Before You Write That Year-End Check: Four Giving Strategies Worth Considering

Maybe you give to the same few charities every December. Or perhaps this year you want to do something more—for a cause that has touched your family, a local organization you care about or a school that made a difference. You may already know where you want the money to go. How to make the gift can take a little more thought.

Writing a check may be the right choice. Before you do, though, it is worth asking: Would another asset make more sense? Will I need this cash next year? Does the timing matter? These are useful questions to bring to your advisor and tax professional. The four approaches below can help start that conversation.

1. Consider giving appreciated investments instead of cash

Before reaching for your checkbook, take a look at what you own. If you have publicly traded shares that have grown in value, you may be able to donate them directly rather than sell them and give cash. Depending on the asset, holding period and recipient, this may avoid realizing a capital gain on the donated shares. If much of your wealth is tied to employer stock or one other holding, ask how a gift would change what remains in your portfolio. Confirm any transfer restrictions, and make sure the charity can accept the shares before starting.

2. Give yourself time to decide where the money goes

You may know how much you want to set aside for charity without knowing every organization you want to support. A donor-advised fund may be worth discussing. You contribute assets to a sponsoring organization and can recommend grants to qualified charities over time. An eligible deduction may be available in the contribution year, subject to applicable rules. Ask about fees, contribution requirements and grant restrictions—and whether a simpler approach would meet your needs.

Be comfortable parting with the assets before you contribute. The gift is irrevocable, and the sponsoring organization has legal control. Your grant recommendations are subject to its rules, and a deduction is not guaranteed.

3. If you are eligible, ask about qualified charitable distributions

If you are age 70½ or older and have an IRA, ask whether a qualified charitable distribution, or QCD, fits your situation. It allows eligible IRA owners to direct funds to a qualifying charity. If you are subject to required minimum distributions, a QCD may satisfy some or all of that obligation, subject to current rules and limits. First, consider what you need from the account for your own retirement expenses. Then review eligibility and timing with your tax professional and custodian.

QCDs generally must be paid directly from an eligible IRA to a qualifying charity. They cannot be directed to a donor-advised fund, and an amount excluded from taxable income as a QCD cannot also be claimed as a charitable deduction. Confirm current eligibility, exclusions and limits before transferring funds.

4. Consider “bunching” charitable gifts

If you tend to give a similar amount each year, ask your tax professional to compare your usual pattern with combining several years of planned gifts into one tax year. This is often called “bunching.” Whether it helps depends on your deductions and full tax picture. A donor-advised fund may let you make the contribution in one year and recommend grants over time. But a larger gift today also means fewer assets available for other needs. Look at upcoming expenses before making that commitment.

Leave room for the rest of your life

Charitable giving rarely happens in isolation. The decisions you make can intersect with your investment strategy, retirement income, estate planning, and even business succession goals. Before settling on an amount, think about what is coming up: a retirement date, a home repair, help for a family member or simply the cash cushion that helps you feel comfortable. Those needs belong in the giving conversation, too. Your advisor can help you weigh the gift against your cash needs and investments, while your tax and legal professionals address tax treatment and estate questions.

You don't need to arrive with a strategy already chosen. Bring the charities you care about, a rough giving amount, and the accounts or investments you might use. A conversation with a financial advisor and tax professional can help you understand your options before making a decision. Start early enough to work through the details; charities and custodians may have processing cutoffs before December 31.

Make your next conversation count

Thoughtful giving starts with the right questions. Explore our Year-End Giving Menu to compare potential approaches, then use the Year-End Giving Checklist to organize your priorities before speaking with your planning team.

Whether you’re revisiting an existing strategy or exploring your options for the first time, a OneDigital Wealth advisor can help you consider how charitable giving fits into your broader financial picture.

EXPLORE THE GIVING MENU  |  DOWNLOAD THE CHECKLIST  |  CONNECT WITH ONEDIGITAL WEALTH

 

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Investment advice is offered through OneDigital Investment Advisors LLC (“ODIA”). This material is for informational purposes only and does not constitute investment, legal, or tax advice. ODIA and their associates are not estate planners and cannot provide tax or legal advice.  Consult your estate-planning attorney or qualified tax advisor for specific advice regarding your situation. Before buying any insurance product review the policy documents for coverage details and any exclusions from coverage. Any benefits advertised are subject to the claims paying ability of the insurer. Insurance products are available through OneDigital Insurance LLC., an affiliate of ODIA, or by Investment Advisor Representatives of ODIA in their separate capacities as independent insurance agents.

Not all of the investment advisory services offered by ODIA are utilized by the investment advisors across our various offices. Some offices utilize their own distinct investment processes and philosophies. Please ask your investment advisor for clarification on the services, processes and philosophies they utilize when providing advisory services.

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