Charitable Giving Planning for Individuals & Families
Does your charitable giving strategy include considerations like timing, structure, and the tax treatment of each gift? Working with an investment adviser can help individuals and families bring those decisions together as part of a coordinated charitable giving strategy.
Tax-Efficient Charitable Giving Strategy
How a charitable gift is made can change both its tax outcome and its impact. Giving appreciated stock instead of cash avoids capital gains tax on the appreciation, while bunching multiple years of giving into a single donor-advised fund contribution can convert a smaller annual deduction into a larger itemized one. For donors age 70 1/2 or older, a qualified charitable distribution from an IRA can satisfy a required minimum distribution while excluding the amount from taxable income. The right strategy depends on your age, your income, and what assets you have available to give.
Our team works with individuals and families whose giving runs the full range, from annual cash gifts to major contributions of appreciated assets, multi-year pledges, and legacy commitments. Raffa has worked nonprofits and associations as well as private wealth clients for more than 20 years, which allows us to understand both sides of a donor transaction. We have had the opportunity to see firsthand what helps a gift be impactful through the receiving organization versus what has created challenges.
Common Charitable Giving Strategies for Individuals and Families
Charitable giving for individuals and families uses a wide range of strategies, from simple annual cash gifts to complex non-cash transfers. The strategies below represent common approaches our advisers coordinate with individuals and families.
Annual Cash Gifts & Pledges
Gifts of Appreciated Securities
Donor-Advised Funds
Multi-Year Bunching Strategies
Qualified Charitable Distributions
Bequests & Beneficiary Designations
Our Approach to Charitable Giving Planning
Charitable giving planning is an ongoing process. Your giving strategy is built around your goals and financial situation and adjusted as your finances, family, and giving priorities evolve. Our approach typically includes the following:
Understanding Your Goals and Current Giving
Charitable giving is shaped by what you and your family care about most. Your first conversations with your adviser explore the organizations and causes you currently support, those you would like to support, recent gifts and the vehicles that funded them, and any values or principles you want reflected in your giving. To give applicable advice, your adviser also reviews your overall financial picture, including your investment strategy, income, and tax situation. These conversations give your adviser the context to build a giving strategy aligned with both your intent and your broader financial life.
Developing Your Giving Strategy
A giving strategy is the framework that guides how, when, and through what vehicles you give. At Raffa, we work with individuals and families to translate giving intent into a strategy that fits each donor. For some, that is a simple recurring gift schedule reviewed annually. For others, it is a multi-year roadmap covering planned major gifts, multi-year pledges, gifts tied to taxable events such as a business sale or stock vesting, and legacy commitments arranged through bequests or beneficiary designations. The strategy is reviewed and adjusted annually rather than reinvented each year.
Aligning Gift Timing with Your Tax Picture
Tax-aware gift timing is the practice of structuring charitable contributions so the deduction lands in years where it provides the most benefit. For individuals and families with variable income, large taxable events such as a Roth conversion or a business sale, or significant required minimum distributions, the timing of charitable contributions matters as much as the amount. Common strategies include bunching multiple years of giving into a donor-advised fund during a high-income year, evaluating qualified charitable distributions for donors age 70 1/2 and older, and timing gifts of appreciated stock around major tax events. Your adviser can also coordinate with your CPA to align your investment strategy with your tax strategy when timing charitable gifts.
Choosing the Right Vehicle for Each Gift
Vehicle selection is the process of choosing the structure through which a charitable gift is made, such as a donor-advised fund, a direct gift of cash or stock, or a qualified charitable distribution. The right vehicle matches the gift’s purpose, the donor’s tax situation, and the asset being given. A donor-advised fund works well for donors at any age who want to take a deduction now and decide on grants later. Direct gifts of appreciated securities benefit donors with concentrated or low-basis positions, including stock from equity compensation. A qualified charitable distribution serves donors age 70 1/2 or older taking required minimum distributions. For each donor, the right vehicle depends on age, income, and what they intend the gift to accomplish.
Coordinating with the Receiving Organization and Other Advisers
Large charitable gifts can involve multiple parties including the receiving organization, your investment adviser, your CPA, and attorneys depending on the situation. Your investment adviser at Raffa can collaborate with you and your independent tax adviser and attorneys, as appropriate, to develop a comprehensive strategy that takes into account your full financial situation and charitable goals. Raffa’s long-standing work with nonprofit and association clients gives our team familiarity with how gifts are received, processed, and recognized on the other side of the transaction.
General Disclaimer: Raffa Investment Advisers does not provide legal or tax advice. We encourage you to consult tax or legal professionals regarding your individual circumstances.
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Frequently Asked Questions About Charitable Giving Planning
What is the most tax-efficient way to give to charity?
The most tax-efficient way to give depends on your age, income, and the assets available to you. Common strategies for individuals and families include gifting long-term appreciated securities, contributing to a donor-advised fund in a high-income year and bunching multiple years of giving into a single contribution, and making qualified charitable distributions from an IRA after age 70 1/2. In many instances, cash may not be the most tax-efficient choice when alternatives are available. This is why it is important to work with your investment adviser and CPA to identify the most tax-efficient strategy for your financial situation.
What is a donor-advised fund and how does it work?
A donor-advised fund is a charitable account where the donor contributes cash, securities, or other assets, takes a tax deduction in the year of the contribution, and then recommends grants to qualified charities over time. These funds are commonly used by individuals and families who want to take a deduction in a high-income year, simplify recordkeeping for multiple gifts, or convert appreciated securities into more flexible charitable capital.
Should I give cash or appreciated stock to charity?
Whether you should give cash or long-term appreciated stock is dependent on your current financial situation. Prior to making a decision, we recommend working with both your investment adviser and CPA to determine which is the better fit for your investment strategy and tax strategy. Giving long-term appreciated stock is typically more tax-efficient than giving cash for positions you have held more than one year. You avoid capital gains tax on the appreciation and can take a charitable deduction equal to the fair market value of the stock at the time of the gift, subject to AGI limitations.
Can I gift cryptocurrency to a charity?
Yes. Cryptocurrency you have held longer than one year can often be donated directly to a qualified charity or to a donor-advised fund that accepts digital assets. The tax treatment is typically similar to gifts of appreciated securities: you avoid capital gains tax on the appreciation and can deduct the fair market value at the time of the gift, subject to AGI limitations and IRS valuation rules. Not all charities accept crypto directly, so you may need to route your gift through a donor-advised fund that does, then recommend grants to the recipient charity in cash. Documentation requirements for crypto gifts are often stricter than for stock, and gifts above $5,000 generally require a qualified appraisal.
What is a qualified charitable distribution (QCD) and who qualified?
A qualified charitable distribution, or QCD, is a direct transfer from a traditional IRA to a qualified charity. QCDs are available to IRA owners age 70 1/2 or older, count toward your required minimum distribution, and are excluded from taxable income. The annual QCD limit per individual is indexed for inflation. For individuals and families taking RMDs, a QCD often produces a more favorable tax outcome than taking the distribution and donating the cash separately.
When does a donor-advised fund make sense versus a private foundation?
A donor-advised fund is a simpler and lower-cost vehicle for most individuals and families with significant giving goals. It often involves no separate tax return, no annual minimum distribution requirement, and minimal administrative work. A private foundation tends to offer more control over investments and grantmaking but requires its own tax return, an annual distribution requirement, and ongoing administration costs. The threshold for a private foundation typically starts in the millions of dollars; below that, a donor-advised fund usually serves the same purpose more efficiently.
How can I integrate charitable giving with my overall financial strategy?
Charitable giving works best when it considers the rest of your financial picture, including your investment strategy, tax strategy, retirement income planning, and estate planning. The timing of large gifts can offset high-income years, such as from a Roth conversion, business sale, or stock vesting. Additionally, if a non-cash gift is selected, the asset chosen for a gift can reduce capital gains exposure in the portfolio. Furthermore, beneficiary designations, bequests, and charitable trusts can each play a role in coordinating lifetime giving with legacy goals. For donors at any age, the value comes from making each decision with the rest of the picture in view.
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Disclosures:
This content is provided for informational and educational purposes only and does not constitute individualized investment, legal, or tax advice. Charitable giving strategies involve complex financial, tax, and legal considerations, and the appropriateness of any strategy depends on an individual’s specific financial situation, objectives, and circumstances.
Raffa Investment Advisers does not provide legal or tax advice. Individuals should consult their independent tax and legal professionals regarding their particular circumstances before implementing any charitable giving strategy. Any references to tax benefits, tax efficiency, or charitable impact are based on general principles and are not guarantees of specific outcomes. Actual results may vary based on changes in tax laws, regulations, individual circumstances, and other factors.
Donor‑advised funds, qualified charitable distributions, gifts of appreciated assets, and other charitable vehicles are subject to eligibility requirements, contribution limits, sponsor approval, and applicable laws and regulations. Cryptocurrency and other non‑cash charitable gifts involve additional valuation, volatility, custody, and documentation considerations and may not be suitable for all donors or charities.
Advisory services are provided only pursuant to an executed investment advisory agreement. Please refer to Raffa Investment Advisers’ Form ADV for additional information regarding services, fees, and risks.
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