Charitable Planning Tips for this Tax Season


By Jackie Yahr, Esq., Assistant Vice President, Charitable Planning, The Associated

As April 15 approaches, many of your clients will be facing a new reality as they see how the changes to the tax laws impact their tax liability. While it may be too late to make any decisions that will affect their 2018 tax return, inviting your clients into your office for a discussion around careful planning for the current tax year and beyond will set you apart from other professionals and position you as the trusted and well-versed advisor.

Here are 3 tips to discuss with your clients:

1. Don’t let the increased Standard Deduction stop charitable giving.

The sweeping changes to the federal tax laws now mean that charitable donations are deductible only if your client itemizes, which is a less likely scenario for many taxpayers given the new, higher standard deduction ($12,000 for individuals and $24,000 for married couples, slightly higher for those over 65). If your client’s gifts to charity last year did not exceed the standard deduction, do not worry, there are planning tools that you can employ this year and, in the years to come, that will help your clients continue to be tax-efficient.

2. Alternative gifting can help your client’s tax situation.

If your client’s annual charitable giving does not put them over the standard deduction threshold, you may consider discussing the option of “bundling” your client’s giving with your client. The idea is to take a few years’ worth of ALL of your client’s charitable donations and give them in a single year to help push your client over the standard deduction threshold. Your client can certainly give the specific charities that they support those bundled amounts designate those gifts over a number of years. Another option is to put the bundled amount into a Donor-Advised Fund at The Associated, which affords your client a larger tax deduction in Year One and additional savings on their federal income taxes. Then, in the subsequent years, your clients have their Donor-Advised Fund from which to recommend all their charitable contributions to the charities that they support.

For any client who is 70 ½ or older, if they have an IRA, they are most certainly taking a Required Minimum Distribution or RMD every year. When your client withdraws their RMD, they are realizing additional income in that taxable year. One solution to avoid paying those additional taxes is to encourage your client to make their charitable gifts directly from their IRA. To do this, your client must simply contact their IRA plan administrator and instruct them to send all or a portion of their RMD directly to the charity or charities that they support; some plan administrators even provide a checkbook which allows them to send portions of their RMD to multiple charities. By employing this tactic, your client will fulfill their obligation to take their RMD, avoid additional taxable income, and continue to support the charities your clients care about most deeply.

3. Look at your client’s entire portfolio for tax-advantageous giving.

Assets that have appreciated in value can be among the most tax-advantaged items to contribute to charity because you can potentially eliminate capital gains tax liability on their sale and enjoy a current year tax deduction, if you itemize. This allows your client to pay lower taxes and also allows the charities your clients’ support to receive the most money possible. Some examples of highly appreciated assets include publicly traded securities, restricted stock, real estate, privately held stock (C-Corp and S-Corp), and limited partnerships or limited liability corporations. And a Donor-Advised Fund is a great vehicle to consider for those assets if your clients are giving to charities that are not as experienced at handling those complex assets. While not all appreciated assets may be suitable for a Donor-Advised Fund, here at The Associated, we can work with you and your clients to sell contributed appreciated assets and put the proceeds into a Donor-Advised Fund, which will allow your clients to recommend charitable contributions on a timetable that suits them.

As always, The Associated’s Philanthropic Planning and Services professionals remain ready to work with you and your clients on how to incorporate charitable planning into their estate plans and how to help maximize the financial and charitable benefits of any such planning strategies available to you. For more information, contact Jackie Yahr at jyahr@associated.org or 410-369-9248.

This article is for informational purposes only and should not be construed as legal, tax or financial advice. When considering gift planning strategies, you should always consult with your own legal and tax advisers.

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