While the primary goal in making a charitable gift is to support a worthy cause, there are also tax & financial planning benefits for the donor that should be considered. The best gifts do the most good for the most people, and supporting your favorite charities thoughtfully can maximize the gift’s impact, take advantage of tax benefits, and complement a broader wealth management plan.
Direct Donation & Appreciated Securities
- For clients with highly appreciated securities or concentrated stock positions, it’s often beneficial to fund charitable commitments with those stocks. The gift should still be deductible, the capital gains taxes that would be incurred if the position was sold are avoided, and the portfolio is better diversified.
Qualified Charitable Distributions (QCDs)
- Clients who are over the age of 70½ can contribute up to $108,000 per year directly to nonprofit institutions from their Individual Retirement Accounts (IRAs). The distribution is excluded from their income entirely, plus the client can still take the standard deduction (or itemize their deductions if they qualify).
Bunching Strategies
- It can be beneficial for people to bunch two to three years of their normal charitable gifts into one year so that they can itemize those deductions in the year of the large gift. They can then take the standard deduction in the following year or two. These bunching strategies will often be used in concert with a donor advised fund.
Donor Advised Funds & Family Foundations
- In some cases, particularly in years when the donor’s tax rate will be significantly higher than normal, the donor may want to take a significant charitable deduction, but they may not want the charity to receive the funds all at once or they might not even know which nonprofit they want to support. Donor advised funds and family foundations can be used to make charitable gifts that are deducted in one year, but granted to charitable beneficiaries over a period of time.
These can be funded with cash, as well as appreciated securities, as well as complex assets like private business interests, real estate, and carried interest in private equity funds.
Charitable Trusts
- For clients looking to support their favorite nonprofit, who also want to support themselves or their loved ones, split interest trusts like Charitable Reminder Trusts and Charitable Lead Trusts can provide win-win solutions. These trusts split the beneficial interest into two parts: an income beneficiary and a remainder beneficiary. These split interest trusts have the ability to benefit qualified charities, as well as noncharitable beneficiaries.
Philanthropic Consulting and Planned Giving
- In addition to our team’s expertise and significant experience, we can also leverage experts within Baird and Baird Trust, as well as outside consultants and planned giving specialists to help design a philanthropic plan that best suits our client’s unique needs.
