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Charitable Giving Strategies

by Phil Tull | December 1, 2020 | Financial Planning, Retirement Planning, Wealth Management

Phil: Welcome to Tull Financial Group’s Financial Friday. I’m glad to be here with Robin Tull today talking about charitable giving. I know this year has been a tough one for so many – especially small businesses and it’s really been cool to see the response of people to come around each other and to really give and to be a part of getting through difficult times. We got to be a part of that in a small way with the local hospital and we’ve gotten to give back to them in a small way as they are serving the community so well during this time. I know we enjoyed getting to do that and so many people are interested in giving this year especially as the end of the year draws in there are a lot of people that are thinking of how they can give and how they can do it in a tax beneficial way. One of those ways is that through the Cares Act you can give $300 with what we call an “above the line” deduction which everybody is able to get now. Robin, can you give us any more insight into that as well as some other strategies people can be thinking about in terms of charitable giving?

Robin: Yeah, the Holidays are approaching quickly and so that means people are looking to give and this year I think that you’re really not going to be able to wait till the 20th – 25th of December. You are going to have to do it earlier this year just because of COVID and with how organizations are set up. The $300 – if you do itemize, it doesn’t matter, but if you don’t itemize and you make a gift for $300 you need to put that on your return in an above the line deduction – it’s something that the CARES Act has provided you. Some of the other things that the CARES Act has done is if you give cash to an organization, whereas it used to be you could only deduct up to 60% of that amount, now it’s 100% under the CARES Act. They want to encourage people to give and there’s still a lot of organizations that need help so if you give 100% you get a 100% deduction. Now if you want to give stock, which we have a lot of clients as you know Phil, that give stock to organizations. In that case, you want to make sure it is held for 12 months if there’s a gain on that stock and you give it directly to the organization so the tax liabilities are forgiven and you get to deduct the charitable gift. Now if the stock, on the other hand, if you’ve had a loser and it’s gone down in value, you don’t want to give the stock. What you want to do is to sell the stock and give the cash under the CARES act provision of 100%.

Phil: I know so many people are able to utilize that, especially with the run up in technology stocks and things like that and the standard deduction does make it difficult for some people to itemize. There are different strategies and I know another one is charitable bunching. Would you provide some insight into what that looks like?

Robin: Yeah, you know a few years ago the government changed the tax law where they raised the standard deduction and so if you took the standard deduction and you didn’t have enough charitable giving, you weren’t able to use it. So, what we’ve encouraged people to do is if you look out and say look I’m going to give a certain amount every year. I’m going to give $10,000 a year. You could actually bunch two or three years together and those three years of gifts in one year can be given to use the itemized deduction. Then the next year you go back to the standard deduction. I think it’s something to look at. You know we have a lot of retired clients that we work with and in addition to that, the CARES Act affected their required minimum distributions where they didn’t have to take it this year, so if you had an RMD, you could actually waive it for 2020. We find a lot of people give through the required minimum distribution and that’s still an opportunity up to $100,000. When you do that, just let us know and let the organization where your gift is going, and just make sure that’s done early enough. Again, it needs to be done beginning of December.

Phil: I know one thing we’ve seen a lot is making sure you track that. When you do the QCD (qualified charitable distribution) you want to make sure that you have receipt of that with that organization as well as if you have a tax prepare that they’re tracking that so you’re ensuring that come tax time you’re having that deduction there listed as a line item so you getting all the benefits from that qualified charitable distributions. It’s a great avenue to add. I know another one that we see a lot especially now -it used to be when you had to create a charitable foundation, it was a lot of work to structure that legally, but now it’s fairly simple to create a Donor Advised Fund (DAF) and put money into that. Could you walk us through how that works?

Robin: This is one of my favorite devices. It’s like your own mutual fund that you give to. Once you give to it you could say it’s “The Jones Family Legacy Fund” and you make that contribution to the donor advised fund, you get an immediate tax deduction for it. Maybe you don’t want to give it out until you’re ready and some of these capital campaigns with hospitals and churches and so forth you know their capital campaigns run at different times. The DAF provides the opportunity to make the gift at the year end to the donor advised fund but then give them money the next year when that capital campaign starts up. I really like that and also it can be an anonymous gift which a lot of people like.

Phil: That’s great, there are so many different tools and so many things to consider and think about. Please use your financial advisor – it’s so important to use that advisor as you go through your wealth management and financial planning. You really want to utilize your experts, and if you don’t have one, we would welcome the call. We would love to talk through these different strategies with you and really add that value because there is a lot of value to be added when it comes to tax planning and preparation and really utilizing all the tools that you have available in your financial arsenal. Continue giving – it is the season and plan early. It is really a blessing to be able to give. We hope you got something out of this segment today have a great rest of your week!

If you’re ready to talk to someone about wealth management, retirement planning, tax strategies, or charitable giving, please give Tull Financial Group a call today at 757-436-1122.