The Wealth Advisors’ Guide to Year-End Charitable Giving
Did you know more than 70 percent of high-net-worth clients say having philanthropic discussions with their wealth advisors is important to them?
These conversations are especially important during the giving season. About one-third (31 percent) of annual giving occurs during December.
But waiting until December could limit your clients’ ability to receive the maximum tax advantages for 2021, especially if they plan to donate appreciated securities or complex assets.
At The San Diego Foundation, we act as a charitable partner for San Diego wealth advisors throughout the giving season, helping you build customized, year-end charitable giving strategies that achieve your clients’ philanthropic goals and maximize tax deductions.
Partner with Us this Giving Season
2021 is a Favorable Giving Environment
2021 represents a favorable year-end giving environment for your clients.
Although the stock market has been volatile this year, the S&P 500 Index has hit record highs. And between 2016 and 2021, the S&P 500 has roughly doubled, which means your clients may have highly appreciated securities in their portfolios.
Existing tax laws offer incentives to clients who contribute appreciated non-cash assets held more than one year.
2021 is also unique because several 2020 CARES Act provisions have been extended into this year, boosting your clients’ charitable tax deductions.
Most significantly, the charitable giving deduction limit remains increased to 100 percent (previously 60 percent) of Adjusted Gross Income (AGI) on cash donations for individuals who itemize. The AGI limit also remains at 25 percent of taxable income for corporations (previously 10 percent).
Year-End Charitable Tax Strategies for Your Clients
Open a Donor-Advised Fund
Donor-advised funds (DAFs) offer similar benefits to private foundations with the added value of maximum tax benefits, donor anonymity, no startup costs, and a community foundation support staff to eliminate your client’s administrative duties.
A DAF is funded with an irrevocable, tax-deductible donation from a cash or non-cash gift, such as appreciated securities or complex assets including private stock, real estate or business interests.
Your clients receive an immediate tax deduction and can support their favorite community initiatives or nonprofit organizations over time.
Use QCDs to Manage Required Minimum Distributions From an IRA
Every year, charitable-minded clients over age 72 face a dilemma: What to do with the mandatory taxable distribution – otherwise known as a required minimum distribution (RMD) – from their Traditional IRA accounts.
One option is to make a qualified charitable distribution (QCD) and contribute up to $100,000 directly to qualified 501(c)(3) public charities without counting the distribution as taxable income (if age 72 or older). Thus, clients can receive a tax benefit from their charitable contribution even if they do not itemize deductions.
Consider The San Diego Foundation as your QCD alternative.
In addition to the continued uncertainty around the future of estate taxes, the COVID-19 pandemic has led many clients to revisit their estate plans with their wealth advisors this giving season.
By establishing a planned gift, your client can communicate exactly how funds will be granted and receive peace of mind knowing that contributions will go directly back to the community and causes your client cares about.
There are many ways to give through a will or living trust. Assets donated to The San Diego Foundation are removed from your client’s estate for tax purposes.
Our financial statements and investment history ensure you can trust our long-term fiscal stewardship of your clients’ charitable gifts.
Under the oversight of our Board of Governors Investment Committee and Chief Investment Officer, we invest donor-advised funds in a diverse, carefully defined set of asset classes to mitigate risk and provide sustainable growth.
Alternatively, you can consider our AMPlify (Asset Management Partnership) program, a customized investment strategy that enables wealth advisors and your clients to set up charitable accounts at The Foundation that are managed personally by you.
Your clients can donate many types of assets, such as mutual funds, stocks and more, to their fund at The San Diego Foundation. Refer to the critical dates below to ensure that contributions are received and processed by December 31, the IRS deadline for yearly tax deduction eligibility. For some assets, these dates fall in November.
*As of February 15, 2021, Northern Trust became The San Diego Foundation’s broker for gifts of appreciated securities, gifts of stock and exchange-traded funds (ETFs). When facilitating a transaction, please provide the following Depository Trust Company (DTC) wire instructions and information to your broker:
Depository Trust Company
FBO The Northern Trust Company
Participant Number 2669
Reference Account 44-98583
Trust Name, if applicable – required for TSDF to accept gifts from a trust
Your San Diego Foundation Fund Name or Number
Your Charitable Partner for Year-End Giving
You know your clients. We know philanthropy.
For more than 45 years, we have worked with a large network of wealth advisors and other financial planners to help accomplish their clients’ financial planning objectives and charitable giving goals, while maximizing their tax deductions.
Interested in learning how we can meet your clients’ year-end financial planning and charitable giving goals? Contact us today.