Ask An Advisor About: Year-end giving

Featuring Professional Advisor Marianela Collado

November 3, 2021

Marianela Collado,CPA/PFS, CFP® of Tobias Financial Advisors, is a member of the Community Foundation of Broward's Professional Advisors Council.

“Ask an Advisor” features members of the Community Foundation of Broward’s Professional Advisors Council, who share insights about tax law, wealth management, estate planning and giving strategies that help local philanthropists create a BOLD impact.

In this edition of “Ask an Advisor,” we ask expert financial advisor Marianela Collado about asset alternatives and maximizing tax benefits for year-end giving.

Q.

Why is a Qualified Charitable Distribution (QCD) from an IRA an ideal asset for year-end giving?

A.

If I know a client is charitably inclined and is over the age of 70 ½, my first step is to recommend they use their required IRA distribution to make their charitable gift. Nobody likes to pay taxes on their IRA distribution. When you fulfill your Required Minimum Distribution (RMD) with a Qualified Charitable Distribution, those distributions are not included in your Adjusted Gross Income (AGI). A big benefit of the Qualified Charitable Distribution is keeping your Adjusted Gross Income below certain thresholds that can have other tax implications.

It’s important to remember that to qualify as a QCD the distribution must go directly to a 501(C)3 charitable organization and it’s not allowed as a contribution to a Donor-Advised Fund, whether at a nonprofit or a commercial financial institution. A big benefit of partnering with the Community Foundation for year-end giving is that the Community Foundation has several types of charitable Funds that qualify for a QCD. Plus, by giving through the Community Foundation you get the benefit of a team of experts who help you make the biggest impact possible for the issues you care about the most.

Q.

How does donating appreciated stock/securities help accomplish charitable giving goals and reduce tax liabilities?

A.

For those who want to give beyond the level of their Required Minimum Distribution or are under the age of 70½, my next planning strategy is to recommend they donate appreciated stock. Donating appreciated stock is like putting your charitable giving on steroids. Because not only are you getting the tax deduction for the value of the securities you donate, you are also removing the tax liability associated with the appreciation of that stock. All the appreciation is basically wiped away – the capital gains tax disappears.

For those who prioritize charitable giving, you are able to give more because you don’t have to pay the additional tax on the appreciated stock. You can have a bigger impact on the charitable end. But don’t wait until the last minute to make a year-end donation with appreciated stock. The stock has to be transferred and received by Dec. 31 in order for you to get the tax benefit for that year and it can take several days to complete those transactions depending on the financial institution.

Q.

Why should someone consider gift bundling through a Donor-Advised Fund at this time of year?

A.

After standard deductions doubled under the 2017 tax law, more people started losing out on the same level of tax benefits they used to get with their year-end giving. Gift bundling can help you get over that standard deduction hurdle. A year-end gift to a Donor-Advised Fund enables you to front-load multiple years’ worth of support for important causes and organizations that you intend to support in the years to come. By doing so, you get your tax deduction this year and lock in long-term support for one or more nonprofit organizations that are near and dear to your heart. And after guaranteeing your tax deduction now, you can take your time distributing support through your Donor-Advised Fund.

Gift bundling through a Donor-Advised Fund can also be a great tool to help get children or extended family engaged in philanthropy. You can create your Fund and then sit down at the Thanksgiving table to talk about ways your family can use the Fund to give back to your community. So, beyond the tax benefit, gift bundling to your Donor-Advised Fund becomes a way to create a family legacy. It’s an opportunity to emphasize your values and teach them to the next generation.

Learn More

To talk about year-end giving opportunities, contact Mark Kotler at mkotler@cfbroward.org or 954-761-9503 ext. 130.

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