How to Structure Charitable Giving Throughout Your Lifetime

How to Structure Charitable Giving Throughout Your Lifetime

December 01, 2020

Charitable giving is a way for affluent individuals spread their money around and to benefit causes that are near and dear to their hearts. Yet, for those who fall into the high net worth category, it is critical to structure charitable giving correctly so that you will reap the tax benefits while making the greatest impact. Below are just a few possibilities on how structuring your charitable giving will provide you with the most benefit. 

Donor-Advised Funds

With a donor-advised fund, you will put in money that you intend to give out to various charities over a period of time. By making your charitable donations this way, you will be able to take the deduction for the full amount of the funds that are placed in the account, even if the money is not going to be dispersed to the charities that year. This method also provides you with the added flexibility of being able to hold onto the funds until you are ready to disperse them, which could possibly grow depending on how it is invested. 

Low-Cost Basis Stock Donation

Many top executives are offered stock options as part of a compensation plan. When your company is thriving, you are more likely to hold onto those options until they are exercised for a very low cost when compared to the value it currently holds on the market. When you do decide to sell your stock, you will be hit with a large tax burden. This will occur even if you plan to use the funds from the sale for donations. 

If you plan to use the stock profits to donate to charity, you should instead donate the stock directly to a charity, which will save you from having to pay high taxes on money. This will be beneficial for a non-profit organization in multiple ways. First, you will be able to give them more without having to incur the tax burden, since most organizations will not have to pay capital gains. The organization could also choose to continue to hold the stock, in the hopes that it will appreciate even further. It might also help your portfolio by lowering the concentrated ownership of one stock. 

Above are just two of the ways you may structure giving to help ease your tax burden and allowing you to provide organizations with much-needed funds. 

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.



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