Charitable Planning

Make an impact beyond your family, helping our community and the world at large.

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Learning about our own higher purpose is a life-long pursuit.

Charitable Planning Benefits

Donating money feels good and aligns your income and assets with a cause you feel passionate about. It creates legacy benefits by removing the asset from your taxable estate. Donations can eliminate taxes on a highly appreciated asset, like a business or a farm. Plus, you get recognition for making a large gift while you are alive, for instance, by endowing a chair at your alma mater.

Americans are Generous!

Statistics show that Americans give more to religious organizations than any other charity. But, the range of recipients is vast.
Aligning our money with our values is liberating.

0.9%

Religious

0.4%

Services

0.5%

Benefit

0.1%

Gifts

0.1%

Others

30.9% Religious
26.4% Education and human services
16.5% Health and society benefit
11.1% Gifts to foundation
15.1% Other

Other charitable recipients include the arts, environmental causes, international affairs and individuals.

Sources: Urban Institute accessed on June 4^th, 2020.

Forms of Charitable Planning

Charitable planning can take many forms. Some plans are simple, some complex. Some plans are expensive and others are nearly free (other than the gift itself). And some charitable plans take on some risk while others are completely safe.

Outright gifts to family
Outright gifts to charity
Donor advised fund
Gifts of stock options to family
Gifts in trust to family
Charitable trusts
Gifts of stock options to charity
Gifts in family limited partnerships
Private foundations

For more complete information, and a free consultation, contact a financial advisor.
If you’d like to continue reading, then download a free chapter from the book, Go Tax Free.

FAQs

Frequently asked questions about Charitable Giving

Should I gift an investment that has declined in value?

Generally speaking, it is a bad idea to give away an investment that has a taxable loss.

If you give a gift of equity (stocks) that have declined in value, you are losing the chance for a tax loss. When you make a gift, you also give away the cost basis.

Instead, sell the investment, realize the tax loss and save yourself some taxes, and then give away the proceeds in cash. There are always exceptions to these rules. Make sure to talk with your financial planner!

What are the tax consequences if I give a gift of appreciated stock?

If you give the gift of equity (stocks) that have increased in value since you purchased them, then you can avoid paying taxes on the gains!

The recipient benefits from any gains in the stock’s price. Which also means that the recipient must pay taxes on those gains at their tax bracket.

In other words, you cannot get a step-up in cost basis by gifting an appreciated investment.

How much can I give?

You can give away as much as you want to anyone you want at any time you want. Unless you are worried about taxes, in which case you want to be more careful.

The tax limit for 2023 is $17,000. This is called the annual gift tax exclusion. You may give up to this amount from a person, to a person, in 2023. A married couple may double this amount. And if the recipient is married, you may double it again. Two people would be able to give two people $68,000 in a single year without a tax problem.

For the most recent gifting limits, browse to Resources > Go Tax Free.
https://www.assetsandincome.com/go-tax-free-life-insurance-roth-iras/

What if I give more than the tax limit?

If you give more than the annual gift tax exclusion amount, then you are supposed to file a gift tax return, IRS form 709. And you are supposed to file it every year until your death, documenting the total gifts you have made to make sure that they do not exceed the lifetime gift limit. Currently, the lifetime limit is linked to the estate tax limit. In 2023 it is the largest it has ever been: $25.84 million.

For the most recent gifting limits, browse to Resources > Go Tax Free.
https://www.assetsandincome.com/go-tax-free-life-insurance-roth-iras/

Can I get a tax deduction by giving to family?

No tax deductions are allowed for gifts to people. You can get a tax deduction for a gift to a charity.

How much is the charitable deduction? How does that amount vary by charity?

Charities file as tax-exempt organizations. But not all tax-exempt organizations are charities. Make sure to talk with your charity to find out what type of charity they are and how much of a tax deduction you will receive for your gift. For the detailed answer to this question, refer to IRS Publication 526.

If your charity is a large organization, they may be filed as a “50% charity”. If that is the case, then you can make an annual tax-deductible cash gift of up to 60% of your taxable income every year. However, if you are making a gift other than cash, your limit is reduced to 50% of your AGI for a gift to a “50% charitable organization.” If you want to make a large gift, ask your charity if they qualify with the IRS as a “50% charitable organization.”

If you are giving to a smaller charity, then they may be subject to a 30% or 20% AGI limit for your tax deduction. And if you are giving to multiple organizations subject to different rules, you will want to get the biggest tax deduction you can. You can refer to IRS Publication 526 for more details, and examples.

Or you can just ask for help from your wealth manager at A&I!

Client Stories

Client stories included on this website reflect hypothetical client situations that represent
those commonly encountered by AIWM representatives, they do not reflect actual client relationships.

Bill and Linda

Roger

Bill and Linda worked at large corporations for many years. They believe in saving and not spending more than they earn. Now they have quit the corporate life and would like to save some of their assets from the taxes, passing on their wealth to their children, grandchildren, and church. We:

Completed a discovery meeting, learning more about their values, goals and relationships
Facilitated conversations about what money means to each of them
Enlisted the help of an attorney
Created a charitable remainder trust as well as a wealth replacement trust
Funded the trusts
Ongoing investment management and financial planning advice

Bill and Linda enjoyed the tax-deductible charitable donation, avoiding taxes on the gains of their investments. They are generating income for both of their lives. They are proud of the gifts they have made to their heirs and their church.

Roger lived alone, except for his cats. He amassed a tremendous network of friends and he was always the life of the party. His alma mater was a local university, to whom he would bequeath the financial assets he accumulated over his life. We:

Helped Roger with the planning
Managed the assets prudently
Made sure the annual donations were in alignment with his goals
Coordinated communications between the attorneys, the bankers and the university foundation
Spent many hours together at football games, lunches and more

“Learning about our own higher purpose is a life-long pursuit,” said Roger. Our community is better off because of his philanthropy.

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