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Be Savvy With Bunching Donations and Income-Based Charitable Bequests

May, 14 2018

The Professional Seminar is an annual continuing education event for professional advisors hosted by Communities Foundation of Texas and Southern Methodist University. In May, Chris Hoyt, professor of law at the University of Missouri-Kansas City School of Law, addressed the strategies and solutions for retirement asset planning for first and second marriages, income tax savings with charitable bequests and the cost-benefit choices for philanthropists when choosing ways to make donations to a private foundation, a supporting organization or a donor-advised fund. 

Discussing ways that estate planning techniques could benefit donors, Professor Hoyt offered the following advice:

Income-Based Bequests

Discussing ways that estate planning techniques could benefit donors, Professor Hoyt advised the room that there are different ways to consider making a charitable bequest through an estate. The more traditional approach is a direct gift from the assets of the estate, which can reduce the estate tax. 

He encouraged the practitioners in the room to also consider having the charitable bequest be made from the estate’s taxable income, not just the assets, which provides income tax savings. This is a very different approach 
but one that can be very advantageous for the right donor.

Bunching Donations to Your Donor-Advised Fund

Savvy fund holders may plan to make a larger gift or “bunch” several years of donations to their CFT donor-advised fund in one year, and maximize their itemized tax deduction. Because there are no grant requirements for donor-advised funds, they can then have their CFT fund make grants to the charities they recommend in this year and over the course of several years.

“Furthermore”, says Jerri Hammer, CFT Advisory Council member and Armanino LLP tax partner, “this technique becomes even more tax-efficient if they are able to fund their gift to the donor-advised fund using long-term appreciated marketable securities, because they will be able to avoid paying the capital gains tax on the appreciation on those securities in addition to enjoying a full fair market value deduction for the gift (perhaps subject to income limitations).”

Advisor Testimonials

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To learn more or to request a confidential giving consultation, contact Carolyn Newham at 214-750-4226 or cnewham@cftexas.org.

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