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Money Minute: Charitable Giving Strategies

Money Minute: Charitable Giving Strategies

Charitable giving can be incredibly rewarding, and if you regularly donate substantial gifts such as $1,000 or more to your favorite causes, there are some strategies you should consider.

  • Ensure the Charity is 501c3. This can be verified on helpful websites like irs.gov or charitynavigator.org. Charity Navigator’s website explains how much of your donation is used for the mission of the organization compared to their administrative costs.
  • Low Basis Stock Donations. Giving appreciated stock you’ve held for more than a year can be better than giving cash. Low basis stock donations to your favorite charities allow you to gift an appreciated asset without realizing the gain and paying corresponding taxes.
  • IRA Beneficiary. If you want to bequest a larger amount at death, another option is to name a charity as one of your IRA beneficiaries. Check with your custodian to see if they will honor a specific dollar gift, and then the rest of your IRA can still go to your family while making this tax-advantaged donation at the same time.
  • Charitable Trusts. Using either a charitable lead trust or a charitable remainder trust is another way to gift money to a charity. A charitable lead trust pays income to your chosen charity for a certain period of time after your death. Once that time period is over, the remaining trust principal passes to your heirs. A charitable remainder trust provides the trust income to your heirs for a period of time after your death, and then the principal goes to your favorite charity.
  • Will Bequest. The easiest way to make a charitable gift is with an outright bequest of cash in your will. You will need to add a short paragraph in your will that names the charitable beneficiary as well as the amount of your gift.
  • Tax Implications.The federal government taxes transfers of wealth you make to others, both during your lifetime and at your death. You may also be subject to state transfer taxes. Careful planning is required to minimize transfer taxes. By leaving money to a charity, the full amount of your charitable gift may be deducted from the value of your gift or taxable estate.

Review your options with your tax advisor or wealth manager to make sure you can utilize these tips for your situation. It’s important that your donations are rewarding for you and the charities you support.

Article Topic Expert: Debbie Oswald

Debbie is a Principal with SVA Plumb Wealth Management, LLC. With more than twenty-five years experience in investment management, consulting, trust services, retirement plans, and financial planning, Debbie assists affluent clients with establishing wealth management strategies to achieve their financial goals.

Debbie proactively coordinates tax and legal resources as appropriate to provide comprehensive planning for her clients.

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