How You Can Help!
Many successful individuals and families are asked to give to any number of great causes. While it is relatively easy and almost second-nature to simply write a check, there are other creative ways to give which may not only enhance the net benefit to the beneficiary, but also provides benefits to the donor!
As opposed to simply writing a check, consider the following below!
Gifting Appreciated Stock
Many successful investors have appreciated stock in their portfolio with potentially meaningful appreciation. This appreciation becomes a (capital gain) taxable event when sold, but if directly gifted to a qualified 501(C)3 organization such as The Patriot Fund, this tax is avoided by both the donor and the beneficiary.
- Donor – has the benefit of taking a tax deduction equivalent to the full market value of the stock gifted and the donor completely avoids the capital gain tax.
- Beneficiary – receives the stock and sells it at full market value. A qualified 501(C)3 organization is exempt from capital gain taxation.
Many successful and potentially philanthropic investors find an immediate need for a tax deduction to offset potentially capital gains and income tax exposure. Contributing appreciated stock to a Donor-Advised Fund allows donors to benefit by a current tax deduction while spreading the beneficiary gifts over time.
- Donor – has the benefit of realizing a greater current income tax deduction while not committing the entire value immediately. Gifts can be “advised” to the custodian over time.
- Custodian – there are many qualified donor-advised funds available at a number of Trust Companies. The Trust Company receives the granted stock, sells it without capital gain tax exposure, and on the advice of the donor, will make the distribution to qualified charitable organizations.
- Beneficiary – as with any gift, the beneficiary 501(C)3 organization is free from taxation and in this case, a number of beneficiaries may be funded over time.
Individual Retirement Account Distributions
Financially successful individuals may have a meaningful amount of capital accumulated in Individual Retirement Accounts (IRA’s) which they feel is available for potential charitable giving.
- For those over 59 ½ years of age, a withdrawal can be made payable to a qualified charity (Qualified Charitable Distribution – QCD), the amount of which is excluded from taxable income to the donor.
- For those over 70 ½ years of age, Qualified Charitable Distributions up to $100,000 can be counted toward satisfying your required minimum distribution (RMD).
For some families of greater charitable desire, considering a Family Foundation may provide opportunities similar to the Donor Advised Fund but with greater flexibility, control, and management. Such foundations are used to not only fulfill family philanthropic planning desires, but also to foster a legacy of such thought and strategy.
The Patriot Fund does not provide tax advice and is highlighting concepts and thoughts worthy of consideration. We recommend discussing your desires with your Financial Advisor and your Tax Advisor/CPA.