organization that runs the donor-advised fund, such as Schwab Charitable or Fidelity Charitable, among many others.
That fund, in turn, gifts the value of the assets to the charitable organization of your choice. You can also give through a community foundation that acts as a donor-advised fund. You can then direct the money to a recipient at a later date, once you’ve had time to think about where you want the funds to go.
Gifts of stock to charity and to donor-advised funds do require some lead time. If you have accounts at Schwab or Fidelity, the deadline for transferring stock or bonds in your Schwab or Fidelity account directly to charity is December 16, and for mutual funds it’s December 2.
Charitable IRA Rollover
If you are over 70 1/2 years old, a charitable IRA rollover is also a possibility. A charitable rollover allows you to distribute up to $100,000 directly to charity from your IRA account. You don’t have to recognize the income from the distribution, but it can count toward your annual required minimum distribution.
Charitable Trusts and Gifts
Charitable trusts and charitable gift annuities are on the more complex side. Your financial advisor and tax planner can help determine whether these types of gifts are right for your situation. Your advisor can also help you model cash flow to determine what you can afford to give without increasing your risk of running out of assets while you still need them.
As you make your final 2016 gifts, take advantage of the opportunity to review your giving methods, habits, and goals, since these will provide insight you can apply toward your 2017 giving strategy. It’s not too early to start thinking about how you can make your 2017 giving as efficient and effective as possible.
Contact your Moss Adams professional to learn more about how you can make the most of your charitable giving and which solutions may work best for your personal financial situation and goals.