Spokane Journal of Business

Start charitable planning while you’re still working

Try to maximize donations during peak earning years

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Whether you’re enjoying your retirement now or you’re working hard to inch closer to it, there are a variety of planning questions you’re probably thinking about: How much money will I need to retire? Where will my cash flow come from in retirement? How should I structure my estate planning documents or my life and health insurance? 

These are the kinds of issues retirees often spend time discussing and forming plans to address. Another question many people think about but tend to spend a lot less time planning for is this: How should I structure my charitable giving? 

People give to charity for a variety of reasons: to show gratitude for help that was provided to loved ones in a similar circumstance; out of a desire to improve their community and its resources; because they’re passionate about creating change on a particular issue; for personal recognition or a business promotion; or for the tax benefits associated with giving.

Nearly three-fourths of all giving last year was made by individuals, according to “Giving USA 2014: The Annual Report on Philanthropy,” and the vast majority of gifts each year are made with cash. Implementing a charitable-planning strategy can help to make these annual donations more powerful—and possibly improve the tax benefits you receive.

When should I give?

You’ve worked hard throughout your career, and finally, you’ve reached a point where you’re comfortable with your retirement nest egg. Now it’s time to start thinking about giving back to the community that has helped you to succeed.

This is the typical timeline people follow when they’re considering larger or lasting charitable giving; the primary focus is on making sure their retirement is fully funded first. And while it’s important to make sure your personal retirement goals can be achieved, waiting until you’re retired to begin charitable planning isn’t always the most effective strategy.

The primary reason to start charitable planning before retirement is to take advantage of the income-tax deduction for charitable contributions during peak earning years. You still receive an income-tax deduction if you make gifts during retirement, but the effective tax rate for many people drops considerably once they retire, making the deduction less valuable at that time. 

One common strategy is to make a larger contribution to a donor-advised fund during your working years and then conduct your charitable giving out of that fund in retirement, when you’ve decided which charities you’d like to support. 

Contributing to a donor-advised fund typically provides an income-tax deduction at the time the money is contributed. Later, you have the ability to distribute the money to the charities of your choice. 

What should I give?

In 2012, 93 percent of charitable donors made gifts of cash during the year. By comparison, only 26 percent of donors made gifts of noncash assets, such as stocks or mutual funds.

Cash gifts make a lot of sense as small recurring gifts, because the simplicity of writing a check and the fixed value of cash make them efficient. However, for larger gifts, donating appreciated securities in lieu of cash can be much more powerful.

If one were to sell $55,000 in stock and donate the proceeds, the gift would result in total tax savings of $4,800, after factoring in a capital-gains rate of 20 percent and assuming a cost basis of $10,000. When donating the same amount of stock directly to a charity, total tax savings would be $16,500, since capital-gains tax isn’t part of the equation in that scenario.

By giving appreciated stock to charity, you can avoid paying the capital gains tax, keep more money for the charity and yourself, and preserve your cash reserves for your ongoing living expenses in retirement.

Trusts and foundations

If you’re considering a large, legacy-type gift, there are a few additional charitable gifting vehicles that you might also consider. Charitable trusts such as charitable remainder annuity trusts, known generally as CRATs, and charitable lead annuity trusts, known as CLATs, can provide contributions to charity while preserving either an income stream or a future asset for you or your heirs.

These strategies can help when you’re trying to find a balance between your charitable giving goals and the assets you want to leave to your family. Due to the added complexity of these trusts, consult with your tax, financial, and legal advisers to make sure such a strategy would fit within your overall financial planning.

Foundations are another way you can make a large gift today and then contribute the funds to charities over time. 

Foundations require certain levels of annual giving, and there are some additional administrative requirements, but they can be a great way to set up long-term chartitable giving programs that you can control.

Community foun-dations, including the Inland Northwest Community Foun-dation in Spokane, are also available to help with larger gifts, and they’ll handle all the administrative needs that come with operating a foundation.

Supporting charities can be a rewarding and important part of your retirement planning. Still, it’s important to consider all the different vehicles and types of assets you could use before you embark on a giving program. 

Depending on your needs, resources, and the type of giving you’re considering, developing a thoughtful plan is key to getting the most out of your charitable donations—both for yourself and for those nonprofit organizations  that you’ve chosen to support.


Ryan Franklin is a senior financial adviser in the Yakima office of Seattle-based Moss Adams 

Wealth Advisors LLC. You can reach him at (509) 834-2458 or 


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