Putting Charitable Giving into Perspective

As the year comes to a close and the holidays approach, many individuals and businesses are turning their thoughts to charitable giving. They may be prompted by year-end pleas from nonprofit organizations or simply by tax planning considerations. But 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 non-profit 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

The first step is to find true clarity when it comes to overarching charitable goals. Where do you and your business really want to make an impact? Some may be motivated by faith-based efforts, others by their community or academic history.  Depending on income and assets, some may be interested in pursuing naming rights at a university or hospital. Or, perhaps you are driven by causes – combatting hunger, improving literacy or fighting disease.

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, will call for specific strategies. An advisor can help a client in this situation explore the option of 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 is set to give, knows where to give, and also 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, if a client gives away appreciated stock, the gain is not taxable. 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 usually 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.

With the help of an advisor, clients can structure gifts in ways that minimize taxes and take advantage of assets that may be underused, such as a life insurance policy that is no longer needed.

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.

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John R. Anzivino, CPA, is a principal in the estate, trust and exempt organization practice of Kaufman Rossin, one of the Top 50 CPA and advisory firms in the U.S, where he offers sophisticated high-net-worth clients with estate planning and tax needs.  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). John can be reached at janzivino@kaufmanrossin.com

Seth R. Kaplan is a Partner in the Wealth Preservation and Tax Planning Group of Berger Singerman. He concentrates his practice in the areas of personal tax, planned giving, and estate planning for high net worth individuals. Seth has been involved in planning and coordinating major gifts to national universities and other charitable organizations, including significant impact gifts in the multi millions. He can be reached at skaplan@bergersingerman.com