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Financial Planning for the Charitable Heart

| February 14, 2019
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In December, our firm was honored to be featured on the front page of the Sarasota Herald Tribune in an article related to our community’s Season of Sharing Fund drive: a fund that helps individuals & families (who reside in our 4-county area) on the verge of homelessness to help them get back on their feet, financially.  We were proud to donate to this fund drive in honor of our clients, without whom our work would not be possible.

To continue that “charitable” theme, as we celebrate Valentine’s Day this week, I thought I would touch on this subject again, as helping clients realize their charitable dreams is one of the best services we can provide for them – and our community; hence the phrase:  “charitable giving is where the head and the heart meet.”

That sense of giving back to those in need is really a big part of our culture in America, and something I think we can all be proud of.  To illustrate that, let’s look at a few facts:

  • In 2017, total giving to U.S. charities totaled an estimated $410 billion – a new record1.
  • Giving by individuals in this country represents 70% of total giving1.
  • The top three categories of recipients are religion, education and human services1.
  • The average charitable deduction for the nearly 37 million Americans who reported one on their tax return in 2017 was $5,5082.
  • And something really interesting: taxpayers making $30,000 or less donate more as a percentage of their income (10-11%) than taxpayers making over $250,000 (8.5%)2

1According to Giving USA, publishedby the Giving USA Foundation

2According to 2017 IRS data


The trends in charitable giving were up in 2017, likely fueled by gains in the stock market.  It’s too early to know what the trends will be in 2018, as the new tax law takes effect, which may have a major impact on charitable donations.  While charitable giving is still deductible in 2018 (up to 60% of taxpayer adjusted gross income), with the new standard deduction of $12,000 for individuals and $24,000 for married taxpayers, it’s uncertain if lower-earning taxpayers will continue to give to charity as they have in the past.  If they do, it will definitely be a decision of the heart.  The IRS won’t be able to track their giving any more, as it will be buried within the standard deduction.

At SRQ Wealth, if a client is so inclined, charitable giving is part of our financial planning process. We help clients identify their charitable goals, understand the causes they wish to support, educate them on different strategies that could help them meet their goals, and connect them with resources to help implement these goals.   There are more ways to charitably give than there are days in the week, and it’s rewarding when we can find the right fit for our clients’ heads – and hearts!

Because there are so many choices of giving strategies, this blog will be dedicated to the simpler ways one can give to charity, along with the related tax benefits.  I will share the more complex strategies in a later blog. 

Here goes:

1. Outright Gifts – sending a donation directly to charity during your lifetime is certainly the easiest way to donate, but there are many ways to do this, too:

  • Write the check to charity – as long as it’s dated & sent by December 31st, it will be tax-deductible in the year made.
  • Charge your credit card with a charitable gift – as long as it’s captured on your statement by December 31st, it’s deductible in that year, even if you pay it off in January.
  • Purchase a membership in a local charity (e.g. museums, zoos, etc.) that you support. 
  • Participate in a giving challenge, such as our local Giving Challenge, presented by the Community Foundation of Sarasota County. Often, these participating charities receive matching dollars from our local community foundations, depending on the types and level of donations they receive.
  • If your employer offers a matching program, maximize your gift by directing your employer match to your favorite charity as well.
  • Gift appreciated assets – this is most commonly done by donating appreciated investments directly to charity. They have to be held longer than 1 year, and if they are worth more than 30% of your adjusted gross income when donated, your deduction will be limited to that 30%, but you will be allowed to carry the excess deduction over to future years.
    • Why is this a great strategy?  Because you get to deduct the full market value of the asset on the day it is donated, even if you paid much less for it over a year ago. 
  • Use the IRA charitable rollover – also known as the Qualified Charitable Deduction (QCD), this enables taxpayers over the Age of 70 ½ who must take withdrawals from their IRA accounts (RMDs) to send those RMDs directly to charity. This can be done for up to $100,000 per person per year. 
    • Why is this a great strategy?  Because you do not have to recognize the amount donated directly to charity as income on your own tax return.  You don’t deduct it as an itemized deduction either, but having a lower adjusted gross income can have many other tax advantages. 

2. Donor Advised Fund – is a bit of a hybrid strategy between outright gifts (given while you are living) and bequests (given from your estate). A donor-advised fund (DAF) is a charitable giving vehicle administered by a public charity (such as a community foundation) created to manage charitable donations on behalf of organizations, families, or individuals.  When you donate into a DAF, you get a tax deduction at the time of the donation.  Once established, you can direct payments from the fund to your charities of choice at a later date (almost like a “charitable checkbook”).  This gives the donor time to research which charities to benefit and for how much.  Most donors establish and give to these during their lifetimes, but a DAF can also be the recipient of a bequest from an estate as part of a legacy plan. 

3. Bequests – the most final form of an outright gift is the one you leave to charity as part of your estate. For donors who are not sure if they need all of their assets for living expenses during their lifetimes, gifts made through an estate (when no longer needed by the donor) can be an important and heartfelt way to remember one’s favorite charities – and be remembered for making the donation.  Your estate will also get a tax deduction for the donation, if estate taxes are still a consideration.   There are three common ways to make a bequest:

  • Bequest by will – your personal representative would make the gift as you direct in your will. This method is overseen via a probate court.
  • Bequest by trust – the trustee of a trust you create will distribute the gift as you direct in your trust. This method is more private than gifts by a will.
  • Bequest by named beneficiary – means you have named a charity as a beneficiary of your IRA, annuity or life insurance policy. Beneficiary proceeds go directly to the charity regardless of what your other estate documents may say. Using this method can create tax consequences if living heirs are also named as beneficiaries along with charity(ies). 

As with most financial planning strategies that may have an impact on your taxes, it’s best to consult with your tax advisor before implementing some of these steps, so you are fully aware of the tax impact of the charitable gift you are making.  Regardless of which strategy you choose, it’s important for you to feel good about your charitable giving plan and the impact it will make.  As we like to say, “give until it feels good!”  Then it’s truly a gift of the heart.

Happy Valentine’s Day!








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