Giving Tuesday has been established as an international day for charitable giving each year on the Tuesday immediately following Thanksgiving. We would like to take this opportunity to shine a light on philanthropic efforts and the different ways you can maximize your impact on causes and organizations that are important to you. It’s a fitting time to consider your philanthropic goals and review or design a giving plan.
As your advisor, we are here to help facilitate the discussions that will help you define your giving goals and then build your plan, especially where there are techniques that touch the investment and financial planning realms. Our wealth management team is regularly on the lookout for new strategies and ideas to help guide in the establishment, modification, or monitoring of a tax-aware, impactful gifting plan.
There are two categories of ideas that we feel are important to focus on: (1) strategies that maximize after-tax giving so you can give even more and (2) strategies that make your charitable giving more effective.
Maximize After-Tax Giving
- Donors who gift appreciated securities versus cash receive the additional tax benefit of avoiding taxation on the capital appreciation. However, there are deductibility limits as a percentage of your adjusted-gross income that change depending on what type of donation you make. We can help you navigate these considerations as you make gifting decisions in each tax year.
- It might also make sense to prioritize the donation of complex, illiquid assets, which often also have a low cost basis. Examples include private stock, alternatives, or real estate. Gifts of complex assets are governed by complex regulations, but we can help demystify the process.
- Since the new tax law increased the “Standard Deduction” amount, concentrating multiple years’ worth of gifts in a single tax year can maximize the after-tax benefits of giving.
Effective Strategic Giving
- One of the common questions we address is, “What is the best vehicle to achieve gifting goals: donor-advised funds or a private foundation?” The answer comes down to weighing the factors of privacy, ease of administration, cost, and control. As your advisor, we can help you learn more about these choices and lay out the differences to help you make an informed choice.
- Once you reach over age 70½, you can gift up to $100,000 per year directly from an IRA account to a charitable organization (or multiple organizations) without tax consequences. And these direct “qualified charitable distributions” help satisfy the required minimum distribution amount you may be required to take each year. Even if you’ve already taken an IRA distribution this year, you may still be able to make charitable distributions from your IRA, and they may be more tax-advantageous than gifts from your other assets. We would be happy to review these options and tradeoffs with you.
Note that all these tax and gifting techniques require careful forethought and planning, as every person’s tax situation is different. That’s why we feel it’s important to help you coordinate the discussion with us, as your advisor, as well as your tax professional. And our ultimate goal is to help you maximize your impact while optimizing your tax situation.
Happy Giving Tuesday!
If you would like to discuss your charitable giving or tax–planning issues in more detail or have other year-end planning questions, please contact your Litman Gregory Wealth Advisor or email our team at information@lgam.com.