Make Your Charitable Giving More Effective
Jerry Davidse covers three strategies for more tax-efficient charitable giving: donor-advised funds, donating appreciated stock instead of cash, and qualified charitable distributions from an IRA. He explains how each can be coordinated with a family's investment, tax, and estate plan depending on their age, income, and giving goals.
Jerry Davidse covers three strategies for more tax-efficient charitable giving: donor-advised funds, donating appreciated stock instead of cash, and qualified charitable distributions from an IRA. He explains how each can be coordinated with a family's investment, tax, and estate plan depending on their age, income, and giving goals.
Key takeaways
- Donor-advised funds let you take a charitable tax deduction now while granting to charities over time, which can help in high-income years.
- Donating appreciated stock instead of cash may help you avoid realizing capital gains while still qualifying for a charitable deduction.
- A qualified charitable distribution lets IRA owners age 70 and a half or older give directly from an IRA and count it toward their required minimum distribution.
- The most effective giving strategy depends on your age, income, investments, and how it fits your broader financial plan.
Hi friends. For many of the families we work with, charitable giving is an important part of their long-term plan. But the way you make charitable gifts can be just as important as the amount that you give. At Presilium, we help our clients evaluate strategies that may allow them to give more effectively while coordinating their generosity with their investment, tax, and estate plans.
One strategy we frequently consider is a donor-advised fund. A donor-advised fund allows you to make a charitable contribution today, receive a tax deduction in the year of your contribution, and then provide grants to eligible charities over time. This can be especially valuable during a high-income year or when you want to combine several years of charitable giving into one tax year. It can also help families organize their giving and involve children or grandchildren in choosing the charities they want to support.
A second popular strategy is donating appreciated stock instead of cash. If you own an investment that has increased substantially in value, selling it may create a capital gains tax. By donating appreciated stock directly to a qualified charity or donor-advised fund, you may avoid realizing that gain and may qualify for a charitable deduction. The charity receives the full value of the investment, and you can then use the cash you otherwise would have donated to rebalance or diversify your portfolio.
A third strategy is a qualified charitable distribution, often called a QCD. If you were at least age 70 and a half, you may be able to transfer money directly from an eligible IRA to a qualified charity. The distribution may be excluded from your taxable income and can count towards your required minimum distribution for the year.
The most effective approach depends on your age, income, investments, charitable goals, and overall financial plan. We work with our clients and their tax professionals to determine which strategy or combination of strategies may be most effective. Generosity begins with choosing the causes that matter most to you. Thoughtful planning can help ensure that more of your wealth reaches those causes and creates the impact you intend.
Thank you. And I look forward to talking with you next Friday morning.
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