Magnifying Charitable Interests

Smart Giving

You may be financially ready to start a journey of charitable giving or perhaps you are a seasoned veteran. There are many donation strategies available, but every option won't necessarily be ideal for everyone. The best choice will depend on your unique financial and philanthropic goals. 

Magnifying Charitable Interests

Magnifying Charitable Interests

Do you want to see your charitable donations go further? After all, you've worked hard for the opportunity to donate to the charities and organizations you care about. Avoiding excess fees and taxes are two ways you can see your charitable giving make an even bigger impact.

Choosing the right donation strategy for your unique financial situation is how to make your money last longer, minimize taxes, and increase tax benefits. Achieving your donation goals and seeing your giving make an impact, is something everyone should have an opportunity to do. 

Below are different charitable giving strategies that may just be right for you. Looking for more personalized information? Please feel free to give us a call anytime.   

DAF (Donor-Advised Fund)

DAF (Donor-Advised Fund)



A donor-advised fund (or DAF), allows you to set aside assets in a special account, grow the funds over time, then grant donations to qualifying charities at a later date.

The donor is elegable for income tax benefits in the calendar year deposited. They also have full control over where and when their donations are deposited, and the ability to pass the account on to heirs.

You can contribute different types of assets to the DAF, such as: stocks and bonds, mutual funds, cash, money in IRA and 401K, private company stock, crypto, and life insurance.


THE ADVANTAGES 

  • Support for charities of choice
  • Good option for those still developing their philanthropy
  • Deposits into the fund count as a tax deduction in the year the funds were deposited, not the year dispursed
  • Assets put into a DAF aren't subject to estate taxes, so they don't count toward total estate value (applicable to those with more than 12.92 million in assets)
  • Possibility to offset capital gains (you don't pay capital gains tax on assets you put in a DAF) 
  • Anonymity for donors that prefer to remain anonymous


THE DISADVANTAGES

  • You hand over legal control of your assets once you contribute to the fund (can make recomendations)
  • Fees and adminitrative costs involved with maintaining and investing the assets
  • Minimum donation requirements for some sponsors
  • No ability to revoke a donation once gifted
QCD (Qualified Charitable Distribution)

QCD (Qualified Charitable Distribution)

With a QCD, distributions transfer from an individual retirement account, to a qualified chairty of your choice. You must be at least 70 and a half years of age to make a qualified distribution. A QCD is not taxed and does not count towards your taxable income. In certain circumstances, a QCD can also count toward the required minimum disributions (RMD's) that people over the age of 73 must meet each year if they have traditional IRAs. 


THE ADVANTAGES

  • Allows you support charity of choice
  • Can be deducted for your gross income on your tax return, without having to itemize deductions
  • Can avoid the 25% penalty that is imposed if you don't take your required minimum distribution (RMD)
  • Can offset required minimum distribution
  • QCD's lower your annual gross income 


THE DISADVANTAGES

  • Donors cannot receive any benefit for making a qualified distribution to charity (cannot use a QCD to purchase something at a charity auction or tickets to charity event)
  • Chosen charities must be on the IRS's list of appoved charities
  • For QCD to count toward your minimum annual IRA distribution, it must meet the same deadline as a normal distribution






<br data-mce-bogus="1">Charitable Lead Trust


Charitable Lead Trust

A Charitable Lead Trust (CLT) creates income for the charity over the term of the trust. After the term ends or the donor passes away, the assets would no longer go to charity but to a non-charitable beneficiary (family, estate). This type of donation is best for donors that want to pass assets onto their heirs while reducing the impact of gift and estate taxes. It is also best for those who enjoy seeing the impact of their charitable giving up front. 


THE ADVANTAGES

  • CLT donations are eligible for income tax benefits in the calendar year of donation
  • Charity payment amount, frequency, and duration are flexible
  • Possible to avoid capital gains tax on any appreciated securities donated
  • You have the ability to see immediate impact of charitable donations while still passing wealth to heirs


THE DISADVANTAGES

  • The invested assets are irrevocable 
  • There can be heavy administrative demands and upkeep, making it an expensive to maintain
  • Since assets are part of your estate, they aren't entirely exempt from estate and gift taxes
<br data-mce-bogus="1">Charitable Remainder Trust


Charitable Remainder Trust

A Charitable Remainder Trust (CRT) creates income for non-charitable beneficiaries over the term of the trust. After the term is over or the donor passes away, the remainder assets funnel to charity. This type of charitable donation is best for those with large estates, gifts, or appreciated assets that want to maximize their tax benefits while gifting to a charity. It is also for those who require income for themselves or others, but still want to give.

THE ADVANTAGES

  • CRT donations are eligible for income tax benefits in the calendar year of donation
  • Assets aren't considered part of the donor's estate, typically avoid probate, and are generally not subject to gift or estate taxes.
  • Income amount, frequency, and duration are flexible
  • Possible to avoid capital gains tax on any appreciated securities donated
  • Generates income for you and your beneficiaries


THE DISADVANTAGES

  • The invested assets are irrevocable
  • There can be heavy administrative demands and upkeep, making CRT expensive to maintain
  • The assets would not be available to the charity during the trust term or your lifetime
  • The value of the charitable gift could be diminished significantly without proper income planning
  • CRT benefits won't be realized with small gifts or estates
Cash

Cash

With cash donations, you make a cash or check donation directly to charitable institution of your choice. This type of donation is best for donors interested in making smaller donations that don't require liquidating appreciated securities and anyone seeking a simple, one-time donation. 


THE ADVANTAGES

  • Cash donations are eligible for income tax benefits in the calendar year of donation
  • It is a very simple, straight forward, donation process

THE DISADVANTAGES

  • It is up to the donor to acquire and track written records of all cash donations in order to receive tax benefits
  •  Capital gain tax could apply
Securities

Securities

You can "gift" certain securities to charity. Stocks are a good example of a such a security. This type of donation is best for donors who have seen positive growth in their stocks and for those accustomed to liquidating securities.


THE ADVANTAGES

  • Securities are eligible for income tax benefits in the calendar year of donation
  • You can avoid the capital gains tax that would otherwise apply if appreciated securities were used as cash donations
  • If the stock is over 1-year old and has appreciated, you can deduct its fair market value from your taxes

THE DISADVATAGES

  • It is up to the donor to acquire and track written records of all cash donations in order to receive tax benefits
  • Some charities struggle to liquidate complex or privately held securities
  • If your stocks are less than 1-year old or they have depreciated in value, tax benefits would not apply

These are just a few of the many charitable donation options that are available. The best choice for you will depend on many factors, including your unique financial and philanthropic goals. To decide which giving strategy best suits you, give us a call today.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. 

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