Strategic Ways To Keep Giving During Times of Economic Uncertainty

Keith Wetjen |

Philanthropic giving is an important part of any wealth management plan. Not only does it afford you the opportunity to support the causes that matter to you most, but it also offers a number of tax benefits, allowing you to make a bigger impact with your dollars. During periods of inflation, rising interest rates, and market volatility, however, gifts and donations are often the first thing that individuals cut from their personal spending plan. 

As with any financial decision you make, it’s important to keep your sights on your long-term goals and maintain a “big picture” perspective. Oftentimes, organizations are in need of even more support during periods of economic uncertainty. Additionally, there are a number of giving strategies available to help you maximize your philanthropic impact and minimize your tax liability. Read on to learn more about ways you can continue to support the causes that matter to you most, regardless of the current economic climate. 

Publicly Traded Stocks

When most people think of making a charitable donation, they think about cash donations. However, you also have the option of gifting long-term appreciated stock to a charity. This is beneficial for two reasons. First, you may be eligible for a fair market value tax deduction. Second, it reduces your exposure to capital gains taxes. 

Privately Held Interests

Another often overlooked giving opportunity are privately held non-cash assets such as C- or S-Corp shares, business ownership interest, private equity investments, or even equity compensation. Given these assets often have a high appreciation value, you can drastically limit your capital gains tax liability and enjoy a current year tax deduction.

Donor Advised Fund 

Only some charities are able to accept gifts in the form of non-cash assets, which is one of the ways a donor-advised fund may be beneficial. Not only do these charitable accounts allow you to more easily donate non-cash or “complex” assets, but they allow you to build a reserve of charitable funds that you can give over time. You’ll enjoy a tax deduction in the year you contribute to the fund and also eliminate capital gains taxes. Not only that, but your funds will continue to mature over time and you’ll be able to donate them when and how you see fit throughout the life of the account.  

Combine Your Donation With Investment Vehicle Conversions

If you’ve been considering switching your retirement account to a Roth IRA, doing so in a down market can actually maximize your giving power. When you convert a traditional IRA or 401(k) to a Roth IRA, you’re subjected to income tax on the transferred balance. However, if you choose to give to charity during the tax year of your conversion, you can reduce your taxable income and - as a result - offset the income tax you own on the conversion. 

Interested in making one of these strategies work for you and for your favorite charity? Our team is available to help you identify and implement the appropriate giving vehicle to support your goals. Simply contact your advisor or reach out to us at (860) 838-3730 to learn more.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision. 

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal

limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA. 

This material was prepared by Courtney Henry Consulting.