This is an opportune time to reflect on our charitable giving because the Season of Giving is almost upon us. With over one million non-profits in the United States, and 35,000 located in Atlanta alone, there are many worthy causes to support. Philanthropy is personal, and the motivations for giving vary greatly. Even so, consideration of charitable giving can encourage family discussion, reinforce shared values, and, of course, reduce taxes.
Charitable giving is top of my mind because one of my colleagues and I are participating in the Philanthropic Advisor Leadership Institute program through the Community Foundation of Georgia, the Atlanta Jewish Foundation, and United Way. The program is intended to deepen participants’ knowledge of charitable planning and increase understanding of how values motivate philanthropic clients. One of our first exercises was to review a deck of cards that each featured a different image. The images ranged from photos of families to a landscape of the night sky lit up by stars. We had to select two cards and share how the images represented us and our values. The purpose is to help individuals think about their values and legacy and identify common themes, particularly within multi-generational families that may not share the same goals. While many program participants selected the same images, they had very different interpretations based on their life experiences. This encouraged lively discussion and helped crystallize what type of giving would be most meaningful to us.
Once charitable goals have been established, the next step is to determine how and when you would like to give. There are several vehicles to consider. The most common planned gift vehicles for individuals are donor-advised funds (DAFs), private foundations and making endowed gifts. DAFs are useful for donors who have not yet identified specific recipient non-profits. The donor can receive an immediate tax deduction when a contribution is made to the DAF, so long as the contribution does not exceed 30% (non-cash assets), or 60% (cash), of their adjusted gross income. Excess contributions can be carried forward for five years. Actual gifts from the DAF can be made later. Like other charitable donations, contributions to a DAF benefit from not having to pay any capital gains tax on appreciated gifted assets, and the gift is valued for tax purposes at the full current asset value if you have held the asset for more than one year.
Some people plan to give at their passing. This allows donors to retain control of their assets during their lifetime and reduce estate tax exposure at death. Of course, documentation of the donors’ wishes is critical. Gifts after passing are often made through bequests in a will or trust. Another way to give at passing is through naming one or more charities as the beneficiary of a retirement plan. Gifting of non-Roth retirement assets can be tax efficient as this avoids the possibility of the assets being taxed twice.
Benjamin Franklin said, “nothing is certain except death and taxes,” but we can mitigate taxes at death by having a charitable plan. As we gather through the holiday season, I encourage you to consider your charitable legacy, facilitate conversation with your loved ones, and consider putting your charitable giving plan in place now.