Mark Parthemer, AEP
You’re passionate about the organizations and causes you support. You may even have a philanthropic plan that clearly states the objectives you hope will carry across multiple generations. Partnering with a knowledgeable advisor can help you choose the best option to achieve your philanthropic goals. Clearly, you can be thoughtful of what to give (i.e., appreciated securities, cash, real or personal property or collectibles, such as art). But you also have optionality as to how to give. A variety of options are summarized below. Many of these techniques can be used together to meet your unique philanthropic and financial goals:
- “Checkbook” philanthropy. It’s easy to give outright gifts of cash as well as cash electronically through an organization’s website, or via text message or mobile payment app. Be sure to ask the receiving organization for a gift receipt.
- Donor-advised fund (DAF). Contributions to DAFs generate an immediate income tax deduction. The donor can recommend grants from a DAF, which can be made in the current year, or in one or more future years. DAFs can be invested, and returns are typically tax free.
- Qualified charitable distributions (QCD) from an IRA. After reaching age 70½, a QCD of up to $100,000 per year can be made from your IRA to a public charity (not a DAF, private foundation or supporting organization). The QCD amount is excluded from your taxable income and is not deductible. The IRA’s administrator must send your donation directly to the charity to qualify, and no goods or services can be received in exchange for the donation. Under the SECURE Act 2.0, up to $50,000 of QCDs may be distributed to a charitable remainder trust (CRT) or gift annuity (described below), subject to some limitations.
- Private or family foundation. A tax deduction is generated when contributions are made to a foundation. There is a minimum distribution to charity that must be made annually, but a majority of the assets (and earnings) can be retained. The donor or designee retains control over how the foundation’s assets are invested and distributed. Foundations come with a good deal of administration, so they are not suitable for all families.
- Testamentary gift. Any charitable gift, including life insurance, retirement benefits and gifts from an estate or trust, that takes effect at your death. Leaving retirement accounts to charity rather than individual heirs can provide significant tax savings.
- Gift annuity. An irrevocable gift of an asset to a charity in exchange for an annuity payable for as long as you live. General tax law provides for taxation of capital gains whenever an asset is sold or exchanged; however, there is a special exception for qualified gift annuities, thus deferring capital gains taxes on funding.
- Charitable lead trust (CLT). An irrevocable trust that pays an annuity or unitrust stream of payments to one or more designated charities over a specified period while reducing income and estate taxes. When that period expires, the remaining assets are paid to the noncharitable beneficiary, typically one’s heirs or loved ones.
- Charitable remainder trust. An irrevocable trust structured inverse to a CLT, as the annuity or unitrust is paid first to a noncharitable beneficiary, typically the grantor, over a specified period. At the end of the period, the remaining assets are distributed to one or more designated charities.
- Bunching gifts. Groups what would normally be multiple years’ worth of contributions into a single tax year, resulting in donations large enough to itemize on your tax return and potentially offset a spike in income.
- Employer matching gifts. Check your employee benefits guide or contact your human resources department regarding employer matching gifts. It may be an easy way to magnify your contributions, depending on your plan.
Working with a wealth advisor like Glenmede can help you create a focused, sustainable philanthropy plan while remaining open to diverse opportunities to achieve the impact you desire. The charitable giving vehicles mentioned here can help you realize your goals, but it’s important to discuss these options with your wealth advisor to understand them more fully, including their limitations and tax implications.
To learn more about your charitable giving options, please contact Mark Parthemer at 561-571-4900, or email at email@example.com.
Mark Parthemer is Chief Wealth Strategist & Regional Director of Glenmede’s Florida Office.
This article is provided solely for informational purposes and is not intended to provide financial, investment, tax, legal or other advice. It contains information and opinions which may change after the date of publication. The author takes sole responsibility for the views expressed herein and these views do not necessarily reflect the views of the author’s employer or any other organization, group or individual. Information obtained from third-party sources is assumed to be reliable but may not be independently verified, and the accuracy thereof is not guaranteed. No outcome, including performance or tax consequences, is guaranteed, due to various risks and uncertainties. Readers should consult with their own financial, tax, legal or other advisors to seek advice on their individual circumstances.