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Charitable giving can help your investment strategy

Charlie Wick, Tina DeWitt and Todd DeJong
Vail, CO, Colorado

When you give a gift to a charitable group, you are rewarded by the knowledge that you’re helping an organization whose work you support. But you can also get a “bonus” from your gift in the form of tax benefits.

Specifically, your donations to charities that have received 501(c)(3) tax-exempt status are usually tax deductible, assuming you itemize you tax return. And as long as your total contributions for any one year are 50 percent or less of your adjusted gross income, there’s no limit on th deductions you can take for your gifts to public charities.

Furthermore, your contributions may entitle you to more than just a tax deduction in the year in which you make your gift. If you decide to donate shares of stock, a piece of real estate or another asset that has increased in value since you purchased it, you can avoid the capital gains taxes that will be due on the asset when it’s sold.



Clearly, your charitable giving can provide you with some significant tax benefits. But if you’re interested in going even deeper into the world of charitable gifts, you’ll find that they can also play a role in some of your long-term financial strategies.

Consider, for instance, how you might use a charitable remainder trust. You’d start by donating an asset ” such as appreciated stocks, bonds or real estate ” to the trust, which is managed by a trustee. The trustee, in turn, could sell the asset (relieving you of immediate capital gains liabilities), reinvest the proceeds and then make regular payments to you or another beneficiary you named when you established the trust. So you could set up the trust to provide yourself, or one or more family members, with an income stream for life or for a designated number of years.



After the lifetime of the last surviving beneficiary, or at the end of the specified term, the trust would end, and any remaining assets would then be distributed to the charity you’d named.

Setting up a charitable remainder trust is not as easy as filling out a few forms. To do it correctly, you’ll need to work with your legal and tax advisers. And once you establish such a trust, you’ll find it can have considerable impact on some of the decisions affecting your retirement income.

For example, if you could count on an income stream from a charitable remainder trust, you might be able to withdraw less money each year from your investments and retirement accounts, such as your 401(k) and IRA, to meet your income needs in retirement.



In fact, if you were to receive this trust-generated income, it might even affect the type of investments you need to make before retirement, possibly changing the balance somewhat between growth and income.

In any case, consider being as generous as you can afford in your support of worthwhile charitable organizations. But if you incorporate your charitable giving into your long-term investment picture, you’ll need to make the right moves ” so prepare carefully.

Edward Jones, its employees and financial advisers do not provide tax or legal advice. You should consult with a qualified tax or legal specialist for professional advice on your specific situation.

Charlie Wick, Tina DeWitt and Todd DeJong are financial advisers with Edward Jones Investments. They can be reached in Eagle at 970-328-4959, in Edwards at 970-926-1728 and in Avon at 970-845-1025.


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