As the year comes to a close and the holidays approach, many individuals and businesses are turning their thoughts to charitable giving. They might be prompted by year-end requests from nonprofit organizations or simply by tax-planning considerations. More likely than not, business owners will also be motivated by a genuine desire to help others and make a difference in the world around them.
In addition to making charitable gifts throughout the year, thousands of South Floridians show their generosity by supporting their favorite causes on the annual Give Miami Day, sponsored by The Miami Foundation. With $7.1 million raised for more than 600 nonprofit organizations during this year’s event alone, there’s no doubt that South Floridians are passionate about giving back to their community.
Consulting with a tax and estate planning advisor can help philanthropic-minded individuals to understand the steps needed to achieve their charitable goals in the most tax-advantaged matter.
Defining your goals: Where do you and your business really want to make an impact? Some might be motivated by faith-based efforts, others by their community or loyalty to their alma mater. Depending on their level of income and net worth, they might be interested in pursuing naming rights at a university or hospital, for instance. Or, perhaps they are driven by causes — helping children in need, animal rights, fighting disease or recovery from natural disasters.
Once you understand what your true passion is, the process of finding the right opportunities for giving becomes easier to manage.
Structuring gifts: Next is assessing circumstances that will influence how best to structure certain gifts. A major event such as a plan to sell a business or a low-basis asset or security, for instance, might call for certain strategies. An advisor can help a client in this situation explore the options for donating all or a portion of the asset in order to minimize capital gains and other taxes. In some cases, the use of a charitable remainder trust will make sense when a client intends to give, knows where to give and plans to sell a large asset.
Planning ahead for taxes: Year-end tax planning is another example of a condition that regularly comes into play in charitable discussions. For instance, a client may be able to donate appreciated stock without having to recognize the built-in gain. As a result, if a client has the option of giving away a specific amount in cash or the same amount of a low-basis stock, the stock will be preferred for year-end tax purposes. By donating the appreciated stock, instead of selling the stock and donating cash, the client gains the tax deduction and at the same time avoids paying capital gains tax.
Ultimately, how gifts are structured should be a reflection of many factors, including the level of involvement you want in the charities of your choice and in the giving process overall, your tax positions, the types of assets you have, and, of course, what your overall giving goals really are. You may employ one or a combination of approaches, including charitable trusts, private foundations, charitable gift annuities and donor-advised funds. By working with an advisor to develop a comprehensive charitable plan, you can create a complete financial strategy that maximizes tax advantages now and into the future.
John R. Anzivino, CPA, is a principal in the estate, trust and exempt organization practice of Kaufman Rossin.He is the founding president and co-founder of the Partnership for Philanthropic Planning of Miami-Dade and is a member of the Partnership for Philanthropic Planning (formerly known as the Planned Giving Council). firstname.lastname@example.org. Seth R. Kaplan is a partner in the Wealth Preservation and Tax Planning Group at Berger Singerman. He has been involved in planning and coordinating major gifts to national universities and other charitable organizations, including significant impact gifts in the multimillions to Drexel University, the University of Miami, the University of Florida, United Way of Miami-Dade County and the Greater Miami Jewish Federation. email@example.com.