Money Read Time: 4 min

August Wealth Strategies


Scott Grenier, CFP, AEP, CAP

Manager, Tax & Estate Planning
Baird Wealth Solutions Group


Jonathan Raymon, JD, CTFA, CAP

Charitable Solutions Strategist
Baird Trust

Looking for the most efficient ways to achieve your charitable goals? In our August Wealth Strategies Webinar, two Baird experts explain the options available to you, from donating appreciated stock to establishing a private foundation.

Bunching Your Contributions

The current large standard deduction means that most taxpayers won’t benefit from itemizing their charitable gifts as deductions.  But if you bunch several years of donations in a single year, you can make use of that higher deduction one year, then skip your donations the next year.

Giving Appreciated Assets

When you donate stocks or bonds that you've held for more than a year to a charity, you are allowed to deduct the current fair market value rather than the purchase price. After a year like this one, with a strong equities market, many investors are looking to realign their asset allocation, which makes it a good time to dispose of appreciated stock. Short-term holdings, in contrast, are only deductible up to the cost basis, and the difference between the cost basis and fair market value is taxable as a sale if the asset is donated to a charity.

One caveat: The deduction for a long-term asset is limited to 30% of your Adjusted Gross Income (AGI). But if you can’t take the full deduction this year, you can carry the remainder forward to use at some point over the next five years.

Making Qualified Charitable Distributions from an IRA

If you’re 70 ½ or older, you can make a Qualified Charitable Distribution of up to $100,000 to a qualified public charity. The distribution doesn’t incur a charitable deduction for you, but the amount donated won’t count towards your AGI. This can be a great strategy to fulfill your charitable intentions and keep your AGI lower for other tax purposes, including future Medicare premiums.

Establishing a Donor Advised Fund or Private Foundation

These are options for long-term philanthropic efforts, similar in effect but with important distinctions between the two. A donor-advised fund is an investment account created with a sponsoring charity that invests the assets and lets you distribute those funds to charitable causes in the future. You get an immediate charitable income tax deduction equal to your contributions, and not only do the funds’ investments grow tax-free, but any future contributions to the fund are also deductible.

A private foundation is a charitable trust or a nonprofit corporation in which you or your family funds the majority of the entity. Assets donated to a private foundation are deductible for up to just 30% of your AGI, but unlike with a DAF, the foundation’s officers have full discretion over where the donations go, and they’re not limited to 501(c)(3) charities.

Forming a Charitable Remainder Trust or Charitable Lead Trust  

The idea behind a Charitable Remainder Trust is that you as the grantor can take income from it for the rest of your life, after which the remaining balance goes to a charity.  Taxes are deferred until the assets are paid out over the course of your (and potentially your spouse’s) lifetime.

One group for whom these can be especially valuable: people who are selling a farm or small business toward the end of their life. The return can be folded into a charitable trust, providing you with tax advantages as well as income for the rest of your life, and providing your chosen charity with a sizable donation.

A variation is the Charitable Lead Trust, in which the charity receives the income generated by the trust during the grantor’s life. After the grantor’s death, the remaining assets in the trust then pass to your heirs.

And Don't Forget....

If you want to take a deduction for any charitable gift of more than $250, you’ll need a written acknowledgment from the recipient at the time of the gift, attesting to the date and amount of your contribution. Without this letter, you run the risk of having the IRS deny your deduction.

To learn more about the options available to you for charitable giving efforts, start by watching the August webinar for more details and contact our office for how to implement these strategies into your plan. Our entire series of Wealth Strategies webinars is also available online.

The information reflected on this page are Baird expert opinions today and are subject to change. The information provided here has not taken into consideration the investment goals or needs of any specific investor and investors should not make any investment decisions based solely on this information. Past performance is not a guarantee of future results. All investments have some level of risk, and investors have different time horizons, goals and risk tolerances, so speak to your Baird Financial Advisor before taking action.

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