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.