Planning for Your Philanthropic Desires

Katie Fischer, CFP®

Planning for Your Philanthropic Desires

You may have seen the recent news about philanthropist MacKenzie Scott’s most recent round of charitable donations. (If you haven’t heard you can read about it here in her words.) Scott is the ex-wife of Amazon CEO Jeff Bezos. Through their divorce, she received a significant amount of Amazon stock worth billions. Including this most recent round of gifting, she has given away over $8 billion to non-profits.

While that number is flashy and worthy of headline news, you don’t have to have billions (or even millions) to use your money to support your favorite causes. There are a number of ways to give financial resources to your charities of choice. Below are a few ideas to consider.

Directly Giving Out of Your Paycheck

Some organizations partner with employers to allow employees to have contributions deducted directly out of their paychecks. This is a great opportunity for individuals who may have a small budget for charitable contributions or who struggle to remember to make the contributions they would like to donate. You can elect to donate a few dollars out of each paycheck and your employer will ensure the organization gets your money.

Donating Appreciated Securities

You can donate after-tax investments that you have held for at least 12 months and that have increased in value directly to most organizations. This strategy provides a special tax advantage because you don’t sell the security before making the donation. Therefore, you would not be required to pay taxes on the long-term capital gains. If you itemize your deductions, you would also be able to deduct the amount on your tax return for the year the donation is made.

Qualified Charitable Distributions (QCDs)

If you are over the age of 70 ½ and have assets in a pre-tax IRA, you can make charitable donations directly out of your IRA. These donations are called qualified charitable distributions (QCDs) and must be made directly from the IRA to the charity. A QCD, unlike most IRA distributions, is not included as part of your taxable income, but it can be counted towards your annual Required Minimum Distribution (RMD).

Donor Advised Funds (DAFs)

Donor Advised Funds are accounts that can be funded now while the distributions to charities can be complete in future years. The advantage of a DAF is that you receive the tax deduction in the year the account is funded, allowing you to accelerate tax deductions into one year. Once you contribute to the DAF, you can keep the account invested until you are ready to make a donation to your favorite charity.

Including Charities in Your Estate Plans

While you may prefer to make charitable donations while you are alive to see the impact your funds make, it is also common for individuals to include their favorite causes in their estate plans. If you would like to include charitable bequests in your estate plans you have a few options including adding a charity in your Last Will or adding a charity as a beneficiary of a retirement plan. You should talk to your attorney and financial planner about the option that makes the most sense for your situation.Selecting Charities

MacKenzie Scott used a team of advisors to help her evaluate and select the charities that best represented the mission she wanted to support. While most of us don’t have the means to hire professionals to guide our efforts, if you are interested in a specific charity or cause, you can use free resources like Guidestar to learn more about 501(c)3 organizations. Once you set up a free account, you can see information on missions, leadership, and Form 990 that will help you see how the organization uses its financial resources.

Making a Plan

No matter whether you’re working or retired, there are many strategies available to support your favorite charitable causes and potentially receive a tax benefit for doing so.

Once you have evaluated and selected the charities you wish to support, talk to your financial planner and accountant to help determine the best strategy for your gifts. Most of the strategies mentioned above have special tax benefits for you, so it is best to make a plan before making significant donations.

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Are you interested in learning more about how charitable giving strategies may fit into your financial plan? Give me a call today to talk about your situation!

Katie Fischer, CFP®
Partner | Senior Financial Planner | Chief Compliance Officer


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