Financial planning for the Charitable Heart, Part I

March 26, 2013 

Americans, in general, are pretty charitable people. According to the IRS, in 2008, the average American gave $2,564 to charity -- which doesn't begin to count the thousands of people who, like me, donate their time to charity by volunteering: not a tax deduction, unfortunately.

Charitable giving can have a financial planning process of its own, which, if implemented carefully, would look like this:

1. Determine how much to give. For everyday giving, charitable donations are often part of a typical monthly budget. For wealthier donors, charitable giving can be part of a financial plan that addresses retirement, tax and estate planning. With proper planning, donors may find they can give more than they originally thought they could.

2. Define your charitable intent. Consider your values and the causes you feel strongly about. Decide what you want your gift to accomplish.

3. Choose who to benefit. You could visit those charities that interest you and ask questions about their operations and who they benefit. A good source for background information is located at

4. Decide how to benefit them. There are more ways to give charitably than there are days in the week. What strategy is right for you will depend on your circumstances. This and future articles will cover the more common strategies available.

Outright gifts to charity can take many forms. Most simple: write a check directly -- and charities prefer that. Consider that person "who has everything:" a gift to their favorite charity in their honor makes a great birthday gift.

Buying "memberships" in local museums, zoos, and other organizations is another great way to donate and receive "member"benefits back. And don't forget, some corporationsmatch employees' gifts to charity: A great way to maximize your gift.

A tax efficient way to give outright is to donate appreciated assets you've owned longer than a year; often done with publicly traded stock.

For example, if you own stock worth $2,000 that cost you $600, when donated to charity, you should be able to deduct the full $2,000 market value, even though your cost was lower. This is better than selling the stock first and donating the proceeds: you'll have capital gains taxes of at least 15 percent, eroding your gift -- or your wallet.

Please note: If you donate appreciated property held less than a year, you may only deduct your original cost, so plan carefully.

Another charitable strategy is to use the IRA charitable rollover. If you're over 70-and-a-half and own a traditional IRA, you must take required minimum distributions: income-taxed to you. In 2013, you may donate up to $100,000 of your IRA to charity, satisfying your RMD for the year.

You don't report the withdrawal as income or get a tax deduction either. This provision expires in 2013: if so inclined, plan for this reasonably soon.

The next article will cover bequests and more complex strategies for charitable giving. Before considering these and other charitable giving strategies, consult with your tax advisor to determine what's right for you.

Karin Grablin, CPA, CFP®, MBA is with SRQ Wealth Management, 1819 Main Street, Suite 905, Sarasota; 941-556-9004; This information is not intended to be a substitute for specific, individualized tax, legal or investment planning advice.

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