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

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2021 is a Favorable Giving Environment

Connection Between Stock Market Performance and Charitable Giving
History indicates strong annual S&P 500 Index performance correlates to increases in charitable giving. Source: PNC Financial Services group.

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.

Donate Appreciated Securities

Rebalancing your client portfolios during the fourth quarter often means selling investments that have appreciated, typically resulting in capital gains tax.

One simple offsetting measure is to align your clients’ charitable giving with the rebalancing process. Donating long-term, appreciated securities to a donor-advised fund is a strategic win-win:

  1. Clients eliminate the capital gains tax they would incur if they sold the assets and donated the proceeds, which may increase the amount available for charity by up to 20 percent.
  2. Clients can claim a fair market value charitable deduction for the tax year in which the gift is made and may choose to pass on that savings in the form of more giving.

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.

Revisit Your Client’s Estate Plan

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.

Investing for Good

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.

Critical Dates: Year-End Tax Deductions

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.

Type of Contribution

Mutual Fund

Action Needed

Call Donor Services at (619) 814-1332 or email DonorServices@sdfoundation.org.

Timing

Mutual fund donations must arrive to The Foundation by November 22.

Stock*

Action Needed

Submit a Stock Contribution Form.
Call Donor Services at (619) 814-1332 or email DonorServices@sdfoundation.org.

Timing

Stock donations must arrive to The Foundation brokerage accounts by December 29 at 1:00pm.

Credit Card

Action Needed

Login to your MyTSDF account.
Click on “Give to My Fund” and follow instructions.

Or

Call (619) 235-2300 to contribute to your fund with your credit card. Credit card processing fees will apply.

Timing

Credit card donations must be processed by The Foundation by December 30 at 12:00pm.

Check

Action Needed

Mail to:
Attn: Donations
The San Diego Foundation
2508 Historic Decatur Road, Suite 200
San Diego, CA 92106

Please write your fund name and number in the memo field of your check. Make the check payable to The San Diego Foundation.

Timing

Mail must be postmarked by the U.S. Post Office by December 31.

Electronic Bank Transfer

Action Needed

Login to your MyTSDF account.
Click on “Give to My Fund” and follow instructions.

Or

Call (619) 235-2300 to set up an electronic bank transfer to your fund.

Timing

Funds must be received by December 31.

Wire Transfer

Action Needed

Call Donor Services at (619) 814-1332 or email DonorServices@sdfoundation.org.

Timing

Funds must be received by December 31.

*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
  • Your Name
  • 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.

Partner with Us

Jason Rogers, AIF, CWS
Director, Wealth Advisor Relations
jrogers@sdfoundation.org
(858) 245-1508