While many of us give to different organizations and give for different reasons, we believe it is important for all of us to consider giving. Unfortunately, it is easy to hold money or other possessions tightly or to even give begrudgingly. Whether we are giving time, money or other resources, parting with something of value can sometimes be difficult as it means we will have less. But it is important to give – and to give willingly.
4 Reasons To Consider Giving
- Giving Helps Others: If you are reading this blog post, you have been given a lot. It can be easy to participate in the “comparison game” and look at others who have more with some degree of envy. The old saying is true… ”comparison is the thief of all joy.” Whether you give directly to a person experiencing financial hardship or your gift is directed toward a charitable organization, the end result of your giving can be a huge blessing to those in need.
- This World Is Fleeting: My grandmother used to say, “all I really have to do is die and pay taxes.” She was correct as we leave all of our worldly possessions behind at our passing. While planning for your financial future is VERY important, it is important to remember that the things of this world are temporary.
- Giving Expresses Thankfulness: Giving shows that we are thankful for what we have – and a thankful heart is a happy heart. Quite a bit of research has been done on the topic of money and happiness. Studies show that people actually derive greater happiness when they are active givers. We do not suggest the pursuit of happiness to be the main reason for giving, but it certainly does not hurt.
- God Is Giving: The most quoted verse in the Bible, John 3:16, says, “For God so loved the world, that he gave His only Son, that whoever believes in Him should not perish but have eternal life.” Because God has given His Son to us, it seems like a reasonable response for us to give generously back to others.
6 Ways To Maximize Your Giving
- Gift Appreciated Stock To Charity: If you have significant unrealized gains in an after-tax investment account, consider gifting a portion of your appreciated securities to charity. You can avoid the capital gains tax you would incur by selling the shares. The charity will provide you with an itemized income tax deduction based on the fair market value of the shares on the date they were donated to the charity. The charity will sell the shares with ZERO income tax liability.
- If You Are Over 72, Gift IRA Assets: Under the current tax code, you can give up to $100,000 of your Required Minimum Distribution (RMD) directly to a qualified charity and pay no ordinary income taxes. This distribution is called a Qualified Charitable Deduction (QCD). You do not receive an income tax deduction for this type of gift, but you do not have to count the amount of the gift towards your gross taxable income for that year. While doing this, you can still claim the standard deduction on your tax return which is currently $25,900 for a married couple filing a joint tax return. For most retirees that are required to take RMDs, this is a very advantageous gifting strategy.
- Time Your Gifts Wisely: With the revised tax law, your property tax deduction is capped at $10,000 per year. You may not be able to itemize this on your income tax return either since the standard deduction doubled and a married couple needs to exceed $25,900 of deductions in order to itemize. Because of this, it might make sense to "bunch" your deductions. This means you would make your 2022 and 2023 charitable gifts at the end of 2022 so your total gifts would exceed the standard deduction amount. Then in the following year, you can claim the increased standard deduction.
- Gift Appreciated Stock To Family Members: Many family members enjoy giving money to their children and grandchildren. This could be to reduce your taxable estate or just to gift family members via a “Santa Claus” gift at the end of each year. While writing a check to your children/grandchildren might be the easiest way, there is value in gifting them appreciated stocks. Assuming that the child is in a lower income tax bracket, they might qualify to pay capital gains at a much lower rate.
- Donor-Advised Fund (DAF): “Tax-break now, charity later” is the best way to describe a Donor-Advised Fund. This type of fund can receive a charitable contribution at any time. You will receive an income tax deduction in the year the gift was made to your donor-advised fund but still control the funds with the intentions of giving at a later date. Most assets can be added to a donor-advised fund – stocks, mutual funds and cash. Some donor-advised funds even allow you to contribute real estate or shares of a privately held company.
- Charitable Trust: There are two main types of charitable trusts: charitable remainder trust (CRT) and charitable lead trust (CLT). The charitable remainder trust allows a charitable organization to use the assets for a specific period of time. When the trust terminates, the assets become the property of the charity. The charitable lead trust allows the owner to retain control of the assets. Any interest that comes from the trust goes to the charity or is split with the trust beneficiaries. At the time of trust termination, the funds usually revert back to the beneficiaries.
Takeaway
We LOVE generous clients and enjoy helping them create and execute strategies to maximize their charitable giving. The Price Group also supports charities locally and nationally – you can read more about the charities we support here. As always, the ‘devil is in the details’ and you must consider various income tax law limitations (i.e. “kiddie tax”, annual gift tax exclusion, the lifetime lump sum gifting option, etc.). Have specific questions about the most advantageous way to give? We would love to help.
About the Author
Matt Price serves as a Partner and Senior Vice President for The Price Group of Steward Partners. He resides in Houston with his wife, Emily, their three children and the family golden retriever. Matt studied at the University of Pennsylvania – Wharton School of Business for his Certified Investment Management Analyst (CIMA®) designation after receiving his undergraduate degree from the University of Tennessee - Knoxville. Over the past 10 years, Matt has helped families make high quality, common sense decisions regarding their wealth and their legacy. Matt firmly believes that everyone needs a wealth coach!
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Steward Partners Investment Solutions, LLC (“Steward Partners”), its affiliates and Steward Partners Wealth Managers do not provide tax or legal advice. You should consult with your tax advisor for matters involving taxation and tax planning and their attorney for matters involving trust and estate planning and other legal matters.
The views expressed herein are those of the author and do not necessarily reflect the views of Steward Partners or its affiliates. All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results.
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