As the year draws to a close, it’s a perfect opportunity to rethink how you give to charity. This is important for managing how much tax you pay and how much help reaches those in need. Here are four effective strategies:

1. Donate Stocks Instead of Cash: If you own stocks or mutual funds that have increased in value, consider donating them. This way, you avoid paying taxes on their gains, and the full value goes to charity. It’s a smart way to reduce taxes and support your favorite causes.
2. Gift from Your Retirement Account: If you’re over 70½ years old, you can transfer money directly from your IRA to a charity. This method doesn’t count as taxable income, which can be beneficial for managing your taxes.
3. Combine Your Donations into One Year (Bunching): If your donations in a single year exceed your standard tax deduction, you get more tax benefits. This strategy involves giving more in one year and less in others but still supports your chosen charities effectively.
4. Large Upfront Donations Spread Over Time: Using a Donor-Advised Fund (DAF) or a Charitable Lead Trust, you can make a big donation now, which is spread over several years. This is particularly useful if you expect to be in a higher tax bracket in the future.

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These strategies are just a starting point. There are many ways to align your charitable giving with your financial goals. If you need more information or have questions, we’re here to help. Contact us to explore the best charitable giving options for your situation.

Read the full article for more in-depth information: 4 Charitable Giving Strategies to Maximize Your Impact​​.

In recent years, financial advisors have increasingly been setting up donor-advised funds (DAFs) for clients who wish to contribute to charities. Despite the advantages, some individuals have yet to take this step. DAFs offer immediate tax deductions, the freedom to distribute funds over time, online donation capabilities, privacy options, low fees, and the growth of assets in a tax-free environment. They also simplify the process by consolidating donation receipts into a single annual statement​​.

As the year draws to a close, advisors should seize the opportunity to encourage clients to consider DAFs. They might ask clients if they:

1. Regularly donate to charities and plan to continue or increase their contributions.
2. Seek to reduce taxes, particularly on highly appreciated assets.
3. Are expecting significant income and want to allocate some for future donations.
4. Need a substantial tax deduction now but require time to select charities.
5. Find themselves hurriedly making donations at year’s end.
6. Experience variable income which complicates consistent charitable giving.

…and several other critical questions that can help clients reflect on their charitable strategies​​.

While some may not be ready to transition to a DAF immediately, initiating this conversation is crucial during this peak season of giving. It’s a period when many are thinking about their philanthropic impact and may be open to more effective ways to support their favored causes.

For those who have not yet decided to open a DAF, direct contributions to charities are still valuable and necessary. However, by discussing DAFs now, clients may be more inclined to set up their DAF earlier in the following year, thus avoiding the end-of-year rush​​.

If you are contemplating your charitable giving options and wish to explore the benefits of donor-advised funds further, we invite you to reach out to our team. We are committed to guiding you through the process, ensuring that your philanthropic efforts are as impactful and efficient as possible.

Click here to read the original article on Wealth Management.

Some individuals or families wish to leave behind a significant donation at the time that they pass away. A charitable remainder trust is one estate planning tool to help you do this. You’ll want to consult with an estate planning lawyer to decide whether or not this is the right instrument for you.

There are several different steps involved in the creation of a trust like this. The first is to meet with your lawyer to discuss your intentions and to ensure this is the appropriate step.

You will also want to make sure that your chosen charity is approved by the IRS. You can then transfer the assets that you intend to go to that charity into the trust and appoint the charity as the trustee of the trust. This gives the charity the power to invest or manage the property inside. Within the trust provisions created by your estate planning lawyer, there should be an explanation about who is to receive income from the property of the trust. This can be you, as the creator of the trust or someone else that you choose.

You may want to receive income payments for the rest of your life or for a predetermined number of years and you can discuss the various advantages and disadvantage of this with your estate planning lawyer. Any property remaining in the trust at the time you pass away will then be transferred to the charity. If you would like to discuss creating a charitable remainder trust, schedule a consultation with an estate planning lawyer today.

As part of your estate plan, you likely want to provide for your beneficiaries like your surviving children and spouse. However, research shows that more people than ever are also including charitable giving in their estate planning strategy.

In 2020, for example, individual charitable gifts totaled over $324 billion. This was the highest dollar amount to date. If you believe that philanthropic values are not just important to you but important to your entire family, allocating some of the funds in your estate to support charity can help you provide an ongoing legacy. Your family can also benefit from being brought into this process to introduce the concept of charitable giving to children now.

To start this, meet as a family to discuss how funds could be donated based on the collective values that you share. As you go through the estate planning process, remember to keep other family members involved as needed, such as telling adult children the location of your primary documents for estate planning. You might also use this opportunity to tell your children more about the organizations that you intend to support financially during your life and after you pass away. Finally, meet with your estate planning attorney to discuss how to designate funds to be given to charity in your will. You are not limited to only making gifts to charity at your death but this can be an excellent way to provide for a long lasting legacy.

Since the new tax laws in place doubled the standard deduction to $12,000 for single tax payers and $24,000 for those married filing jointly, this means that you need to understand how this affects your itemized deduction planning.

There are changes that repeal or limit many itemized deductions, such that in 2018, 90% of taxpayers will be using the standard deduction. For anyone who is contemplating the standard deduction rather than itemizing, consider putting all of your charitable contributions across alternate years if this will enable you to itemize in a future year but take the standard deduction one year. 

One other avenue to pursue if you wish to consider this option is to contribute to a donor advised fund, making distributions to that charitable organization over the course of time.

This is most appropriate if you do not want to give the money to charity all at one time. Annual exclusion gifts should also be considered as end of year options.

For those who want to minimize their exposure to estate taxes, remember that you can gift up to $15,000 to an unlimited number of people every single year without decreasing your lifetime estate tax exclusion or paying gift tax.

If you spread this out over the course of multiple years, such as you would with your charitable contributions, now is a good time to talk to an experienced estate planning lawyer about how this will affect your future planning and needs.

The support of an estate planning attorney can help you to stay on top of all necessary estate planning changes and tax law updates that might affect you and your loved ones. Appropriate tax planning should always be done in conjunction with the support of an accountant and an estate planning professional.