Smart Charitable Giving Strategies April 30, 2021 Family Financials Print Last week, we talked about supporting causes you care about through charitable giving while reducing your tax bill at the same time. We also discussed “bunching” two or three years of charitable gifts to increase your tax savings. This week we’ll suggest four smart (and strategic) ways to give charitably. 1. Direct cash donation. It isn’t the most tax-efficient giving strategy but it is the simplest. Giving cash is often the easiest way to make a charitable contribution, both for you and the charitable organization you’re supporting. From a tax standpoint, cash donations can be deducted from your adjusted gross income (AGI)—up to a limit of 60% of your AGI each year. But in some cases, you may want to look beyond simply sending cash straight to a charity. 2. StockA financial instrument giving the holder a proportion of the ownership and earnings of a company. donations. It’s rewarding (literally) to watch the stocksA financial instrument giving the holder a proportion of the ownership and earnings of a company. you own rise in price. Paying the capital gains tax (20% now, possibly heading to 43% or so for the highest earners if the Biden administration’s plans prevail)—not so great. And that’s before we talk about state and local taxes. One way to avoid those taxes is by gifting appreciated stockA financial instrument giving the holder a proportion of the ownership and earnings of a company. to a charity directly, rather than pledging the cash from the proceeds. The benefit is twofold: You avoid paying capital gains, and you can deduct the full value of the shares from your taxable income, up to 30% of your AGI in the current tax year. 3. Donor-advised funds (DAFs). This option is almost like having your own personal foundation, combining the ease and simplicity of cash and securities donations with the longevity and flexibility of more complex charitable vehicles. Instead of giving directly to a charity, you contribute cash or highly appreciated stocks to the DAF and receive an immediate tax deduction. Once the DAF is funded, you can direct those funds to charitable organizations immediately or defer making specific grants for a while. In the meantime, the funds can be invested in any of several investment options offered by the DAF and grow tax-free. DAFs are simple to set up and we can help you fund them according to your charitable goals. There are administrative costs, but they tend to be low and are often superseded by the ease and convenience of using a DAF instead of managing individual charitable contributions over the course of the year. 4. Qualified charitable distributions (QCDs). In lieu of taking required minimum distributionsA required minimum distribution is the amount of money that must be withdrawn each year from tax-deferred retirement accounts once the beneficiary reaches retirement age (72, according to IRS rules). (RMDs) from your IRAA type of account in which funds can be saved and invested without being subject to tax until the account holder reaches retirement age. account, QCDs allow you to trim your tax bill by directing some or all of that cash to a charity—reducing your AGI up to $100,000 ($200,000 if married filing jointly) per year. In addition to the tax-saving techniques above, charitable giving is a valuable tool for estate planning. Charitable trusts, in particular, are handy for families that anticipate leaving a taxable estate. But they’re complicated and come with substantial administrative costs—so check with your tax, investment and estate planning professionals before taking the leap. Contact your wealth management team and tax professional if you have questions about charitable giving and your specific situation. We’re happy to help. After all, we are The Planner You Can Talk To. About Adviser Investments Adviser Investments is a full-service wealth management firm, offering investment management, financial and tax planning, managed individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trusts, institutions and foundations since 1994, and have more than 3,500 clients across the country and over $7 billion in assets under management. Our portfolios encompass actively managed funds, ETFsA type of security which allows investors to indirectly invest in an underlying basket of financial instruments (these may include stocks, bonds, commodities or other types of instruments). Shares in an ETF are publicly traded on an exchange, and the price of an ETF’s shares will fluctuate throughout the trading day (traditional mutual funds trade only once a day). For example, one popular ETF tracks the companies in the S&P 500, so buying a share of the ETF gets an investor exposure to all 500 companies in the index., socially responsible investments and tactical asset allocation strategies, and we’re experts on Fidelity and Vanguard mutual funds. We take pride in being The Adviser You Can Talk To. Our minimum account size is $350,000. To see a full list of our awards and recognitions, click here, and for more information, please visit www.adviserinvestments.com or call 800-492-6868. This material is distributed for informational purposes only. The investment ideas and opinions contained herein should not be viewed as recommendations or personal investment advice or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed. Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged. Past performance is not an indication of future returns. Tax, legal and insurance information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice, or as advice on whether to buy or surrender any insurance products. Personalized tax advice and tax return preparation is available through a separate, written engagement agreement with Adviser Investments Tax Solutions. We do not provide legal advice, nor sell insurance products. Always consult a licensed attorney, tax professional or licensed insurance professional regarding your specific legal or tax situation, or insurance needs. Companies mentioned in this article are not necessarily held in client portfolios and our references to them should not be viewed as a recommendation to buy, sell or hold any of them. © 2021 Adviser Investments, LLC. All Rights Reserved.