Wednesday, December 8, 2021

Gifts to Charity



Darcie Guerin

B18-CBN-10-2-15-6“The best thing to give your enemy is forgiveness; to an opponent, tolerance; to a friend, your heart; to your child, a good example; to your father, deference; to your mother, conduct that will make her proud of you; to yourself, respect; to all men, charity.” ~ Francis Maitland Balfour, British Biologist, 1851-1882


Question: What is the most efficient way to make gifts to charities? I support a number of organizations and want to know if the gifts need to be completed before year-end for tax purposes?

Answer: Making charitable donations isn’t only commendable, but by doing so, you may substantially reduce your income tax liability. Let’s look at a few ways to accomplish this, from the simplest approaches to a few of the more advanced gifting techniques.



If you itemize, the most straightforward charitable contribution method is to give cash, typically in the form of a check, prior to December 31, 2015. If you’re in the 25% tax bracket and itemize, a $1,000 gift could provide you tax savings of $250, while benefiting the charity to the tune of $1,000.



While cash gifts are easy and straightforward, from a tax perspective, gifts of securities are frequently the most advantageous type of donation. Gifting of long-term, appreciated securities allows you to avoid paying capital gains tax. You still receive an income tax deduction equal to the full fair market value of the security at the time it is gifted.

For example, if you bought stock over twelve months ago with a purchase price of $5,000, and the stock is now worth $25,000, you receive a charitable deduction of $25,000, avoiding taxes on the $20,000 capital gain if you’d sold the stock and gifted cash. Gifts of long-term, appreciated securities are fully deductible up to a maximum of 30%*of your adjusted gross income.



Contributing cash and/or marketable securities to a donor advised fund sponsored by a reputable financial institution may make good sense if you support several philanthropic organizations, and for a few other reasons as well. First, because a DAF is a 501(c) (3) public charity, you receive an immediate tax deduction up to the maximum allowed for your contribution. Second, if you contribute securities held for more than one year, you avoid paying long-term capital gains tax on the appreciated portion of their value. Gifts can also reduce estate taxes, since the value of your estate has decreased equal to the amount donated. Because gifts of cash to public charities are fully deductible up to a maximum of 50%* of your adjusted income, they are a great way to contribute to a donor advised fund account.

In addition, through the fund, you can request grants to specific qualified charities at any time. This lets you decide when and how much you want to donate to a particular charity.



Finally, your contributions have the potential to grow. For instance, donations to the Raymond James DAF are invested tax-free in one of six investment objectives or professionally managed accounts, and may appreciate so that you can give more than the original value.

To recap, the advantages of giving to a Donor Advised Fund (DAF) are as follows:

1) Receive immediate tax deductions;

2) Avoid long-term capital gains taxes;

3) Reduce estate taxes;

4) Simplified reporting of your gifting activity; and

5) Opportunity to formulate and create your charitable legacy plans using a Donor Advised Fund.



If you as the donor are interested in receiving regular income, a charitable gift annuity is an option. The donor makes a contribution of cash or marketable securities, and in exchange, the charity agrees to pay a fixed sum to designated annuitant(s) on an annual basis (annuity payments are generally based on rates determined by the American Council on Gift Annuities). Upon the death of the last annuitant, the remaining account balance will go to the charity. In the case of the Raymond James Charitable Gift Annuity, donors have the flexibility to change their mind about the ultimate charitable beneficiary.



A charitable remainder trust is an irrevocable trust allowing you to receive income and support your favorite charity by contributing cash, real estate or appreciated stock while saving on income, estate and capital gains taxes. There are startup costs, and an attorney is required to draft the trust.

It generally makes sense to make multiple and/or more sizable charitable contributions in the years you have the highest income or highly appreciated securities. If you expect income to drop in the next year or two, you may even consider making advance contributions.

Because everyone’s tax situation is unique, discuss your gifting plans with your financial advisor and tax professional before contributing. With proper guidance and planning, there are ways to maximize your gifting opportunities. If you have questions or would like additional information on any of these techniques, please let us know. Stay focused; plan and invest accordingly.

*Portions of contributions in excess of the limit may be carried forward and used up to five years.

The opinions expressed are those of the writer, but not necessarily those of Raymond James and Associates, and subject to change at any time. Information contained in this report was received from sources believed to be reliable, but accuracy is not guaranteed.

“Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.”


This article provided by Darcie Guerin, CFP®, Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. She may be reached at 239-389-1041, email, Website:



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