More Creative Options for Charitable Giving

IRA vs. Cash:  People over age 70 ½ are required to make minimum distributions from their IRA accounts each year.   People in this situation who want to support a charity may consider making the charitable contribution directly from their IRA account rather than from cash.  They are allowed to redirect all or a part of the required minimum distribution (up to $100,000 a year) to a charity.   The advantage:  no taxes are paid on the amount going to the charity.

Appreciated Stock vs. Cash:  In this scenario, rather than making a cash donation, a person elects to give a charity common stock that has increased in value over the years.   The advantage:  the donor does not pay capital gains taxes on the appreciated stock, and if the stock represents a concentrated holding in their portfolio, it may also produce a more diversified investment portfolio.

Insurance Policy Donation:  Many people are unaware that one may make a gift of a new or existing insurance policy to a charitable organization, which then becomes the owner and beneficiary.  This is especially attractive when a policy death benefit and/or cash value is no longer needed.  The advantage:  Provides an immediate tax deduction if there is a cash value, allows a larger gift with smaller cost, and ongoing premium payments are tax-deductible.

The next (and final) blog in this series will look at a concept called “bunching gifts,” donor-advised funds, and the concept of a charitable checking account.