The Gift of Giving: Planning for Charitable Donations and Gifting

As consumers scramble to buy the perfect holiday gifts for those they care about, many are missing the opportunity to give a gift that keeps on giving long past the holiday season. According to Certified Financial Planner Board of Standards, Inc. (“CFP Board”) Consumer Advocate Eleanor Blayney, CFP®, gifting and charitable donations made at the end of the year can offer multiple benefits and long-term rewards if made with some thought and a plan.

“Too often we aren’t smart about the gifts we make. We see gift-giving as a chore to find ‘stuff’ for the stockings, or we dash a check off to a charity before the end of the year,” says Eleanor Blayney. “We should consider transforming our giving from just stuff – opened today, forgotten tomorrow – to gifts that benefit the recipients and ourselves long after the tinsel and bows have been swept away.”

Creating a plan for charitable donations and gifting is the last of 12 steps in CFP Board’s year-long “12 for ’12 Approach to Financial Confidence.” As consumers make their gifts this year, Blayney suggests considering four strategies to giving:

• Plan Now, Give Later, Part 1: By simply budgeting and setting money aside throughout the year for year-end giving, you’re certain to make the season merrier, both for you and the people and causes you care about. Doing the opposite – spending without planning first, then paying later – is a sure-fire way to turn the joy of giving into a new year’s hangover.


• Plan Now, Give Later, Part 2: This good advice deserves a second look, but now in the context of charitable giving. Planned giving, a category of charitable transfers, involves pledging or earmarking assets today for a future transfer to charity. Making a charitable bequest in a will is one example; naming a charity as a beneficiary on a retirement plan or insurance policy is another. Charitable remainder trusts and gift annuities also provide for future donations, but can generate current tax deductions in an amount equal to the “present value” of the later transfer. From a financial planning point of view, planned gifts are both smart and generous: they ensure that a donor’s assets are available to him or her for lifetime expenses if needed. Once that need is no longer there, the remaining assets go to benefit charity.


• Plan Now, Benefit Later: This method of giving is really a form of “investing” – using today’s money to build a better future. Most of the gifts we give are depreciable goods like clothes, games, and food. Once worn, used, or consumed, they have little remaining value. Instead, consider gifts with long-term benefits: a contribution to a child’s college savings plan, payment for a skills-building workshop, or picking up the fee for an adult child or relative to talk to a CFP® professional.


• Plan Now, Benefit Now: With a bit of careful planning, you can make some of your gifts this holiday season pay off almost immediately through added tax savings. For example, rather than just writing a check to a charity, review your portfolio for appreciated securities you have held for more than a year. Not only do you get a deduction for the market value of the securities donated, but you get the additional benefit of avoiding the capital gains when the security is sold. For individuals who may be subject to estate and gift taxes, making a gift to a beneficiary today can have the advantage of minimizing the total taxes that must be paid both now and later. A CFP® professional can assist with the finer points of this gifting strategy, helping you to choose the best types of assets to give now and the strategies to maximize the amount of current gifting that can be done transfer-tax free.

“With a plan, it’s possible this holiday season to give gifts with benefits that last longer than the momentary joy of unwrapping a present,” says Blayney. “A CERTIFIED FINANCIAL PLANNER™ professional can help you make a plan that allows you to give a gift that truly makes a difference in the lives of your loved ones and the organizations you care about.”

12 for ’12 APPROACH TO FINANCIAL CONFIDENCE

In January, CFP Board launched a new initiative called “12 for ’12 Approach to Financial Confidence” where all the components and steps for successful personal financial management are presented, one each month throughout the year including: establishing realistic goals, tax planning, emergency and risk management, investing, retirement, debt management, and estate planning.