Kristin Bartlow

Financial Advisor, Managing Director

Creating customized financial plans and managing investment portfolios for Bay Area families, entrepreneurs and retirees.

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December 5, 2023
Kristin Bartlow

Optimizing Charitable Giving and Taxes Over Your Lifetime: Exploring Strategies Beyond Donor-Advised Funds

Of all the strategies available to investors, charitable giving is pretty unique. How else can you make a meaningful impact and support causes that mean a lot to you while optimizing your after-tax returns?

My personal journey into philanthropy, initiated by my mother’s influence and early exposure to organizations like the National Charity League, means I understand the fulfillment derived from giving back. I know the transformative power of charitable giving.
In this post, I’ll take a closer look at how to make the most of your gifting efforts and reveal practical strategies that go beyond the conventional scope of donor-advised funds.

Consideration 1: The Timing and Value of Your Contributions

Recent changes with tax reform, like the increased standard deduction amounts, have reshaped the landscape, making it essential to consider how your charitable giving strategies work for your overall plan. Smaller donations may no longer yield significant tax advantages, but you can use the concept of “clumping” donations to maximize impact in a single tax year.

The idea of “clumping” isn’t new and involves consolidating, for example, two years’ worth of donations into a single tax year. This strategy delivers more significant tax benefits than annual giving, optimizing both your charitable impact and tax advantages.

Donor-Advised Funds (DAF) are specifically designed to take advantage of this “clumping” strategy, allowing you to realize an immediate tax deduction in the year the fund is set up. You are then able to spread the giving to individual charities over several years. This is a particularly smart strategy to use in the event of a windfall or higher than usual annual income year.

Consideration 2: Donating Cash vs. Stock

An often-overlooked opportunity when giving is donating appreciated stock instead of cash. While cash donations provide an immediate tax advantage, donating appreciated stock presents an additional opportunity to bypass capital gains taxes entirely. If you have stock with gains associated with it, you can donate the stock and the gain; not only will you avoid paying capital gains tax on it, but the charity can sell it without paying tax on it, as well.

If you take advantage of two tax strategies—for example, using a DAF and donating appreciated stock into that DAF—the impact is even more substantial. This kind of combined approach shows the importance of thoughtful financial planning in charitable giving.

And strategic charitable giving isn’t confined to annual donations, either. If you have a significant event coming up, like the sale of your business or your company going public, you can transfer your stock to a charity to avoid the tax implications of the event. Transferring stock to a charity in such situations is a very complicated, sophisticated planning topic, but it’s something that we can talk you through.

Consideration 3: Getting Creative With More Unique Giving Strategies

Beyond traditional methods, exploring unique giving strategies can amplify the impact of your contributions. Pooled giving, where individuals collectively contribute to create a more substantial fund, is gaining traction. Additionally, employer matching programs and Qualified Charitable Distributions (QCD) from retirement accounts are two underutilized — but still very effective — avenues for boosting charitable contributions.

As you navigate the intersection of charitable giving and tax optimization, a comprehensive approach that extends beyond traditional strategies is crucial. From strategic capital gains considerations to instilling a culture of giving in the next generation, the key lies in thoughtful planning and commitment.

A Final Thought: Giving With Your Heart, Guiding You With Our Experience

The feeling of making a positive impact is truly second to none. I know this well, as I’m actively involved in various non-profits, including “100+ Women Who Care Contra Costa County,” an organization I founded in 2017. We donate ~$10,000 per quarter to non-profits in our county, creating a significant ripple effect in the community.

Ultimately, your values and philanthropic preferences guide your giving. As financial advisors based in San Francisco, we collaborate with you to ensure your gifts are optimized for maximum impact and tax efficiency over a lifetime. In doing so, you contribute to meaningful causes while cultivating a sense of purpose and fulfillment that transcends financial decision-making.

Want to learn more about charitable giving strategies and discuss your personal goals? Book a call to get the conversation started.

ABOUT THE AUTHOR

KRISTIN BARTLOW

Financial Advisor, Managing Director

Kristin Bartlow left a career in property and casualty insurance in 2009 to pursue the entrepreneurial opportunity and relationship-focused work of financial planning.

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