Updated: Nov 2
August 3, 2022
Christopher Weil & Company, Inc.'s Associate Advisor, Vianca Tabuena, contributed an article to the Ronald McDonald House Charities San Diego for their August 2022 newsletter. It appears below.
Here’s a statement that may raise some eyebrows. We are advising clients to stop donating cash. Before you worry that we’ve lost our philanthropic minds, hear me out. By all means, we believe in giving. But maybe not cash.
As wealth managers and financial advisors, it thrills us to work with philanthropically-minded clients to find gifting strategies that benefit both the client and the nonprofits receiving their gifts. Our tried and true strategies include recommending donations of low-basis stock over cash. And to not only make those donations directly, but to consider using a Donor Advised Fund (DAF) and/or a Charitable Remainder Trust (CRT). For the donor, there are potentially huge tax benefits. Additionally, some of your most paralyzing tax conundrums can be resolved by gifting more complex assets to Ronald McDonald House Charities of San Diego (as well as other worthy nonprofits).
There is a host of clever ways to incorporate our local Ronald McDonald House Charities (and other nonprofits) into your philanthropic plan. In addition to donating low-basis stock instead of cash, you could name them as the beneficiary of your IRA, 401(k), or a no longer needed permanent life policy or annuity. You could make them the income beneficiary during your lifetime of assets that revert back to your estate at your passing (for example oil and gas rights).
Many donors are not aware that more complex assets, like real estate, can be suitable for philanthropic gifting. For example, many high-net-worth San Diegans own rental properties that have appreciated substantially since they were originally purchased. (According to the Zillow Home Value Index, the average San Diego County home has appreciated by nearly 153% in the last decade.*) Some of those owners are ready to stop being landlords and/or are looking for ways to diversify their portfolios. Many are disincentivized by the prospect of triggering a massive capital gains tax. Fortunately, charitably inclined landlords can contribute their rental property to the San Diego Ronald McDonald House. (Many other nonprofits also provide this convenient option.)
There are so many win-win reasons to do this. You might:
avoid capital gains tax while divesting yourself of an asset you no longer wish to own and manage;
take advantage of the opportunity to realize historic values in the San Diego real estate market;
retain the full value of the asset, undiluted by taxes, for the benefit of Ronald McDonald House Charities of San Diego;
receive a healthy tax deduction to apply over the next five years against other income from a Roth conversion, a large liquidity event from a business sale, or the sale of other highly appreciated assets (to name a few);
transfer the responsibility of selling the property to the Ronald McDonald House; and
strengthen the ability of the San Diego Ronald McDonald House Charities to serve families when they are most in need of it.
Should you desire more flexibility in your gifting, consider opening a Donor Advised Fund or creating a Charitable Remainder Trust and donating your real estate (or other assets) there.
With a Donor Advised Fund your flexible options include:
donating one asset and retaining the option to gift multiple recipients;
donating one or more assets and retaining the option to gift in periodic installments;
donating one asset, gifting a part of the proceeds, and then holding the rest until such time as you identify additional suitable recipients; and/or
receiving your tax deduction at the time of the donation, not at the time the gift is sent to the end recipient.
A Charitable Remainder Trust includes the following benefits:
converting a low-basis asset into a lifetime of income;
receiving your tax deduction at the time of the donation, not at the time the gift is sent to the end recipient; and
supporting the San Diego Ronald McDonald House Charities (and/or another worthy nonprofit) by designating them the recipient of the assets in your Charitable Remainder Trust at your passing.
At Christopher Weil & Company, Inc., philanthropy is central to our culture. Our firm’s employees have a tradition of community involvement where they frequently donate their time, talent, and treasure. Staff participate in decision-making when gifts are made on behalf of the firm. One of our advisors serves as an in-house philanthropy specialist. And we believe this helps give us and our clients particular insight into the world of charitable giving. If you would like to discuss ways you might support Ronald McDonald House Charities of San Diego, please reach out to Beth Van Eetveldt, the Director of Individual Philanthropy for the Ronald McDonald House, or connect with any member of Christopher Weil & Company Inc.’s advisory team.
Please note that guidance from a tax professional is crucial in determining the optimal charitable gifting strategy for any donor’s particular circumstances.
Information contained herein was accurate at the time of posting. The information on this website is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor. Figures cited in any examples are for illustrative purposes only. References to tax rates include federal taxes only and are subject to change. State law may further impact your individual results.
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