While the Friday and Monday following Thanksgiving have both been nicknamed for days of retail consumption, the Tuesday following is referred to as Giving Tuesday, and established as an international day for charitable giving.
As we near Giving Tuesday it is a fitting time to consider your philanthropic goals and review or design a giving plan. With that in mind, we take this opportunity to consider the ways you can maximize your philanthropic impact on causes and organizations that are important to you.
There are two main objectives that we believe are important to focus on and have summarized them below. These objectives can inform a broader discussion in which we help you define your overall philanthropic goals and then work with you to build your plan, potentially taking advantage of techniques specific to your investments and financial planning situation. And because our wealth management team stays up to date as new strategies and ideas emerge around impactful and tax-aware gifting approaches, we welcome the chance to revisit the topic each year.
- Maximize After-Tax Giving
- Gift Appreciated Securities: 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.
- Gift Private Assets: It might also make sense to prioritize the donation of complex, illiquid assets, which often also have low cost basis. Examples include private stock, private alternative investments, or real estate. Gifting these types of assets is governed by complex regulations, and we can help review your options.
- Bunching of Charitable Gifts: Since the “Standard Deduction” amount increased several years ago, concentrating multiple years’ worth of planned charitable gifts in a single tax year can maximize the after-tax benefits of your giving – especially when using a Donor Advised Fund Account (described below).
- Effective and Strategic Giving
- Private Foundation vs. Donor Advised Fund Account: 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 understand these choices and lay out the differences to help you make an informed choice.
- Qualified Charitable IRA Distributions: Once you reach 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. These direct “qualified charitable distributions” also help satisfy the 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.
For more details on some of the strategies outlined above as well as ideas on how to engage your next generation in philanthropic activities, please visit our previously published charitable gift planning blog post.
Please 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 are here to help develop your giving plan and process and will help coordinate the discussion with your tax professional as well. Our ultimate goal is to help you explore strategies that may maximize your charitable 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 advisor.
Important Disclosure
These materials have been provided by Litman Gregory Wealth Management, LLC (“LGWM”) for informational purposes only. No statement herein is to be construed as a solicitation or recommendation to buy or sell a security. The information contained herein has been derived from sources that we believe to be reliable; however, we do not make any representation as to the accuracy, timeliness, suitability, completeness or relevance of any information. Information contained herein is current as of 11/2024. Tax laws and regulations are subject to change, and we recommend consulting with a tax professional or financial advisor for guidance tailored to your situation. This material is furnished ‘as is’ without warranty of any kind. Its accuracy and completeness are not guaranteed, and all warranties expressed or implied are hereby excluded.
Past performance is not indicative of future results. Investing involves risk, including the potential loss of principal.
For additional information about LGWM, please consult the firm’s Form ADV disclosure documents by contacting compliance@lgam.com or through this link.