Many of us include charitable organizations in our estate plans because we believe in the important work they do. But there is another approach worth considering: giving while you're still here to see the difference your generosity can make.
Many nonprofits are experiencing increased demand for services while facing more challenging fundraising environments. If your financial plan allows for charitable giving, this may be an excellent time to accelerate some of your charitable intentions and support the causes you care about today.
The good news is that several charitable giving strategies can provide meaningful tax benefits while maximizing the impact of your gift.
If you are age 70½ or older and own a traditional IRA, a Qualified Charitable Distribution may be one of the most tax-efficient ways to give.
A QCD allows you to transfer funds directly from your IRA to a qualified charity. Because the distribution goes directly to the charity, it is generally excluded from your taxable income. For those taking Required Minimum Distributions (RMDs), a QCD can also satisfy all or a portion of that requirement.
The benefits can include:
For many retirees, a QCD allows them to support their favorite charities using dollars that would otherwise be taxed as ordinary income.
Another highly effective strategy is donating appreciated securities that have been held for more than one year.
Rather than selling the investment and donating the after-tax proceeds, you may be able to transfer the shares directly to the charity. In many cases, you can avoid paying capital gains tax on the appreciation while also receiving a charitable deduction for the fair market value of the stock if you itemize deductions.
For example, imagine you purchased stock years ago for $10,000, and it is now worth $40,000. If you sell it first, taxes may be owed on the $30,000 gain. By donating the shares directly, the charity receives the full value of the gift, and you may avoid recognizing the capital gain altogether.
This strategy often allows both the donor and the charity to come out ahead.
While tax benefits are important, they are not the primary reason to give. The real reward is knowing your gift is helping organizations fulfill their missions today.
Whether supporting your church, local food bank, educational programs, medical research, or community nonprofits, charitable giving can be one of the most meaningful ways to align your financial resources with your values.
If charitable giving is already part of your long-term plan, consider whether some of those future gifts could make an even greater difference right now. A Qualified Charitable Distribution or gift of appreciated stock may allow you to support the organizations you care about, reduce taxes, and witness the impact of your generosity firsthand.
As always, consult with your financial advisor regarding your specific situation before implementing any charitable giving strategy.
Apella Capital, LLC (“Apella”), DBA Apella Wealth, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered or excluded or exempt from registration requirements. Registration of an investment advisor does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. Apella Wealth provides this communication as a matter of general information. Any data or statistics quoted are from sources believed to be reliable but cannot be guaranteed or warranted.