charitable giving

Which Charitable Giving Strategy is Right for You?

Thanksgiving marks the official start of the holidays. This time of year, letters start arriving in mailboxes from charitable organizations requesting contributions before year-end. Instead of responding immediately to each appeal, consider an overall charitable giving strategy to maximize the impact of your donations.

Many years ago, I worked with a generous elderly client who received many such letters. When she compiled a list of all her contributions for the year, she was surprised to find that she had sent multiple checks to several of the organizations. That led her to adopt a more organized approach in future years.

Charitable Impact

Setting up a charitable giving strategy can lead to a more impactful and efficient result. In addition to identifying which causes are important to you, you should consider the type of involvement you want in the charitable organization(s) and whether to involve other family members.

Engaging other family members may present an opportunity to demonstrate family values or provide financial education.

There are many ways to give, and sometimes a combination of techniques makes sense. Below are a few approaches to giving that we discuss with clients.

Donor Advised Fund

One method that has broad appeal is a Donor Advised Fund (DAF). These accounts are offered by many financial institutions, including Schwab, Vanguard and Fidelity, and may also be available through other organizations such as a local community foundation. A Donor Advised Fund offers the benefits of a low minimum to get started (often $5,000), an immediate tax deduction, low minimum grant request amounts, low administration costs, and simpler recordkeeping for tax preparation, to name a few.

Donating Appreciated Securities

Another often overlooked method is to donate appreciated securities directly to the charity instead of writing a check. The donor avoids capital gain tax, can qualify for a tax deduction for the donation, and the charity can benefit from the full value of the donated securities.

Many donors can “hit a home run” by combining these two techniques and contributing appreciated securities to a DAF.

Donating IRA Dollars

A third method of giving for individuals over 70 ½ is to make a qualified charitable distribution (“QCD”) directly from their IRA up to $100,000 per year per individual. A QCD is tax-efficient in that it does not increase AGI, and it counts toward the individual’s required minimum distribution. As with other donations, no benefit can be received in exchange, and the gift needs to be substantiated.

Social needs and charitable requests invariably tug at our heart-strings; however, compassion and smart giving can go hand-in-hand. By thinking through your giving options, you are likely to be more strategic and impactful with your donations.

Valerie Connolly, CFA

Valerie joined HTG in 2011 as a senior advisor. Drawing on 30 years of experience in financial services, she greatly enjoys collaborating with clients to shape their financial aspirations. Valerie takes a lead role in developing client investment plans, researching investment vehicles and developing firm-wide investment policy.

Valerie received a BA from Wellesley College and an MBA from University of Chicago. She is a CFA® charterholder and a member of the CFA Institute and CFA Society Stamford.
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.
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