Beyond Giving Tuesday – Mosaic Family Wealth

Maximizing your charitable impact beyond Giving Tuesday is a great way to provide a positive emotional, social & spiritual effect for you and your loved ones on your journey towards a life of significance. And December is a great time of year to consider charitable contributions as a way to positively impact organizations you care about.

With the help of a wealth advisor who can help you maximize advanced giving techniques aligned to your finances, values, and legacy plans, you might consider some of these philanthropic vehicles for your end-of-year giving:

CASH GIFTS: The CARES Act passed by Congress early this year as a result of the pandemic provided a significant change for individuals that choose to deduct 2020 cash contributions, raising the limits from 60% of adjusted gross income (AGI) to 100%.

Keep in mind that any excess contributions above your AGI limit will be carried forward for the next five years. Also note that these changes only apply to cash contributions made directly to a public charity, excluding supporting organizations and donor-advised funds. Stock donations and gifts to private foundations are still subject to the 30% of the AGI rule.

DONOR-ADVISED FUND (DAF): With this investment account you can set aside funds for the sole purpose of supporting charitable organizations you care about. Once your advisor sets up the fund, you make your donation and receive an immediate tax deduction while distributing the funds to charity over time at your discretion.

DAFs are particularly useful when something happens in your life that could make your tax bill especially high, like a large stock cash-out, or selling of a company or other significant asset. Creating and funding a DAF can help you manage your tax bill and enable you to set money aside for charities you can decide on at a later date.

QUALIFIED CHARITABLE DISTRIBUTIONS (QCD): This vehicle offers retirement savers taking required minimum distributions from their IRA accounts the opportunity to divert those distributions to a qualified charitable organization. If you are age 70 ½ or older, you can directly transfer up to $100,000 per year to an eligible charity. The benefit of using a QCD is that these distributions are not subject to taxes as a normal IRA distribution would be. But keep in mind that these contributions are not eligible for a charitable deduction, and the funds have to go directly to the charity and not to a donor advised fund.

Retirees might consider a deduction bunching strategy, which allows you to keep total expenses the same but increase total tax deductions over multiple years. When you bunch, you delay a year’s worth of charitable giving from one year to the next, giving double the amount to charity in the second year. The total giving stays the same, but the total tax deductions claimed are increased, which might make sense for 2020 contributions consider the earning challenges we’ve all faced.

PRIVATE CHARITABLE FOUNDATIONS: Setting up a private charitable foundation enables you to have almost unlimited ability to decide what to invest in and which organizations to donate to, even ones that don’t normally qualify for a tax deduction (like non-501(c)3s, international organizations, and individuals).

Private foundations generally require more of an initial investment than DAFs (hundreds of thousands plus vs. $5,000), but they allow you to make loans instead of grants if you want to provide an organization with the money it needs immediately but then collect it back at favorable rates down the line, enabling you to do good again in the future. Private foundations are also allowed to compensate family members who help you run the fund.

CHARITABLE TRUSTS: This popular tool involves putting money or assets into a trust that you guide but do not own. A trustee, or fiduciary, takes responsibility for the assets and then donates them to the trust’s beneficiary according to your instructions. (Some private foundations are set up as charitable trusts, but not all trusts are private foundations.)

Many people choose to set up trusts because you can often give to charity and continue to collect investment income from what you’ve donated. One way to do this is by setting up a Charitable Remainder Trusts (CRT) which allows you to collect the income generated from a donated dividend-paying asset, like stocks. After a set period of time, whatever’s left in the trust is donated to the charity of your choice.

Charitable deduction rules can be very complicated, and you should work with your wealth advisor and other financial professionals to ensure you are maximizing the tax benefit of any donation. The team at Mosaic Family Wealth is available to provide guidance.

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Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing in this content is intended to be, and you should not consider anything in this content to be, investment, accounting, tax, or legal advice. If you would like investment, accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs.

Mosaic Family Wealth, LLC is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Mosaic Family Wealth, LLC and its representatives are properly licensed or exempt from licensure.