Gift Planning Services is celebrating 20 years this fall, helping donors give over half a billion dollars to the causes they love over the years.
We’ve worked with thousands of donors from all walks of life. They approach life differently. They vote differently. Their family situations and the businesses they own and the values they hold are all different. But they share one thing: they want to make the biggest impact they can with the resources they have.
We specialize in legacy gift planning, helping donors envision how they’ll transfer assets to their kids and favorite causes after they’re gone. But our conversations often start with how they can increase their generosity now while avoiding unnecessary tax. As we head into the end of 2020 (finally!), here are the top 5 ways I encourage donors to give:
Take Stock…of Your Stocks!
Did you buy Google or Apple stock before tech took off? Those shares are probably worth a pretty penny now...far more than you invested years ago. You can give a gift of appreciated stock to your favorite charity. You’ll avoid paying Capital Gains Tax on the appreciation, but the full market value of that stock will go to work for your favorite cause immediately. Contact your broker and indicate that you’d like to transfer stock to a charity. You’ll need their nonprofit tax ID number.
Make a QCD…ASAP.
Are you over 70 ½**? You can make a Qualified Charitable Distribution from your IRA to your favorite charity. If you don’t need your retirement fund income, it’ll allow you to give these pre-tax dollars. Depending on your income bracket, your charity could see 30% more impact than if you were to write a check or give cash (which is post-tax). Cha-ching!
**RMD starts at age 72
Yep, another acronym! At age 72, Americans are required to begin taking an income (aka Required Minimum Distribution) from their IRA. Anyone over 70 ½ can take advantage of the QCD provision, although if you’re 72 or better, you’ll NEED to take distributions, and they’re taxable. If you don’t need that income and prefer not to pay tax on it, this is a great way to give.
Contact your retirement fund custodian to initiate a QCD.
Have a Farm? Give Crops.
You can opt to donate crops to your favorite charity. There’s no charitable deduction here, but transfer the crop to the charity’s name before selling, and you’ll be able to exclude that from your 2020 income. Especially in a strong agricultural year like many regions are having this year, you can offset a higher income year and decrease the potential income taxes you’ll pay.
Cash and the CARES Act
The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed in March and gives each individual the opportunity to take an extra $300 deduction for charitable giving, even if you don’t itemize. And while the charitable deduction is normally capped at 60% of your Adjusted Gross Income (AGI), this year you can deduct gifts up to 100% of your AGI. If you can afford to make a major cash gift, this might be the year to do it! Any gift made in cash, by credit card, or by check is fair game, as long as it’s to a qualified 501(c)3 and you don’t receive any goods or services in return. Keep that receipt!
Fund a Donor Advised Fund
If a gift planning counselor could have a favorite giving tool, the Donor Advised Fund (DAF) would be mine, because it’s just so versatile. (We could write a whole post on the merits of a DAF, but that’s for another day!) DAF funding, up to 60% of your AGI, is tax-deductible in the year it’s funded. Then those funds grow with interest until you decide where and when to give them to your favorite causes. Think of it like your “charitable checkbook”: all the flexibility is in your court. It’s an amazing tool for year-to-year giving, but a DAF can also be paired with other estate planning tools. Like a mini-foundation without fees or maintenance, it can help instill generosity in your kids/heirs for generations to come. You can open a DAF in minutes and fund it with cash, securities, the sale of real estate, or pretty much any other asset.
This is a lot of information, and we’re just scratching the surface. But we’ve created a free, downloadable PDF cheat sheet that lists the best ways to give at year-end, and how to initiate each type of gift, so you don’t miss a beat.
About The Author: Christy Boysen is the Director of Operations at Gift Planning Services, and also serves as a Gift Planning Counselor. Christy’s professional degrees include a B.A. in Psychology, B.A. in Communication, and M.A. in Higher Education.