The time between Thanksgiving and New Year’s is when charitable giving becomes top of mind for many individuals. Whether driven by a desire to honor a loved one, or thoughtfully allocate year-end bonuses, this season is a strategic time for philanthropy.
Charitable giving is not just about generosity. It often reflects your desire to create long-term impacts and continuing family and community legacies. While writing a check to your favorite charity is always appreciated, we believe giving strategies should be an integral part of comprehensive wealth planning. Here are some advanced strategies that go beyond basic donations and utilize tax-efficient charitable planning techniques.
Donor-Advised Funds (DAFs). DAFs are flexible charitable giving accounts managed by sponsoring organizations. Donors can advise on investments and distributions while benefiting from an immediate tax deduction (up to 60% of AGI for cash gifts). The assets in a DAF grow tax-free, and donors can contribute cash or securities. DAFs are especially useful for “bunching” charitable donations into a single tax year while spreading grants over time.
Charitable trusts come in two main forms: Charitable Lead Trusts (CLTs) and Charitable Remainder Trusts (CRTs). CLTs provide income to charities for a set period, with remaining assets going to beneficiaries. These trusts are effective for transferring wealth while supporting charitable causes. CRTs allow donors to receive an income stream for life or a term of years, with the remainder going to a charity. Donors can receive an income tax deduction based on the future value of the gift and potentially bypass estate taxes.
Both trust types are irrevocable and offer a way to balance philanthropy with family wealth planning.
Private foundations are charitable organizations created by individuals or families. Founders maintain control over assets and grant-making, with foundations required to distribute at least 5% of assets annually. These entities offer estate and income tax benefits: Gifts to the foundation can be deducted up to 30% of the donor’s adjusted gross income (AGI); and contributions to a foundation upon a donor’s death are estate tax-free.
Foundations are ideal for philanthropists who want to create a legacy, set long-term giving goals, and involve family members in charitable decisions.
Qualified Charitable Distributions (QCDs). For individuals aged 70½ or older, QCDs are a way to make up to $105,000 in tax-free donations1 annually from an IRA to qualifying charities. This approach can reduce taxable income and count toward required minimum distributions (RMDs).
Each strategy serves distinct financial and philanthropic goals. Biondo Investment Advisors is prepared to assist you in determining how to best maximize your charitable giving and compare the taxable consequences of your options. Given the complexity of some of these strategies, we collaborate with qualified tax professionals for your specific situation.
Regardless of how large or how small, knowing that one’s contributions are aligned with your goals and personal values can provide a profound sense of fulfillment and joy.
Our Best Wishes for a Wonderful Holiday Season
1 www.IRS.govSource: FMeX. All rights reserved. Distributed by Financial Media Exchange
