Be Generous AND Save: 5 Year-end Tips
Posted on November 30, 2014 by bob in MoneyWise
For many reasons this is the time of year when people commonly think of giving, sharing and generosity. One reason is the celebration of Christmas and Hanukkah with their traditions of gift giving. Another is that year-end marks the deadline for charitable gifts that are tax deductible. If you are feeling magnanimous, here are five ideas that you might wish to consider before acting on a generous impulse.
First, while most people give to charity by means of a check or cash, other alternatives may be more efficient for larger 
donations. For example, if you have appreciated stocks or mutual fund/ETF shares that you have held for more than a year and a day, a gift of shares will yield the same deduction as an equal cash contribution, but you will avoid paying tax on the asset’s appreciation.
Second, if you want to donate before year end to capture a deduction, but are not sure where you want the gift to go, here is a solution for you. Many foundations offer an option called a “donor-advised fund” which lets you give now, get a deduction this year, and later recommend where you want the money in your donor-advised fund to go. Organizations offering them include the Central Alabama Community Foundation, Fidelity Charitable, the National Christian Foundation, Schwab Charitable, and Vanguard Charitable. Each has a minimum amount that they will handle and administrative charges, but generally they work the same way. You can check them out on the web.
Third, charitable organizations are not created equal. For instance, some are very efficient, using a large majority of donor funds for charitable activities. Others are less so and may have relatively high expenses for staff (and executive) salaries, fund-raising and promotion, etc. There are easily accessible sources of data on many charities. These allow you to comparison shop for those organizations that meet criteria important to you. Among these are www.guidestar.org, www.charitywatch.org, www.charitynavigator.org, and for many Christian charities, www.ecfa.org.
Fourth, if you have been involved for some time supporting one or more charitable causes, you might want to consider including it or them in your estate plan. One of the best and easiest ways to do so would be to add the charity(ies) as a beneficiary for part of your traditional IRA or other non-Roth retirement account. Since an individual beneficiary would owe tax on a retirement account distribution you leave them, a dollar withdrawn by them would yield less than a dollar of benefit. Because a properly functioning charity pays no taxes, a retirement distribution to charity avoids the tax bite which individual heirs cannot. Therefore, leaving a gift to charity from your retirement account is more tax efficient than a charitable gift from other assets.
Finally, the ideas above are most appropriate when relatively larger gifts are contemplated. But even a small act of sharing can dramatically impact the life of another, especially when the recipient is not looking for it and the donor derives no benefit, including a tax deduction. The blessings of generosity in its purest form often result from such simple acts as a cash gift to a person in need who is not asking for help, taking an unsolicited meal to an elderly or shut-in person, or volunteering to give a bit of your time and energy to a worthy cause to help others. All that is necessary is to tune in to people and circumstances around you. Chances are, you’ll see lots of opportunities. Why not engage in a few small ventures in generosity during the 2014 giving season and see what happens?
Alan Wallace
Alan Wallace, CFA, ChFC, CLU is a Senior Financial Advisor for Ronald Blue & Co.’s Montgomery office, www.ronblue.com/location-al. He can be reached at 334-270-5960, or by e-mail at alan.wallace@ronblue.com.
