Growing Philanthropy

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“The difference between charity and philanthropy is the distance of the soul…To be philanthropic is to give something, to be charitable is to give one’s own heart.” ~Maya Angelou

Recently, 20-year-old Walter Carr gained national attention by walking 20 miles to a new job as a mover when his car broke down. When the family he would be moving learned his story, they shared it on social media and started a GoFundMe. News outlets picked it up, and the GoFundMe account exceeded its goal. Walter chose to give a portion of funds to a nonprofit foundation dedicated to increasing the number of students in local city schools who are on the path to college, career and life readiness, in which he had participated.

Whether it’s called philanthropy or charity, the act of giving creates a domino effect. We’re encouraged by the example of others or by our own faith traditions to share material goods, money, energy, kind words and acts of service. Today, it’s easier than writing a check; tap a button on your phone or click on a website. But there are additional methods and plans to accomplish your philanthropic goals for the organizations that are important to you.

Donor Advised Funds
The Council on Foundations estimates that the 2017 TCJA will reduce charitable giving up to $24 billion annually. If you want to maximize the impact of giving, it may make sense to change your strategy. “Bunching” is a tactic through which you make two or more years’ worth of donations in a single year so that with other deductible expenses, you will have enough deductions to itemize that year. The next year you skip donating and take the standard deduction.

Numerous faith-based foundations, mutual fund companies, brokerage firms and community funds set up donor-advised funds with a minimum contribution based on the fund’s limit. Start the fund with cash, stock, mutual funds; some accept artwork, real estate and even bitcoin. If you itemize deductions, donations to the DAF are deductible in the year donated. The real beauty of a DAF is that the donor, or donor’s family, has an almost unlimited time in which to decide what charities to support. Parents can use it as a tool to discuss philanthropy with their children, and older adults view it in terms of establishing a legacy of giving.

Appreciated Stock
If you hold stocks or other investments for more than one year and they grow in value, you might consider selling the asset and donating the proceeds to make a charitable donation. In this scenario, you quite possibly will have a tax liability from the long-term capital gain. The alternative is to give the asset or stock directly to the charity. It can then hold the asset, with the expectation it will increase in value, or liquidate it. If you itemize deductions, the market value of the stock when the gift is made is deductible from your adjusted gross income.

Charitable Trusts
With a charitable remainder trust, the donor gives highly appreciated or non-income-producing assets to the trust, and the trust makes an annual, or more frequent, payout back to the donor or another noncharitable beneficiary for the lifetime of the trust, which the donor chooses. At the end of the term, the remaining assets go to the charity selected. Sale of highly appreciated assets within the trust avoids capital gains liabilities.

A charitable lead trust is similar, but it makes the annual payout to the charity first. At termination of the trust, the remainder goes to a noncharitable beneficiary such as a family member or family trust.

Trusts preserve assets, but they’re irrevocable and require setup and maintenance fees. Plus, the IRS has rules about how much must be left in the trust to qualify for the tax advantages.

Workplace Giving
Increasing numbers of companies are offering payroll deduction options for charities, and many will match the employee’s donation. Check to see if the charities you support are eligible.
In addition, more and more large and small firms are allowing employers time to support charitable causes. It could be a company work day at a Habitat worksite or a day during which the workforce volunteers at a local animal shelter; the activity encourages giving and team building.

IRA Donation
At age 70½, IRA holders are required to take annual distributions from a traditional IRA. The IRS Qualified Charitable Distribution rule allows the account holder to distribute up to $100,000 annually directly to the qualified charities of their choice. If you haven’t reached the age limit, this is a great way to look forward to growing your philanthropic goals.
As always, consult your tax and estate planning advisers to determine the best strategy for your situation. Discuss your goals with your family to make philanthropy a family tradition. ■

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