Charitable giving is part of many of our clients’ financial plans. They generally understand that most charitable donations are tax-deductible. However, they often aren’t aware of how developing a smart charitable giving strategy can maximize a gift’s impact on the recipient as well as its benefits for the giver.
If you want to donate some of your funds, the AllGen team can help you put together a personalized charitable giving plan. Many of our clients use strategies like the following to make their gifts go even further.
Donating Appreciated Stock
There’s nothing wrong with making cash donations as part of your charitable giving plan. However, if you’re just donating cash, you might be selling yourself (and your chosen organization) short.
Minimizing the capital gains taxes you owe is part of managing your investments wisely. When you donate appreciated stock to a qualified charity, you won’t have to pay capital gains taxes on the appreciated amount.
There are additional benefits for you and the recipient as well, such as:
- You may be able to deduct the full appreciated value of the stock from your tax return.
- The charity receives more than it would if you had sold the stock and donated the proceeds.
If you’re unsure how to choose a donation, our team can examine your portfolio and help you decide which appreciated stock makes the most sense to donate.
Creating Donor-Advised Funds (DAFs)
If you want charitable giving to be an ongoing effort, setting up a donor-advised fund (DAF) might be a good idea. Here’s a quick look at how the process works:
- You open an account and make your initial donation.
- If you itemize, you may receive an immediate tax deduction.
- The sponsoring organization invests the funds so they can grow.
- Over time, you recommend grants to certain charities.
DAFs are a great way to start a family tradition of charitable giving too. When you set up your fund, you can name your adult children or other loved ones as successor advisors, and they oversee the fund after your death.
Creating Charitable Trusts
Many of our clients turn to charitable trusts when deciding how to support their favorite nonprofits. One of the most common charitable giving vehicles, the charitable remainder trust (CRT), has financial benefits for you (or a chosen beneficiary) as well as the charity.
When you set up a CRT and fund the trust, you designate a beneficiary to receive an income stream from assets in the trust. The income stream typically lasts for a set amount of time. Once that period expires, the remaining assets go to the charity.
You may also get an immediate tax deduction when you fund the CRT.
Making Qualified Charitable Distributions (QCDs)
If you’re a senior who must take required minimum distributions (RMDs) from an IRA, you might be stuck paying income taxes on funds you don’t immediately need. Qualified charitable distributions offer a unique opportunity to reduce your tax burden through charitable giving.
With a QCD, you transfer a sum of money directly from your traditional IRA to a charity. The amount transferred counts toward your RMD for the year. However, because the money is sent directly to the charity, you don’t have to pay income tax.
Let Us Help You Create a Charitable Giving Plan
At AllGen Financial Advisors, we strive to help all generations find financial freedom. We offer fiduciary financial guidance for clients looking to save for retirement and build wealth. If you’d like to learn more about how we can help you, contact us today.
To schedule a complimentary meeting, call (407) 210-3888 or email advisors@allgenfinancial.com.
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