Reprinted By Permission - Copyright
Boulder Daily Camera
Making Money Matter
Enid Ablowitz
 

January 2004

Year-end Giving Strategies

By Enid Ablowitz

Mr. and Mrs. Dogood sit at the kitchen table with a stack of return envelopes.  It is December and they are ready to write a series of checks to charities and other non-profits from whom they have received solicitations.  After all, this is the season of giving and if the check is dated before year-end, the gift is tax deductible, right?

What’s wrong with this picture? 

Well, certainly not the charitable intention.  How wonderful that they share in this activity.  How terrific that they respond to the letters of request for gifts.  How prudent that they consider how to make tax-wise gifts.

Yet there are things they might want to consider:

• The season of giving is a wonderful time for them to think about giving beyond their circle of family and friends, but it isn’t the only time there are needs and issues.  Maybe this would be a good time for them to create a giving plan that continues throughout the year.  It might also help with a potential cash flow crunch in December and January, allowing them to give more.
• Their giving plan might include charitable recipients beyond those that send requests.  Doing a little research on the mission, the leadership and the accountability of the organization might be appropriate.  In fact, knowing more about how their gift would be used could stimulate larger or consolidated gifts for greater impact.
• Just dating their check before year-end is not sufficient. For their gift to be tax deductible, the check must be delivered or if mailed, postmarked, by December 31.  If they used a credit card, the charge must be processed by December 31, even if the bill is paid later.  If their gift is $250 or more, they will need to get a receipt from the charity to validate their claim for a charitable deduction.
• Writing a check or charging their donation is simple, but if they itemize their tax returns, there is a better way to make their gift.  Uncle Sam could be their giving partner, leveraging their gift and allowing them to give more.  If they wanted to give appreciated stock they could simply arrange a transfer from their account to the account of the charitable recipient.  In doing so, they could avoid paying capital gains taxes on the appreciation and get a charitable tax deduction based on the market value, not the original basis.  They would need to be sure that the delivery is complete before year end to take the tax deduction in that year.  This could be done via wire transfer or, by mailing with a verifiable postmark or by hand-delivering and getting a receipt.  In addition, they could even use the cash they had intended to donate to buy back the stock and establish a new cost basis.
• Suppose they realized they wanted to make a larger gift in the current tax year, but didn’t have time to do their ‘due diligence’ about which organizations they wanted to support.  They could create a donor-advised fund, either through an existing non-profit or for-profit entity set up to manage such a fund.  This would enable them to make the decisions and distributions at a later date. 
• There are also sophisticated strategies for giving that could have long term impact on their income stream or even on issues related to wealth transfer between generations.  They could investigate charitable annuities, charitable remainder trusts and charitable lead trusts and others.  For such complex gifts, they would need to self-educate and have good counsel.

Mr. and Mrs. Dogood will certainly make a difference with the checks they write, but if they feel like they are “paying bills” and are not feeling the joy of giving, that would be a shame.  Besides, they should take full advantage of the incentives offered by the tax code to “partner” with government when making gifts. 

Are you like the Dogoods?  Check with your tax advisor for the best charitable strategies for your own financial circumstances.  Giving can be both personally satisfying and tax-wise. 

Enid Ablowitz is the Vice President for Advancement at the University of Colorado Foundation, Inc., and Director of Advancement for the Coleman Institute for Cognitive Disabilities.  She has been working as a donor advocate for nearly 15 years and has written a book for donors called Making Money Matter:  Eight Steps to Thoughtful Giving. For information on how to obtain a copy, contact her at enidablowitz@hotmail.com.

You may contact Enid Ablowitz by email at enidablowitz@hotmail.com