The Gift that Keeps on Giving

This holiday the season the Irving family calendar is not as jam packed as it has been in previous years, partly I’m thankful for and also partly it feels a little strange.  However, this quieter holiday season (as quiet as it can be with a 1 and 4 year old 😊) will provide some us time to reflect on everything we have to be grateful for this year and also find ways we can give back. I am very much aware this year will look different for many families, but I can’t help but feel that the spirit of giving is particularly stronger this year than in the past.  As many of you know, in lieu of our annual client appreciation event, Meridian donated to charities both local and nationwide suggested by our clients.  In total we donated to 29 charities! While we did miss gathering with everyone and sharing a toast in person, we have all agreed this is now our favorite tradition, which we hope to continue with every year.

To continue the spirit of giving, next Tuesday December 1st marks GivingTuesday ( ).  This is a global movement to inspire hundreds of millions of people to give, collaborate, and celebrate generosity through the gift of time, advocation, goods, kindness, talent, and dollars.  Although GivingTuesday is only officially only one day, I find the purpose behind this day to be even more poignant during this challenging year.

While the overall mission of gifting / and charitable giving is not just reserved for one day year, part of Meridian’s end of year planning with our clients is to ensure charitable goals and wishes are carried out as well as to maximize the benefits of gifting.  2020 in particular marks a year where charities have immense needs as they recover, recoup, and adjust their needs due to the pandemic.  Due to this higher need as well as some uncertain roads ahead, the gifting opportunities this year are particularly attractive given certain provisions of the CARES Act, current tax laws, and potential future changes in the gift and estate tax exemption amount.

We have written a couple of blogs surrounding the details of the CARES Act, but specifically it includes a couple of provisions exclusive for 2020 that create tax incentive for additional gifting this year.  These include:

  • the above the line $300 deduction charitable cash gifts – which might not seem like much, but it does provide encouragement for those who are charitably inclined but do not itemize their deductions to still receive the reduction off their gross income.
  • Increase in the deduction of cash gifts to charity from 60% of AGI to 100% of AGI for those who itemize deductions. Amounts above this limit may be carried forward for up to 5 years. ** please note, these cash donations must be made directly to a operating charities not private foundations, supporting organizations, or donor-advised funds.

However, as attractive and straight forward it is just to write a check to your favorite charity, there are other, and in some cases, more effective alternatives to gifting.  One strategy for those with highly appreciating intangible assets such as stocks, ETFs, and mutual funds held in taxable accounts is to directly gift those securities to charity.  Not only does this provide the donor with a tax deduction for the full donation amount, it potentially eliminates the capital gains taxes realized if the donor were just to sell the assets and donate the cash proceeds.

To really see the potential tax savings benefits, the below chart from Schwab Charitable outlines what a strategy of selling versus gifting a stock valued at $50,000 with a cost basis of $5,000 would look like.

** This example uses 24% as the donor’s income tax rate. $45,000 (the gain of the stock) x 15% (capital gains rate) = $6,750.    $50,000 – $6,750 = $43,250.   $43,250 x 24% = $10,380 – $6,750 = $3,630 in tax savings. 


The same scenario can be said for directly donating other appreciating assets (such as tangible personal property (i.e- art work)  or real estate), keeping in mind there are limits for the annual deduction up to 50% of AGI depending on the type of property donated and if donated to a public charity or private operating charity.  And while there is an annual deduction limit of 100% of AGI for cash and up to 50% of AGI for tangible / intangible property, donation amounts in excess of the limits can be carried forward up to five years, causing tax benefits to be extended into the future for donations.

When deciding what asset to donate or gift, in most cases, it is highly recommended to choose assets that have highly appreciated or are expected to appreciate in the future in order to eliminate capital gains taxes (which for a select few could increase in future years) as well as to reduce the donor’s future taxable estate.  Not only is the donor achieving their charitable goals and contributing to a meaningful cause, but giving and gifting during life is a critical estate planning piece, particularly for those estates that may be tipping over the estate exemption amount which currently sits at $11.58 million; however this could potentially be reduced to half by 2026.


For those retirees or those who have attained age 70 ½ and may not require the income from their IRAs for a certain year, charitable gifting opportunities also exist in the form of Qualified Charitable Distributions (QCDs).  Individuals at least age 70 ½ can direct up to $100,000 per year of distributions directly to a charity.  Not only does this fulfill charitable wishes, but in a year where RMDs are required, this strategy aids in reducing a donor’s future taxable estate, reduces annual taxable income, all while counting towards the required annual distribution.

While most gifting strategies do focus on those in the preservation and distribution phase in their lives, giving can still be an important part of financial planning even in the earlier phases of life and creates excellent philanthropic habits early on.  I thought the below chart was particularly interesting.  The data was pulled from the app Zelle’s September Consumer Payment Behaviors report, based on over 600 interviews a month of adults ranging from age 18-72 and focused on the 2020 gifting of monetary assistance to individuals in addition to non-profits.  Pretty inspiring!

While there is not a one-size fits all strategy to gifting and charitable giving, one thing is universal – it is hard to put a price tag on contributing, whether it be through time, skill, or dollars to a cause that is impactful to you and your community, especially this year.

Wishing all of you and your loved ones a very Happy Thanksgiving.  I certainly know I have a lot to be grateful for this year.

Categories : Financial Planning

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