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As an advisor, what method of charitable giving would I recommend?

The most effective practice depends entirely on your situation, and on your intent. To help guide your decision, here’s a breakdown of some different ways to give to charities, along with pros and cons of each, including tax considerations.


A top choice, if possible, would be giving appreciated assets to a charitable entity.

In this context, “appreciated assets” are most often stocks or funds, but can be real estate or other kinds of holdings.

Once the charity has informed you about their account information or gifting instructions, this is a tax-efficient and fairly easy way to give.

With such a gift, you are typically able to claim the full value of the gift as a deduction, and you avoid paying both capital gains taxes on the increase in value and any transaction fees.

Example: Buy stock ABC for $1,000.

The price of stock ABC rises to $2,500 Fair Market Value (FMV).

You send the security worth $2,500 to the charitable entity’s account.

Benefits: There are no capital gains tax to pay on the $1,500 of appreciation, nor are there transaction fees involved.

When the charity sells the ABC stock, they get the full $2,500 donation from you—with no capital gains tax obligation.

You can claim a $2,500 charitable deduction on your Schedule A itemized deduction tax form in the year of the gift.


Another favorite idea of ours is to consider a donor advised fund (DAF).

A DAF works well for people who:

  1. Have an extraordinary high earning year and want to reduce their tax obligation in that same year.
  2. Have multiple charitable organizations that they want to give to, and want to simplify the process.
  3. Want to build up a charitable fund while their earnings are high in order to continue to give over multiple years in the future.
  4. Want to create a giving philosophy in the family, but don’t want to deal with the maintenance costs and/or don’t have the resources required to start a family foundation.

This is also an easy way to give. Open a Donor Advised Fund, if you don’t already have one established (we can help with this), then transfer (ideally) appreciated securities from your brokerage account directly to the DAF.

Since the DAF is considered a public charity, you can avoid paying any realized capital gains or transaction fees when you give securities to a DAF.

Example: Buy stock ABC for $1,000.

Stock ABC appreciates to a FMV of $2,500.

No capital gains tax or transaction fees are due when transferring the securities to your DAF. The DAF will sell them and $2,500 will be in the DAF, available for you to give away to charitable organizations of your choice immediately, or over time.

Benefits: You can typically deduct the full FMV of the gifted securities as a charitable tax deduction in the year of the deposit to the DAF.

You get the full deduction in the year the gift was made, but there is no time limit for giving away DAF money. It’s easy to make multiple gifts.

Caution: Remember that any amount deposited to a Donor Advised Fund is an irrevocable decision. You can’t get it back if you later decide you need it.


For those who are 70½, using your Required Minimum Distribution (RMD) for Charitable Gifting may be an efficient way to give.

The IRS currently allows individuals who are subject to required minimum distributions (age 70½ and older) from their retirement accounts to gift the RMD amount (up to a maximum of $100,000) to a charitable entity.

You avoid having to declare the RMD as income. That’s offset, to some extent, by the loss of the charitable gift deduction.

Still, it’s an easy and advantageous way to give  pre-tax dollars to your favorite charities.


Finally, the least efficient way to give to charity is giving cash.

While writing a check is the easiest way to give, it is not the most tax-efficient, especially if you have a taxable investment account with appreciated securities.

Writing a check means you are using “after tax” dollars—money you have already paid tax on.

This fact makes giving cash the most expensive way to make donations.

The amount that you send the charity can be used as a charitable donation on your Schedule A as an itemized deduction in the year of the gift.

If you sell securities then use the proceeds to gift to a charity, you will still have to pay any realized capital gains tax and trading fees incurred.

Example: Buy stock ABC for $1,000.

Sell stock ABC for $2,500.

Capital Gain = $1,500 (Capital gains tax will be due on this amount). You will also be charged trading costs incurred. You then can use what is left after paying the taxes to make your charitable gifts.

Caution: Either the charity gets less, since you had to pay taxes and trading fees before making the gift, or the gift costs you more than you estimated because a $2,500 charitable gift of cash (or check) really cost you $2,500 plus taxes and trading costs (transaction fees).

The ability and desire to give to charity is important to many of us. We would be pleased to help you maximize the dollars you give to charity—get in touch and let us know what you’re thinking.

We also recommend consulting with your tax professional concerning the specifics of how charitable gifting will affect you.