Achieving Financial Purpose Through Philanthropy

by | May 3, 2023

Acting or behaving with purpose is a popular life theme today, and it’s nowhere more prevalent than in financial planning.
But despite volatile markets and uncontrollable world events, the team at MS Financial works to help you realize your financial goals and purpose, whether that involves retirement planning, children or grandchildren’s educations, or the legacy you wish to leave for friends and family.
Philanthropy can also be an important part of that financial purpose. As an MS Financial and Charles Schwab client, you have access to a variety of convenient, tax-efficient and money-smart tools—starting with a charitable account free of minimum balances—to carry out your benevolence. It could hardly be easier to help the qualified organizations you care about most.
The Big Picture
Americans’ charitable giving for 2021 totaled nearly $485 billion according to Giving USA. Religious, education and human services organizations ranked 1-2-3 as recipients, garnering 54% of the total. Giving by individuals totaled 67%, $326 billion, with foundations, bequests and corporations giving the remaining 33%. In all, 2021 giving was 5% greater than 2020. Figures for 2022 are not yet available, though many believe that generous giving transcends markets and the economy.
Four Actions Worth Taking
Make a Qualified Charitable Distribution (QCD). Donors aged 70 ½ or older can gift directly from their IRA to a qualified 501(c)(3) organization to avoid taxes on the distribution. Limits for 2023 are $100,00 per individual filer, $200,000 for couples, and may increase in 2024 when indexing for inflation begins. For donors aged 73 or older, the distribution amount applies to their required minimum distribution.
Direct your Required Minimum Distribution (RMD) to charity. Like QCDs, by not directing your annual RMD (in all or partially) into a taxable account, the RMDs are freed from taxes.
Maintain your IRA – strategically. By naming a qualified organization as a beneficiary, appreciated assets can flow to your designated charitable beneficiary tax free. The organization receives full value, and by removing those assets from your estate, you avoid taxes that could otherwise be incurred. IRAs can have multiple beneficiaries at designated levels and can be updated at any time. Additionally, individuals as beneficiaries of taxable account assets can enjoy escalated or “stepped-up” values upon the account owner’s passing, reducing their eventual tax burden.
Open or utilize a donor-advised fund. Often associated with community foundations, DAFs have become the darlings of giving. At more than 1.25 million as of 2022, DAFs grew in numbers by nearly 29% annually from 2017-2021, and 20% annually from 2010-2021.
Conveniently, Schwab offers a DAF account vehicle with no minimum balance. Donors enjoy full tax-deductibility in the year of their irrevocable contribution and can later decide on how much to gift and to whom. Deductibility is in lieu of the standard deduction. Known as “bunching,” it can be advantageous to make more than one year’s worth of well-anticipated contributions in a single tax year in order to exceed the standard deduction. For 2023, that’s $27,700 for those and married filing jointly; $13,850 for individual tax filers. DAFs are ideal for cash contributions, but especially so for highly appreciated non-cash assets, like stocks, that would otherwise incur capital gains when sold.
For all your giving inclinations, Schwab Charitable offers a host of information. Anytime and however convenient for you, we welcome discussing how we can help you meet your financial goals and purpose.

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