Americans are generous. We literally give money away. That’s a good thing. Often we put cash into the collection plate or drop coins when the Salvation Army Santa rings their hand bell. There are other ways of giving to charity that can be advantageous to your client from a tax standpoint. Does your client know their options?
1. Giving my check. This option is obvious. You now have a record of charitable contributions you’ve made during the year. You can summarize them for your accountant.
2. Saving (and requesting) acknowledgments. Many charities send a thank you letter, including the magic words “no goods or services were received…” Some institutions prefer getting a request for an acknowledgement of your gift. Our local church runs a notice in the weekly bulletin, indicating if you want a tally of the money you’ve given through the envelope system, just ask.
3. Paying over time. Nonprofit organizations sometimes need big money. The hospital is adding a new wing. These appeals often come with naming opportunities. Because the amounts requested are large, donors are usually given the option to pay over time. Three years is a typical pledge period. The charity usually wants an initial check up front and specific amounts on set dates. This isn’t a balloon payment mortgage where all the money can be paid on the last day.
4. Donating appreciated stock. This is wonderful when your client owns stock with a low cost basis. If they wanted to give cash, they would have a capital gain if they sold stock to raise funds. They have the option of transferring appreciated stock to the charity, which is sold once in the charity’s name. The donor gets credit for the full amount of the gift.
5. Donor advised funds. These have become a popular vehicle for charitable giving. Your client might be in a position to be very generous this year, yet the big request hasn’t been made by their favorite charities. They can make their gift now, have it count as a charitable contribution, then redirect the money later when the need arises. There are more rules, but it gives your client flexibility.
6. Matching funds. If your client works for a major firm, they might have a matching gift program. Your client makes their gift and fills out a form, which the charity submits. Your client’s gift is matched, up to an annual threshold for the client. Matches are usually 1:1, yet some firms might match 2:1 or more. This increases the amount of money going to the cause.
7. Retirement plan beneficiary. Many charities plan ahead. You might choose to leave a legacy gift by naming the charity as a beneficiary for a portion of your IRA or another retirement plan. In most cases, you have the option of changing beneficiaries. You might also spend all the funds within the account during your lifetime.
These are only some of the many ways your client can give to charity. It’s important they understand their options.
Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book Captivating the Wealthy Investor is available on Amazon.