Why Should Charitable Giving Planning Begin Before December?

11 minutes ago

3 min read

Meaningful giving deserves more than a last-minute check. Starting in September gives high-net-worth families time to coordinate charitable intent with investment, tax, retirement and estate-planning decisions.

The asset you give can matter as much as the amount

Cash is familiar, but it may not be the most tax-efficient way to make a significant gift. Donating long-term appreciated securities directly to a qualified public charity may allow an eligible donor to avoid realizing the embedded capital gain and potentially claim a charitable deduction, subject to adjusted-gross-income limits and other requirements. The charity can generally sell the asset without incurring the capital-gains tax an individual donor would have paid.

This can be especially useful when a portfolio contains a concentrated or highly appreciated position. The gift advances a charitable goal while creating room to rebalance the remaining portfolio. The transaction must be completed correctly, and the donor should not sell the security first if the intention is to contribute the asset itself.

A donor-advised fund can separate timing from distribution

A donor-advised fund may allow a family to make a charitable contribution in the current year, receive a potential deduction if eligible and recommend grants to qualified charities over time. This can be helpful in a high-income year or when a donor wants to contribute appreciated assets but has not yet selected every organization that will ultimately receive support.

A donor-advised fund is not appropriate for every gift. Contributions are generally irrevocable, sponsoring organizations control the assets and fees and investment options vary. Families should understand the rules and confirm that the structure supports the way they want to give.

IRA owners may have another option

Individuals age 70½ or older may be able to make a qualified charitable distribution directly from an eligible IRA to a qualified charity. A QCD can count toward all or part of a required minimum distribution and may be excluded from taxable income when the requirements are met. Because the distribution must move directly from the IRA custodian to the charity, it is important to account for processing time and documentation for tax purposes is still required.

A QCD and a donor-advised fund are not interchangeable. Donor-advised funds generally cannot receive QCDs. Private foundations and certain supporting organizations are also ineligible. Confirm the recipient and procedure before requesting the transfer.

Bunching may make itemized deductions more useful

Some families combine several years of planned giving into one tax year and then take the standard deduction in other years. This “bunching” strategy may help total itemized deductions exceed the standard deduction in the contribution year. A donor-advised fund can support the approach because grants to charities may still be recommended over multiple years even though the contribution occurred earlier.

The decision should be based on a multi-year tax projection, not a single deduction estimate. Income, business events, capital gains, state taxes and other itemized deductions may change the result. For taxpayers in the highest federal bracket, current rules also limit the tax benefit of certain itemized deductions, making coordinated projections even more important.

Give the strategy time to work

Year-end deadlines arrive quickly for security transfers, appraisals, charitable trusts, QCD checks and account openings. Beginning charitable giving strategies in September creates time to identify the best asset, verify the charity, obtain professional guidance and complete paperwork before holiday schedules and processing delays intervene.

Comparing charitable giving strategies and coordinating them with investment management, tax projections, retirement distributions, and estate-planning objectives can help families evaluate how a gift may affect their broader financial plan. The objective is not simply to generate a deduction. It is to help your generosity accomplish more—for the organizations you support and for the financial plan surrounding the gift.

Frequently Asked Questions

Why begin charitable giving planning in September?

Early planning allows time to compare assets, verify recipient eligibility, complete transfers and coordinate the gift with tax projections.

Which charitable giving strategies may suit appreciated assets?

Depending on the donor’s goals, direct gifts of appreciated securities or contributions to a donor-advised fund may be considered.

If charitable giving is part of your year-end plan, September is the time to decide not only how much to give, but how to give it well.

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Investment advisory and financial planning services are offered through Financial Life Advisors.

Disclosure: Information provided is for educational purposes only and is not investment, legal, or tax advice. Financial Life Advisors is compensated for the advisory services discussed and may have an incentive to recommend those services. All investing involves risk, including possible loss of principal, and no strategy can guarantee results. Fees and additional disclosures are available in our Form ADV on our website or at adviserinfo.sec.gov.