By Dalton Atchison
With the Thanksgiving season upon us, many people begin to reflect on their triumphs, their challenges, and all they’re grateful for. For many of our clients, charitable giving is a reflection of that gratitude.
Whether you have a longstanding tradition of joyful giving or you’re just beginning now, take a look at some of our favorite tax-smart charitable giving strategies.
Donor-Advised Fund: A Gift That Keeps on Giving
If you’d like to make charitable giving an ongoing effort, you might find that a donor-advised fund (DAF) best suits your needs and goals. With a DAF, you can enjoy an immediate tax deduction, but you can gradually distribute the funds to charities over time.
When you open and fund your DAF, your contribution is irrevocable, so you can deduct it from your taxes. From there, you can recommend grants to qualifying charities.
Depending on how much you contribute when you open the fund, the tax advantages can be substantial. However, the benefits of donor-advised funds go far beyond tax savings. Setting up a DAF can be a way to establish a family tradition of charitable giving. When you pass the fund down to your children as part of your estate plan, you’re helping the next generation learn to be responsible stewards of wealth.
Qualified Charitable Distributions (QCDs): RMDs With a Purpose
If you’re 73 or older and have a tax-deferred retirement account, you must take required minimum distributions (RMDs) each year. RMDs are taxed as income, and depending on your financial situation, they could bump you into a higher tax bracket.
If you don’t need all the money you’re required to withdraw, you might consider qualified charitable distributions. With this charitable giving strategy, you transfer funds directly from a traditional IRA to a qualified charity. The amount of the QCD counts toward your annual RMD, and it’s not counted as income.
Charitable Remainder Trusts: Support Worthy Causes and Your Loved Ones With Joyful Giving
Sometimes charitable giving has direct financial benefits for your loved ones too. When you set up a charitable remainder trust (CRT), you or a loved one can receive an income stream for a set number of years. After the term expires, the remainder of the assets in the trust go to your chosen charity.
Charitable remainder trusts are irrevocable trusts, so when you transfer assets to them, you should immediately receive a tax deduction.
Donating Appreciated Securities: Tax-Savvy Generosity
As you develop this year’s charitable giving plan, you might think you need to liquidate some of your assets to make cash donations. However, if you want to maximize the value of your gift and minimize the taxes you pay on it, you might think about donating appreciated stocks and other securities.
If you sell an investment to make a charitable donation, you’ll have to pay capital gains tax before donating the rest. When you donate appreciated securities, there’s no capital gains tax to pay, and you can deduct the full appreciated value.
Ready to Build a Charitable Giving Strategy?
At Mountain PEAK Wealth Advisors, we celebrate and support our clients’ charitable giving efforts. When you work with us, we help you build a strategy that maximizes the value of your charitable dollar while also providing significant tax advantages.
We believe in a holistic approach to wealth management, and we understand your finances are deeply personal. Our team takes the time to get to know you and your goals, values, and dreams. From there, we strive to help you build the future you’ve been envisioning.
Have questions? Contact us online today. To schedule a meeting, call (260) 435-1200 or email jeff@mountainpeakwealthadvisors.com.
About Dalton
Dalton Atchison, CFP®, CKA®, CRPC®, is an Associate Wealth Advisor at Mountain PEAK Wealth Advisors in Fort Wayne, Indiana. Since joining the team in 2017, he has earned multiple professional certifications, including the CERTIFIED FINANCIAL PLANNER® certification, the Chartered Retirement Planning Counselor™ designation, and the Certified Kingdom Advisor® certification. As a Certified Kingdom Advisor®, Dalton manages clients’ resources with both prudence and purpose and focuses on helping them integrate their Christian values into their financial decision-making. His approachable style makes financial planning accessible and understandable, even for complex situations.
Dalton received his undergraduate degree from the University of Indianapolis, graduating summa cum laude with a major in business administration and a minor in photography. In his free time, he enjoys running and spending quality time with his wife, Emily, and their family. To learn more about Dalton, connect with him on LinkedIn.
