Year-End Charitable Giving

Written By: Anna Carlson

Last year, Americans made individual charitable contributions of more than $319 billion. As Warren Buffett says, in general we’re a “generous society.” If your financial plan includes charitable giving, it’s important to know the different options & best strategies for your individual situation.

Gifting & giving are often on our minds this time of year. Just a few weeks ago, Warren Buffett announced the amount of his annual donations…over $870 million this year. And do you think he was writing checks/paying cash to these foundations? Of course not. Warren Buffett gifts stock of Berkshire Hathaway as his charitable contribution. Read on for this & other financially savvy methods you can employ when tithing or donating to charities.

It’s important to keep a few things in mind when it comes to your plans for charitable giving: when to give, what to give and how to give.

When to Give

The timing of your donations can have an impact on your taxes as well as the taxes of your heirs and the charity or organization you’re supporting. A couple things to consider are the tax deadlines applicable to your strategy, as well as cash flow needs (especially around the holidays) for you & possibly the organization receiving your donation.

What to Give

Sure, cash may be the most simple asset to donate. If you do have alternative sources, such as appreciated stock or property, gifting that may be a more advantageous method to take.

If you own stock with significant (unrealized) capital gains, perhaps it’s time to consider doing a gift transfer of that stock directly to your charity. If, for example, you were to transfer $5,000 of stock that included $4,000 of unrealized gain directly to your church’s deposit account, neither you nor the church will have to pay a capital gains tax on that $4,000 upon selling that stock.
Once you have reached RMD age (73 if you turn 72 after Dec. 31, 2022), another strategy to consider using is a Qualified Charitable Distribution (QCD). When processing the RMD withdrawal, some or all (up to $100,000 for 2023) of that distribution can be sent directly to your charity/charities of choice. As long as the money doesn’t pass through your hands (aka bank account), you can avoid paying taxes on the amount donated via this QCD strategy.

How to Give

While considering the methods for charitable giving, it’s important that the strategy you choose is in line with your overall plan. Here are some options:

Direct gifts
Bequests
Charitable trusts
Donor advised funds

Bottom line: no matter what your goals are for charitable giving, you don’t want to make that donation without a plan that considers all estate/legacy strategies & tax planning advantages.

Whether or not charitable giving is one of your financial goals, it’s important to have a plan mapped out for your legacy. A comprehensive retirement plan should include strategic legacy planning. If your plan is currently lacking in this realm, give us a call today at (844) CARLSON to learn how we can help create this legacy strategy for you & yours.