Approaching Philanthropy, Part 3: Giving Your Financial Support

If you don’t help fund charitable causes, who will? In our view, nonprofits exist to fill the voids in society left by government services and for-profit businesses. Most receive no revenue, and virtually all have funding gaps that need to be filled. Without the support of donors, many nonprofits could no longer exist today.

If you wish to be a financial supporter, there is more than one way to approach it. Here are some strategies for giving wisely.

Giving cash

By far, the predominant way in which individuals get involved in nonprofits is through charitable giving. Perhaps you have written a check or participated in a fundraising event, like a gala, a silent auction or a golf outing—these are all great ways to show your support.

One nice way to approach giving cash is to set up recurring donations, say monthly or quarterly. This can help smooth out the cash flow for donor and recipient alike, making both of your budgets easier to predict and manage throughout the year.

Giving securities and other property

Giving property instead of cash, particularly shares of stock that have appreciated in value, is an interesting option. Provided that various IRS rules are met, this strategy can make it possible to avoid the capital gains tax associated with that appreciated value. If you own securities in a taxable account that are worth more today than when you bought them, this is a strategy that can enable you to give a larger gift at a lower cost to you.

It is also possible to gift tangible assets to charity, such as land, real estate or collectibles, although the tax calculation can be quite a bit more complex. For example, if your goal is to donate an art collection and receive a tax deduction based on the fair market value, the IRS has a lot of rules and regulations that you have to follow.

Your donation has to be what’s known as “capital gains property,” which means you must have purchased and held the property for at least a year. In addition, the receiving organization must retain your donation for at least three years, and they have to utilize it to fulfill their mission. This makes it tricky to gift things like art. In fact, we’ve seen museums turn down collections because they just don’t have enough storage or display space.

Oh, and if you painted the art yourself, you will only receive a deduction for the cost of the paper and paint—nothing more. In short, donating tangible property is certainly possible, but donating something intangible, like cash or stock, is generally a lot more straightforward.

More tax-smart giving ideas

Giving securities isn’t the only way to amplify the tax advantages of charitable giving.

If you’ve had a particularly high earning year, you could also be on the hook for a particularly large amount of income tax. One solution is to set up a donor-advised fund (DAF), which is an account that lets you make several years’ worth of charitable donations all at once and claim one big deduction.

Over the following years, you can invest and manage the money inside your DAF and issue donations to charities whenever you wish. You can contribute both cash and securities to a DAF, which may allow you to further increase the tax advantages.

Here’s another idea: If you are aged 70.5 or older, you may be permitted to use a qualified charitable distribution (QCD) to take money from your IRA and give it directly to a registered charity. Doing so can satisfy your required minimum distribution (RMD) and help you avoid taxable income. In the long run, gifting to charity using your IRA is potentially the most tax-efficient way to give.

Giving as part of your estate plan

If you have the desire to create a charitable legacy that extends beyond your lifetime, it’s a good idea to start planning now. You may be able to use life insurance, investments and tax and legal structures such as trusts to maximize the philanthropic impact of your estate.

We recommend working with professionals who understand your goals and can help you weigh options such as setting up a private foundation or charitable trust and naming either charities or your DAF as the beneficiaries of your IRA.

Your philanthropic path will likely depend on many factors, including your life experiences, your family values and the needs of your community. It will be shaped by what gives you personal meaning, the amount of time you have available, your unique skillset, your past experiences and your financial resources. A Corient Wealth Advisor can help make sure that your wealth management strategy and estate plan work hand-in-glove with your desire to give.

Other topics in this series:


Lesley Draper, CFP, CTFA

Lesley Draper, CFP, CTFA

Partner, Wealth Advisor

Lesley Draper is a Partner and Wealth Advisor. She is responsible for managing client relationships, advising families and individuals on financial planning, tax planning and investment management. She received her BS from Purdue University in West Lafayette, Indiana. She is a CERTIFIED FINANCIAL PLANNER™ professional, a Certified Trust and Financial Advisor (CTFA). She is currently studying for Charitable Advisor in Philanthropy (CAP) designation. She is passionate about giving back and co-chairs RegentAtlantic's Neighborhood Nonprofits team and serves on multiple charitable boards, including P.G. Chambers School and Morristown Festival of Books. Prior to joining RegentAtlantic, Lesley was a Vice President at Citi Private Bank and subsequently spent 11 years at U.S. Trust Company of New York in the Financial Planning and Family Wealth departments. Lesley enjoys golfing, fly fishing and resides in Montclair, NJ with her partner Bob, two German Shepherds and four rescue cats.

James Sonneborn, CFP, CFA, MBA

James Sonneborn, CFP, CFA, MBA

Partner, Wealth Advisor

Jim has over 35 years of experience managing investment portfolios and providing financial advice to individuals, families and charitable organizations in the New York metropolitan region.

As a Wealth Advisor and Co-Chair of the Firm's Neighborhood Nonprofits Group, Jim works with a wide range of clients and has a particular specialty in philanthropic strategies. For donors, Jim works to construct strategies that align with the client's philanthropic goals. In the nonprofit sector, Jim focuses on helping organizations strengthen their financial position through endowment management and planned giving consulting. Jim currently serves on the boards of The Rippel Foundation and the Environmental Endowment of NJ.

Jim holds a BA in Business from Western Colorado University and an MBA in Finance from Drexel University, as well as the CERTIFIED FINANCIAL PLANNER, Chartered Financial Analyst and Certified Divorce Financial Analyst certifications.


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