“Do your givin’ while you’re livin’
… then you’ll be knowin’ where it’s goin’.”
— Ann Landers

Americans are very generous.

Last year, charitable giving in the United States was estimated at $556 billion. Individuals gave about two-thirds of this, so what we donate truly makes a difference.

As we move toward year-end, it might be a good time to think about your philanthropic wishes and consider some of the many different ways to give.

Of course, you can simply write a check. And many charities make it even easier by allowing you to give online using credit cards.

But you may want to consider other, potentially more tax efficient ways to give.

Please note that I am not a CPA or a tax lawyer — so you should consult with your professional advisers to find out which options may be best for you — but here’s a quick look.

And I apologize for all the acronyms; most are courtesy of our tax codes.

IRA RMD ‘QCDs’

If you are at the age of having to take required minimum distributions (RMDs) from your individual retirement account (IRA), you can elect to make “qualified charitable distributions” (QCDs) as a tax-free transfer to a qualified charity.

QCDs must be made directly from the IRA custodian to the charity and are limited to the amount of your required minimum distribution amount, up to a maximum of $105,000 per year.

Some custodians require you to submit requests, others make it even simpler by giving you a QCD checkbook.

This is remarkably tax-efficient, since you would otherwise be taxed on the RMD amount, and the donations are not subject to the many tax-deduction limitations.

A side benefit is that this minimizes income for income-related monthly adjustment amount (IRMAA) determination purposes as well. The IRMAA determines your Medicare Part B premium.

Direct Gifts of Appreciated Property

Some charitable organizations will accept donations of securities and, in some cases, other property.

Donating assets that have appreciated allows you to deduct the full fair market value of the gift and avoid capital gain taxes on the appreciation.

You should check with the charity to determine if this is even an option, and it typically involves a bit more time and effort but can be a good deal for the charity and your tax return.

Donor-Advised Funds

I like to think of these as personal foundations for regular folks — and much cheaper and easier than establishing your own private foundation!

A donor-advised fund (DAF) is a charitable investment account that allows donors to contribute money, stocks or other assets to support charities.

Donors receive an immediate tax deduction for their contributions, and they retain the ability to advise on how and when the funds will be distributed to the qualified charity of their choice.

We often advised clients to contribute highly appreciated stock that could then be sold by the DAF and diversified with no capital gain taxes.

Donors then “recommend” grants from their fund as desired. The DAF sponsor reviews grant requests to make sure they are legitimate charities, and then processes the donation.

You even may use a DAF as part of your estate plan, naming it in your will or trust as a beneficiary. And you may name successors, often family members, to continue making grant recommendations after you are gone.

There are quite a few DAF providers — including Fidelity, Schwab, Vanguard, the American Endowment Foundation — as well as local community foundations, like our own Santa Barbara Foundation, Santa Ynez Valley Foundation and others.

Note that these take time to set up and to process grant requests. Click here for more donor-advised fund information from the American Endowment Foundation, which I use.

Charitable Trusts

These are legal arrangements governed by a trust agreement, which has particular provisions to qualify for charitable status that provide you with control over how your property and assets are managed, both before and after your death.

As the name suggests, charitable trusts have features to help you give back to charitable causes that you find meaningful, as part of your wealth planning.

Options include charitable remainder trusts (designed to provide you with income for life and leave the remainder to charity) and charitable lead trusts (which give the income to charity during your lifetime and the remainder to noncharitable beneficiaries, usually family).

Both provide tax benefits. These vehicles are especially useful for income tax benefits when a selling business owner is charitably minded and plans ahead.

Lots of important details would need to be discussed with your legal and tax advisers, however.  

Regardless of how you give, remember the joy of giving and helping others. Please do know your charity and give to only qualified organizations through which your hard-earned money goes substantially to helpful programs. I have long used Charity Navigator to vet organizations.

So, do your givin’ while livin’ so you know where it’s goin’ — and be tax-wise, too.