Strategic Giving During Your Lifetime: Four Ways to Give More Without Spending More

Most people give the same way their parents gave. Check in the plate. Card on file for the monthly pledge. Something extra in December when the appeal letter arrives and the year is closing. Almost nobody stops to ask whether there is a better way to do it. There is. The charitable giving strategies in Indiana that stretch the furthest rarely start with cash.

CHARITABLE GIVING STRATEGIES IN INDIANA: THE SHORT VERSION

• Cash is the least efficient asset you own for giving. You already paid income tax on it.
• If you are 70 and a half or older, money can go straight from your IRA to a charity and never count as income.
• Giving appreciated stock or land beats selling it first and donating what survives the tax bill.
• Combining several years of giving into one year can turn giving that produces no tax benefit into giving that does.

There is nothing wrong with giving that way. I spent twenty years in the nonprofit and fundraising world before I practiced law, and I can tell you that consistent annual donors are the foundation everything else is built on.

But cash is the least efficient asset you own for this purpose.

When you give a dollar in cash, you are out a dollar and the charity receives a dollar. You already paid income tax on that dollar before it landed in your checking account. There is no leverage in the transaction at all.

Almost every other asset you own behaves differently. Give the right one, the right way, and the charity receives more than the gift costs you.

Here are the four approaches that come up most often in my practice.

1. GIVE DIRECTLY FROM YOUR IRA

If you are 70½ or older, you can direct money from your traditional IRA straight to a qualified charity, and it never appears on your tax return as income. This is called a Qualified Charitable Distribution, or QCD. Understand why that is different from what most people do.

Money leaving a traditional IRA is ordinary income. Every dollar of it. So if you withdraw money, pay the tax, and then write a check to your church, you have added to your income and then attempted to recover it with a charitable deduction. That only helps if you itemize. Most people no longer do, because the standard deduction is now high enough that itemizing rarely makes sense.

With a QCD, there is no deduction to claim, because there is no income to offset. The money simply never becomes yours for tax purposes.

Once you reach the age when Required Minimum Distributions begin, a QCD also counts toward satisfying that requirement. You meet the government’s demand and support your church in a single transaction, and neither one shows up as taxable income.

Two details cause most of the mistakes.

The two ages are different. You can begin making QCDs at 70½. Required distributions start later. That gap gives you several years where this works purely as a giving strategy, before anyone requires you to take anything.

The money must go directly from the custodian to the charity. If the check comes to you and you deposit it, the transaction becomes a taxable distribution, and you have lost the entire benefit. Call your IRA custodian and ask specifically for a qualified charitable distribution. They handle these constantly.

There is an annual cap per person, and it adjusts for inflation. For nearly everyone, the cap is not the limiting factor.

During my tenure with Christian Community Action in Valparaiso, we were fortunate to have many donors make their annual donation through QCD distributions. At the time, only RMD allocations could be used. It was a way to allow the donors to donate using money that would otherwise have to pay income tax on. Basically, the QCD donation was a 100% tax deduction.

2. GIVE THE APPRECIATED ASSET, NOT THE PROCEEDS

This is the strategy that surprises people most, and it applies to more of them than they expect.

Suppose you own stock you bought years ago that has grown substantially. You would like to support a capital campaign. The instinct is to sell some shares and write a check.

That instinct costs money.

Selling triggers capital gains tax on the growth. Depending on your bracket and the applicable surtaxes, a meaningful slice of the proceeds goes to tax before you give away a dollar. Then you donate what is left.

Now do it the other way. Transfer the shares directly to the charity.

You never sold, so there is no gain to tax. You may generally deduct the full fair market value of the shares, not what you paid for them. And the charity, being tax-exempt, sells the stock and pays nothing.

The organization receives the entire value. You gave away an asset that may have cost you a fraction of that decades ago. The gift costs you far less than the number on their receipt.

A few practical rules

You generally need to have held the asset more than a year to qualify for full fair market value treatment. Deductions for appreciated property are limited to a lower percentage of your income than cash gifts are, with a carryforward for anything you cannot use in the current year. And this only works with assets that have gone up. If a holding has lost value, you are usually better off selling it, capturing the loss, and donating the cash.

This also works for pledges. If you have committed to a multi-year capital campaign, nothing requires you to pay in cash. Appreciated stock can satisfy a pledge payment just as well. In my fundraising years, the donors who understood this gave noticeably more than they had originally planned. Not because they became more generous. The same personal cost simply bought a larger gift.

3. DONATING REAL ESTATE AND INDIANA FARM GROUND

The same principle applies to real property, and in this state it applies with unusual force.

Farm ground that has been in a family since the 1950s carries a cost basis so low it may as well be zero. So does a rental property bought decades ago and depreciated along the way. Selling either one produces a tax bill large enough that people flinch, put it off, and then do nothing for another five years.

Donating the property avoids that entirely. You can give it outright, give an undivided fractional interest, or use it to satisfy a campaign pledge. The charity receives the full appraised value.

Real estate is more involved than stock, and the details matter:

• A qualified appraisal is required, and the timing rules around it are specific.
• Not every organization can accept real property. Many small nonprofits are not equipped to hold, insure, or sell it. A community foundation usually is.
• Mortgages, leases, environmental questions, and mineral or tillable-acre arrangements have to be addressed before the transfer, not after.

Plan this one several months ahead of the gift, in coordination with the organization. It is not a December decision.

In recent years, you may have heard about non-profit organizations called Land Trusts. In Northwest Indiana, one such organization is The Shirley Heinze Land Trust. Families donate land, and the trust preserves or restores it to its natural state for reclamation and education. It is a way to leave a living family legacy for the community to enjoy for years to come.

4. CONCENTRATE YOUR GIVING INTO FEWER, LARGER YEARS

Here is a frustration for people who give faithfully but moderately.

The standard deduction is now high enough that most households never itemize. If you do not itemize, your charitable giving produces no tax benefit whatsoever. You are giving entirely with post-tax dollars and receiving nothing back.

Concentrating, sometimes called bunching, addresses this.

Rather than giving a similar amount every year, you combine several years of intended giving into one. In that year, the larger total may clear the standard deduction threshold along with your other deductions and produce a genuine benefit. In the intervening years you simply take the standard deduction, as you would have anyway.

The obvious objection: your church still has expenses in the off years.

This might lead you to talk to your financial advisor about the use of a Donor Advised Fund (DAF). It is an account you fund in a single year, take the deduction in that year, and then distribute from the DAF annually. Your organizations continue receiving steady annual support. Your deduction was concentrated to allow you a viable tax benefit. Additionally, you can generally fund one with appreciated stock or even a QCD, which layers this other previously discussed strategy.

This is a conversation for your financial advisor, not your attorney. Donor advised funds usually live at investment firms, and the specifics vary enough that comparison matters. Minimums, annual fees, investment options, how much say you keep over grants. Ask what it costs annually and ask how the fund approves distributions.

A fund at your county community foundation can serve a similar purpose, particularly if your giving is local. You may eventually convert it to a permanent fund. Indiana has a broad network of community foundations, and nearly every county has one. They exist to build local, lasting giving.

That path runs into the territory of the next article.

THE QUESTION NOBODY ASKED YOU

If you have done any estate planning, think back on the conversation.

Did anyone ask whether you wanted to do something for your church, your alma mater, your fire department, or the organization that helped your family through something hard?

For most people, the answer is no. The conversation was about children, splitting things fairly, and avoiding probate. All of those matter. But planning that stops there only addresses part of what someone’s long-term goals may be.

If you have charitable intentions and no one has asked about them, that is worth noticing.

WHERE THIS GOES NEXT

Everything above delivers support now, during your lifetime, while you can see it work.

The strategies get more interesting when you need something back from the asset. What if the property or the stock position is one you cannot afford to sell, but you also need the income it represents? What if you want the giving to continue after you are gone?

That is the subject of our next article: Legacy and Planned Giving, covering charitable remainder trusts, retirement account beneficiary designations, permanent endowments, and private foundations.

Every plan is specific to your family, your assets, your tax situation, and your wishes. These strategies work when your attorney, your accountant, and your financial advisor are all part of the same conversation.

CCSK Law works with families across Northwest and Central Indiana on estate planning, elder law, and charitable planning. Charitable intent belongs in a complete plan, and it is worth raising alongside everything else you are deciding. If you would like to talk through how these strategies might apply to your situation, we are glad to have that conversation with you.

Call us: (219) 230-3600. No charge for that first conversation.

QUESTIONS PEOPLE ASK ABOUT CHARITABLE GIVING STRATEGIES IN INDIANA

This article is general information, not legal advice. Reading it does not create an attorney-client relationship, and every situation has details that change the answer. For advice about your own situation, talk with a licensed Indiana attorney.