Bill Parrott |

Thanksgiving marks the beginning of the giving season.  From now until the end of the year charities and non-profits will receive much needed dollars to help fund their good works.   For several organizations the money they receive in the next few weeks will be the bulk of their annual budget.  Individuals typically wait until the end of the year to give because they want to know what their tax situation will be before they donate their money.  Some people give from their wallet, but most give from their heart.  

For where your treasure is, there your heart will be also. ~ Matthew 6:21.

During the financial planning discovery phase I ask people if they have a charitable gift giving strategy or if they donate money to charities on a regular basis.  I’m happy to report most people are charitable.  I once worked with a young pilot from Fed-Ex who didn’t believe in giving money away while he was living.  He wanted to donate all his money at his death through his estate.   I told him part of the joy of giving money away while you’re living is you get to see your gift bear fruit.  I didn’t tell him that people who don’t give today won’t give tomorrow.  

Each one must give as he has decided in his heart, not reluctantly or under compulsion, for God loves a cheerful giver. ~ 2 Corinthians 9:7.

Here are few ideas and strategies to help you with your charitable donations.

1.       Appreciated Securities.  The stock market has produced stellar results in 2017 so you may have a stock or two that has performed well.  When you give appreciated securities to a charity, you get the deduction, avoid a capital gains tax, and your charity receives the money.   Let’s say you purchased Maui, Land & Pineapple in January at $7.15 and today it’s selling for $17.40 for an unrealized gain of $10.25 or 143%.    You can gift your shares directly to your charity and avoid paying taxes on the $10.25 gain.  The charity will sell the stock on the open market to receive the cash and they, too, will avoid the capital gains tax.  You must donate your securities to a 501c3 organization to receive a deduction.  It would be nice to donate your appreciated stock to your Aunt Martha, but the IRS says no go to that idea.

2.       Qualified Charitable Distribution.  The IRS will let you satisfy your required minimum distribution by donating your money directly to a charity from your IRA.   This distribution is referred to as a qualified charitable distribution and you’re allowed to give up to $100,000.   The advantage to the QCD is you get to avoid paying taxes on your IRA distribution and it will satisfy your required minimum distribution for the year so consider a QCD over an RMD.

3.       Donor Advised Fund.  If you have too much money, too many charities, but not enough time, consider establishing a donor advised fund.   You can establish a DAF by year end to receive your charitable deduction.   Once your DAF is funded you can spend time on deciding how much money to give to your charities and when they should receive your gift.  One attraction of the DAF is you get the deduction for this calendar year, but you don’t have to give the money away until later years.  The money in your DAF can be distributed over several years to numerous charities.  You can also manage and invest the money inside your DAF.

4.       Cash.  Cash is king and it’s easy to give away.  An envelope of cash is a welcomed gift to many.   The IRS allows you to give a way $14,000 per person, per year without having to pay taxes on your gift.   However, you won’t receive a tax deduction.  For example, if you have four children and ten grand-children, you can give away $196,000.  You can also give $14,000 to non-relatives and random strangers.   The IRS allows you to deduct up to 50% of your adjusted gross income for tax purposes if you donate your money to a recognized charity.  If you give more than 50%, the IRS lets you carry your donation forward for up to five years.

The end of the year is a great time to give money to those in need and there’s always a right time to help others.  However, an annual charitable giving strategy may be beneficial to your long-term planning and budgeting needs.  A strong charitable and philanthropic plan can pay huge dividends to you and those you support. 

Do not withhold good from those to whom it is due, when it is in your power to do it. ~ Proverbs 3:37.


Bill Parrott is the President and CEO of Parrott Wealth Management an independent, fee-only, fiduciary financial planning and investment management firm in Austin, TX.  For more information please visit

November 26, 2017

Note:  Past performance is not a guarantee of future returns.  Your returns may differ than those posted in this blog.