Charitable Giving: Opportunities to Make a Difference
You are passionate about the organizations and causes you support. You may even have a philanthropic plan, or working with your wealth advisor to draft one, that clearly states the objectives you hope will carry across multiple generations. Consideration to how you give can present opportunities for tax savings and even greater charitable impact. Partnering with a knowledgeable advisor can help you choose the best technique to achieve your philanthropic goals.
A Range of Ways to Give
The major options available when deciding how you and your family can give most effectively are summarized below. Many of these techniques can be used together to meet your unique philanthropic and financial goals.
Charitable Giving Options
| “Checkbook” philanthropy | It’s easy to give outright gifts of cash as well as cash electronically through an organization’s website, or via text message or mobile payment app. Be sure to ask the receiving organization for a gift receipt. |
| Donor-advised fund (DAF) | Contributions to DAFs generate an immediate income tax deduction. The donor can recommend grants from a DAF, which can be made in the current year, or in one or more future years. DAFs can be invested, and returns are typically tax free. |
| Qualified charitable distributions QCD from an IRA | After reaching age 70 ½, a QCD of up to $100,000 per year can be made from your IRA to a public charity (not a DAF, private foundation or supporting organization). The QCD amount is excluded from your taxable income and is not deductible. The IRA’s administrator must send your donation directly to the charity to qualify, and no goods or services can be received in exchange for the donation. Under SECURE Act 2.0, up to $50,000 of QCDs may be distributed to a CRT or gift annuity (described below), subject to some limitations. |
| Private or family foundation | A tax deduction is generated when contributions are made to a foundation. There is a minimum distribution to charity that must be made annually, but a majority of the assets (and earnings) can be retained. The donor or designee retains control over how the foundation’s assets are invested and distributed. Foundations come with a good deal of administration, so they are not suitable for all families. |
| Testamentary gift | A testamentary gift is any charitable gift, including life insurance, retirement benefits and gifts from an estate or trust, that takes effect at your death. Leaving retirement accounts to charity rather than individual heirs can provide significant tax savings. |
| Gift annuity | A gift annuity is an irrevocable gift of an asset to a charity in exchange for an annuity payable for as long as you live. General tax law provides for taxation of capital gains whenever an asset is sold or exchanged; however, there is a special exception for qualified gift annuities, thus deferring capital gains taxes on funding. |
| Bunching | Bunching groups of what would normally be multiple years’ worth of contributions into a single tax year, resulting in donations large enough to itemize on your tax return and potentially offset a spike in income. |
| Employer matching gifts | Check your employee benefits guide or contact your human resources department regarding employer matching gifts. It may be an easy way to magnify your contributions depending on your plan. |
Common Trust Options
| Charitable lead trust (CLT) | A CLT is an irrevocable trust that pays an annuity or unitrust stream of payments to one or more designated charities over a specified period while reducing income and estate taxes. When that period expires, the remaining assets are paid to the noncharitable beneficiary, typically one’s heirs or loved ones. |
| Charitable remainder trust (CRT) | A CRT is an irrevocable trust structured inverse to a CLT, as the annuity or unitrust is paid first to a noncharitable beneficiary, typically the grantor, over a specified period. At the end of the period, the remaining assets are distributed to one or more designated charities. |
Work With Your Advisor
There are many factors to consider. Our team of experienced advisors can help you navigate the options to create a personalized philanthropic plan optimized to achieve your objectives.
This material provides information of possible interest to Glenmede Trust Company clients and friends and is not intended as investment, tax or legal advice. Any opinions, recommendations, expectations and/or projections expressed herein may change after the date of publication. Information obtained from third-party sources is assumed to be reliable but may not be independently verified, and the accuracy thereof is not guaranteed. No outcome, including performance or tax consequences, is guaranteed, due to various risks and uncertainties. Clients are encouraged to discuss any matter discussed herein with their tax advisor, attorney or Glenmede Relationship Manager.