By Jeffrey R. Wolfe, Vice President and Manager, Estate Planning Strategies and Affluent Client Services

Print This Post Print This Post

At year-end many support the holiday spirit and consider making charitable gifts. It’s also pretty practical to review your potential tax liability and see whether charitable giving may make sense if you itemize your deductions. There are some standard year end considerations for charitable giving:

  • Consider gifting highly appreciated assets since you can deduct their fair market value and sidestep any potential capital gains.
  • Recall the IRS requires written records for charitable contributions (typically a receipt or other verifiable documentation).
  • Gifts must be completed by year-end to count for the 2016 tax year.
  • At higher income levels ($259,400 if single/$311,300 if married) itemized charitable deductions begin to get phased out: up to 80% of your potential deduction.

While these time-tested considerations are important, another idea may be to formalize your charitable giving. Many people use “checkbook philanthropy” in that they make informal cash and other bequests whenever they decide to do so. However, you could consider creating a donor advised fund (DAF) in an effort to formalize your charitable goals.

In a DAF you can make gifts to the fund and get an immediate tax deduction for the gift. However, the DAF can invest the gifted funds and is not required to make immediate grants from the funds to a charity. This allows benefits like potentially growing the charitable fund over time and perhaps making a larger future donation. Moreover, ongoing gifts to the DAF mean you will have one statement documenting your annual gifting in lieu of multiple receipts from multiple charitable entities. Of course the DAFs have ongoing management fees, and you are only allowed to make grants from the DAF to recognized 501(c)(3) public charities.

For more information on this and other charitable giving techniques, talk with your Benjamin F. Edwards financial advisor.  Please remember, though, that Benjamin F. Edwards & Co. does not provide tax advice, so it is important to consult with your tax professional for guidance tailored to your specific situation.