Exploring Your Charitable Giving Options

Leo Wealth
by William Schultz 

Over the years, I’ve developed a steady relationship with a local charity director through our mutual involvement in Rotary International. While we’ve participated in neighborhood projects together, it wasn’t until she invited me to a “Charitable Giving” lunch meeting that we had a more active discussion on ways to give. After the meeting, the director and I had the opportunity to discuss the presentation. As an investment advisor, I’m familiar with the intricate strategies for tax-favorable movement of assets, as well as an understanding of trusts and tax law. However, only a small group of wealthy donors can participate in these giving strategies. Consequently, as a local charity director, she’s primarily involved in giving opportunities available to a broader group of donors. Between the two experiences, I thought it would be beneficial to outline various charitable options.

When considering these strategies and concepts, remember not all methods apply to everyone. Every individual has a unique financial situation, and you should review all options with your financial and tax advisors. By no means is this intended to be an all-inclusive list. I hope it provides you guidance on the various donation methods available through your journey of charitable giving. With that in mind, let us get started. 

One of the most straightforward ways to start a charitable endeavor is known as donating your time, skills, and treasure. 

Donate your time
Most charitable organizations survive through the efforts of volunteers. Donating your time is critical for all charities, and giving an afternoon once a week or even once a month will immensely impact your favorite charity. Your employer may even have Volunteer Time Off, or VTO, specifically to donate your time. 

Donate your skills 
Like your time, your skills can be a blessing to most charities. If you have experience in accounting, technology, photography, organization, or any other skill – charities need your help. By donating your abilities, you can help control the expense of maintaining a dedicated staff. 

Donate your belongings
We all have items we don’t use anymore. Or maybe you bought something intending to use it, but never really did. Many charities have resale shops that would benefit from these items. Consider business clothes and unused cosmetics as high-priority items as many clients of resale shops are looking for new jobs, and these types of goods are beneficial toward that endeavor. 

What if your preferred charity doesn’t have a resale shop? Hold a garage sale, or involve your neighborhood or church with a collective garage sale, for a specific cause or charity. These events can generate money while simultaneously creating unity in the community.

Donate credit card rewards or use charity-focused credit cards 
Certain credit cards are focused on charitable giving. Contact your favorite charity to find credit cards that meet your goals, and if they don’t, you can always donate your rewards points.

Feel like taking on a more active donation endeavor? Organize a fundraising effort or shop at places that have charitable initiatives. 

Organize a drive to raise goods
We are all familiar with food and clothing drives. The central concept of drives is to enlist the support of your local school, community, or church to help your charity. They offer people a chance to become more familiar with local charities and perhaps become a more frequent volunteer. These drives also broaden the charity’s donor base and are an excellent way to acquire items to fill resale shops and pantries quickly.

Organize sponsored fundraising 
I find these events work well with school sports. However, you can adapt this idea to neighborhoods or organizations. The idea is to find a specific charity and donors to sponsor cash to achieve a stated goal. For example, my son is involved in a free-throw contest every year for one of our local charities. The donors would give a dollar or more for every free throw he could make in one hour. With social media, you not only have generational involvement but exponentially expand your list of donors. With sponsors at both individual and corporate level, you could raise a considerable sum for your charity. 

Shop at the right places 
In the age of corporate social responsibility, many businesses donate part of their proceeds to charities. For instance, AmazonSmile will donate 0.5% of your eligible purchases to a charitable organization of your choice, and Whole Foods gives you the option to donate your five-cent reusable bag credits to a local organization. Check with the merchants you shop at regularly for a possible opportunity to contribute to a charity as part of your purchase.

Some options allow you to increase contributions, benefit from employer matching, and establish long-term legacy giving.

Doubling gifting in odd years 
This concept was developed after the new tax law increased the standard deduction. Consider making your gifts to charity every other year, potentially allowing you to itemize. To successfully achieve this concept, you need to know where you stand tax-wise. Those close to the threshold for itemizing can “double gift” in the years they itemize by pushing contributions from one year to the next. A tax advisor can help you decide if this strategy will meet your needs and your charitable giving goal to itemize.

Gift matching
Your employer may offer a “gift matching program” that will match some of all of your charitable donations up to a certain amount, potentially doubling your donation. Check with your employer about this type of program or talk to your Human Resource Department about encouraging the company to implement a matching gift program.

Life insurance 
Consider reviewing your group and personal life insurance beneficiaries. Life insurance is relatively inexpensive. If your coverage amount now exceeds your perceived need, you may consider adding your favorite charity to the list of beneficiaries. Remember, you should review this idea with a financial advisor. 

As time goes by and you develop an investment portfolio, there may be opportunities to help fund charities in a tax-efficient manner. The following concepts are not just for the wealthy but for anyone who has developed a portfolio. Charitable giving is easy to implement but requires the participation of your financial advisor and your tax advisor for accurate application. Consider the following concepts, and then use professionals to help implement the best strategy designed for you.

Qualified Charitable Deduction 
If you have an IRA and have reached the age of 72, you will be forced to take Required Minimum Distributions (RMD) that can increase your income tax liability. Consider using a Qualified Charitable Distribution (QCD) to reduce this liability. A QCD is generally a nontaxable distribution made directly by the trustee of your IRA (other than a SEP or SIMPLE IRA) to an organization eligible to receive tax-deductible contributions (501(c)(3)). You must be at least age 70½ when the distribution was made. Also, you must have the same type of acknowledgment of your contribution that you would need to claim a deduction for a charitable contribution. That means you will need to keep records of your QCD checks for your tax professional. The annual QCD limit is $100,000 per year. 

This is an excellent option because many people cannot itemize deductions on their tax returns due to the high standard deduction. Using a QCD can satisfy your RMD without increasing your taxable income, allowing you to take the standard deduction. Consequently, if you don’t have enough deductions to itemize, you still get some tax benefit from making charitable contributions through a QCD. 

Low Basis Investments 
As you start to develop your net worth, you may find you have assets that you acquired early in life that have a “Low Basis.” This type of asset can increase your capital gains tax if you decide to sell. An example would be a stock you acquired early in your investment portfolio that has appreciated leaving a significant unrealized gain. This stock has a lower acquired price than the current market price, and this difference can lead to substantial capital gains tax. By gifting these types of assets to your favorite charity, you can claim the current value as a charitable contribution without having to recognize the gain for income tax purposes. When your charity sells the investment, they do not pay capital gains tax. This concept is available for most types of assets. However, these donations can be straightforward or complicated depending on the amount and the kind of gift. 

As you can see, there are multiple ways of giving available to anyone who has a heart for a charitable cause. The first step is to talk to your charity. Understand their goals and what they need to accomplish these goals. Then, consider a plan to use your unique gifts. You may discover the immeasurable impact you can have on your charity, even if it isn’t with your portfolio. If your plan involves your portfolio, consult with your financial professionals. There is a wide range of tools to develop a personal strategy consistent with your situation and financial goals.

Bill Schultz is Managing Director of Leo Wealth. Bill provides comprehensive financial planning, which includes defining financial goals, risk management, and portfolio management. Bill’s principal focus is high-quality client service and fiduciary relationships.

Securing a BBA in Finance and Economics from Hankamer School of Business at Baylor University, Bill started his career in 1991 with IDS (now Ameriprise Financial). After becoming a manager at IDS, he continued his career at BFT Financial Group LLC to provide his clients with an advanced level of wealth management and comprehensive services. As a member of the investment committee, Bill was involved in the development of the firm’s risk-adjusted client portfolios. He served as the assistant compliance officer in charge of supervising and auditing offices and representatives.

Bill is the proud father of two amazing young adults and a faithful husband to Beth. He loves to cook, spend time with his family, play golf, and fish on the weekends. Believing in “service above self”, Bill is an active member of the HEB Rotary Club where he held the office of President in 2019.

The information provided is for educational purposes only. The views expressed here are those of the author and may not represent the views of Leo Wealth. Neither Leo Wealth nor the author makes any warranty or representation as to the accuracy, completeness, or reliability of this information. Please be advised that this content may contain errors, is subject to revision at all times, and should not be relied upon for any purpose. Under no circumstances shall Leo Wealth be liable to you or anyone else for damage stemming from the use or misuse of this information. Neither Leo Wealth or the author offers legal or tax advice. Please consult the appropriate professional regarding your individual circumstance. Past performance is no guarantee of future results.

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