The Giving Season

Thanksgiving marks the beginning of the giving season.  Charities and non-profits will receive much-needed dollars to fund their good works, and the money they receive in the next few weeks will be the bulk of their annual budget because Individuals typically wait until the end of the year to give. Some people give from their wallets, and others from their hearts.  

For where your treasure is, there your heart will be also. ~ Matthew 6:21.

During the financial planning discovery phase, I ask people if they donate money to charities, and  I’m happy to report most people are generous, but not all. I once worked with a young pilot who didn’t believe in giving money away while living, and he planned to donate his money at his death through his estate. I told him part of the joy of giving money away while you’re living is you get to see your gift bear fruit. 

Each one must give as he has decided in his heart, not reluctantly or under compulsion, for God loves a cheerful giver. ~ 2 Corinthians 9:7.

Here are a few ideas and strategies to help you with your charitable donations.

  1. Appreciated Securities. The stock market has produced stellar results this year, and you may own several companies that have performed well. When you donate appreciated securities, you get a deduction, avoid a capital gains tax, and your charity receives the money. Let’s say you purchased Dicks Sporting Goods in January at $56, and today it’s selling for $129 for an unrealized gain of $73 or 130%. You can gift your shares directly to your charity and avoid paying taxes on your profit. The charity can sell the stock and receive the cash, and they, too, will avoid the capital gains tax. To qualify for a tax deduction, donate your securities to a 501c3 organization. 
  2. Qualified Charitable Distribution. The IRS lets you satisfy your required minimum distribution by donating your money directly to a charity from your IRA. This distribution is called a qualified charitable distribution (QCD), and you’re allowed to give up to $100,000. One advantage of the QCD is that you avoid paying income taxes on your gift.
  3. Donor-Advised Fund. If you don’t know which organizations to support but want to make a charitable contribution, consider establishing a donor-advised fund (DAF). You can fund your DAF today and donate to charities at a later date. You will receive the deduction for this calendar year, even though you can defer your payouts. You can also manage and invest the money inside your DAF.
  4. Cash.  Cash is king, and it’s easy to give away. The IRS allows you to give $15,000 per person per year without paying taxes on your gift, nor will your recipients, but you won’t receive a tax deduction. For example, if you have four children and ten grandchildren, you can give $210,000 per year.

There is always a right time to help others, and the end of the year is a wonderful time to give money to those in need. However, to improve your giving, consider a charitable giving strategy. A philanthropic plan can pay huge dividends to you and those you support. 

Do not withhold good from those to whom it is due, when it is in your power to do it. ~ Proverbs 3:37.

November 9, 2021

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.

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