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Charitable giving in the U.S. reached a second consecutive all-time high last year, after hitting new highs in 2014. According to the Giving Institute, charitable contributions in 2015 grew 4.1% from the prior year to an estimated $373.25 billion and came from the following sources: $264.58 billion individual giving; $58.46 billion foundation giving; $31.76 billion charitable bequests; and $18.45 billion corporate giving.   Should the economy and stock market remain steady for the balance of the year, it is highly likely that 2016 will again set new records for charitable donations.

With the holidays rapidly approaching and year-end just around the corner, now is the perfect time to evaluate your own charitable goals for the year and how that might impact your 2016 income taxes. Here are some charitable planning ideas for your consideration:

  • Instead of cash, use highly appreciated stock for your gift. By gifting stocks with substantial unrealized capital gains, you will avoid capital gains taxes when the charity sells the stock. This can be an especially important strategy for investors with highly concentrated positions.
  • If you are over age 70 1/2 , you can utilize the Qualified Charitable Distribution (QCD) strategy to gift up to $100,000 to charity and have this gift qualify for your annual Required Minimum Distribution (RMD).
  • Collectible assets such as artwork, antique books, cars, manuscripts and other collectibles have appreciated substantially since the Great Recession and may make an outstanding alternative to cash donations.  
  • Often described as a sort of charitable savings account or “mini-foundation”, Donor-Advised Funds are philanthropic vehicles that are accessible by the donor and typically simpler and less expensive to set up and administer than a private foundation. Donors advise the sponsoring charity how to invest the assets and recommend grants from the fund to charities of their choice over time.  
  • Charitable Remainder Trusts (CRTs) may offer considerable advantages. Donors may contribute highly appreciated assets to the CRT, thereby avoiding capital gains taxes.   Once these appreciated assets have been sold within the CRT, the funds can be diversified and managed to provide lifetime income to the donor. At the donor’s death, the funds are distributed to the charity of the donor’s choice. While the donor can change the charity beneficiary during his lifetime, the gift to the CRT itself is irrevocable.
  • Charitable Lead Trusts (CLTs) allow the donor’s philanthropy to receive income for a fixed period of years (typically 15 to 20 years) with the remainder distributed to the donor’s family after the fixed period.   Whereas CRTs ultimately distribute to charity, CLTs allow donors to keep wealth within the family.
  • Community Foundations pool resources from like-minded donors to benefit local communities. Many foundations utilize the Donor Advised Fund approach for their donors.  

Please contact us if you would like to further discuss these or other charitable planning considerations. We are happy to consult with you and your CPA to make sure you select the most suitable strategy that meets both your philanthropic and tax planning goals.