Charitable Giving

Aligning Philanthropy With Smart Financial and Tax Planning

For many of our clients, charitable giving is an important part of both their financial plan and their estate plan. While most people are accustomed to supporting charities by simply writing checks, there are a number of more advanced charitable giving strategies that can significantly improve the tax efficiency of those gifts—especially in retirement.

Once individuals retire, their income sources change, tax rules shift, and new planning opportunities emerge. When charitable giving is thoughtfully integrated into a financial plan, clients may be able to give more, reduce taxes, and create a lasting impact—both during their lifetime and beyond.

Qualified Charitable Distributions (QCDs)

One of the most effective charitable giving strategies for retirees is the Qualified Charitable Distribution (QCD).

Once an individual reaches age 70½, they are permitted to:

• Send money directly from a pre-tax IRA to a qualified charity

• Avoid paying any income tax on the distributed amount

When the individual later reaches Required Minimum Distribution (RMD) age, QCDs also:

• Count toward satisfying the annual RMD requirement

• Do not increase taxable income

This strategy is especially powerful because it allows IRA dollars—money that would otherwise be taxable—to be given to charity without triggering income taxes for the donor or their beneficiaries.

Charitable Giving and the Standard Deduction

Because the standard deduction is now so high, many retired individuals and couples no longer itemize deductions. As a result, they often receive no tax benefit from charitable gifts made by check.

This is where donor-advised funds (DAFs) can be a valuable planning tool.

Donor-Advised Funds (DAFs)

A donor-advised fund allows individuals to:

• Make a large charitable contribution in a single tax year

• Itemize deductions in that year

• Capture the full tax benefit of the gift

• Distribute funds to charities over many future years

• Potentially allow charitable dollars to grow through investment returns

Example:

A married couple donates $10,000 annually to charity. Because the standard deduction exceeds $30,000, they receive no tax deduction.

Instead, they could:

• Contribute $50,000 to a donor-advised fund in one year

• Itemize deductions that year and receive the tax benefit

• Continue supporting charities annually from the donor-advised fund over time

This strategy can be a very effective way to combine philanthropy with tax efficiency.

Charitable Giving Through Beneficiary Designations

Charitable intent can also be integrated into an estate plan through beneficiary designations.

In many cases:

• It is more tax-efficient for children and grandchildren to inherit assets that receive a step-up in cost basis, such as brokerage accounts or real estate

• Charities do not pay income tax on distributions from retirement accounts

As a result, it is often advantageous to:

• Leave pre-tax retirement accounts (Traditional IRAs, pre-tax 401(k)s) to charities

• Leave other assets to individual beneficiaries

This approach can reduce overall taxes paid and preserve more wealth for family members.

Advanced Charitable Trust Strategies

For higher-net-worth individuals, charitable giving can be further enhanced through specialized trust planning.

One example is a Charitable Remainder Trust (CRT):

• The donor receives a significant charitable deduction while alive

• The trust may provide income to the donor for life or a term of years

• Remaining assets ultimately pass to charity

These strategies are more complex and require coordination with an estate attorney, but they can provide meaningful tax benefits while fulfilling long-term charitable goals.

Gifting With Appreciated Securities

Another effective charitable giving strategy involves donating appreciated securities instead of cash.

When donating stocks or investments held in a brokerage account that have significantly appreciated:

• The donor avoids paying capital gains tax on the appreciation

• The charity receives the full market value

• The donor may still receive a charitable deduction (subject to AGI limitations)

While there are specific rules and limits based on adjusted gross income, gifting appreciated securities can be a highly efficient way to meet charitable goals.

Charitable Giving as Part of a Comprehensive Plan

Once retired, individuals often gain access to charitable planning strategies that were not available during working years. The key is understanding how charitable giving fits into:

• Retirement income planning

• Tax strategy

• RMD planning

• Estate and legacy goals

At Greenbush Financial Group, we help clients evaluate which charitable strategies align best with their financial picture and personal values.

Contact Us . . . .

All of our services start with a complimentary consult. No high pressure sales tactics. We are financial planners, not salesmen.

About Our Firm:  Greenbush Financial Group is an independent registered investment advisory firm based in Albany, New York, that provides four main services to clients: fee-based financial planning services, investment management, employer-sponsored retirement plans, and retirement planning services.  The firm serves clients locally in the Albany region and virtually across the United States.

Posts By Topic