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’Tis the Season to Discuss Charitable Gifting

Charitable giving is an important component of financial planning, but it often is overlooked. In fact, one top financial planner said 90 percent of advisors never discuss it with clients.

Although philanthropy is a personal decision, there are still many ways for you to help clients realize their charitable giving objectives. To start, here are a few questions that may help you raise the subject of charitable giving comfortably and effectively with your clients:

  • What kinds of charitable issues do you care about?
  • Are you currently involved with any community groups or charitable organizations?
  • If so, do you give the same amount every year? Are there certain factors the amount depends on? 
  • Do you support the same organization every year? Do you want that to vary from year to year?
  • Which donations have given you the greatest satisfaction?
  • Are there donations that you have regretted?
  • In what form have your past donations been? Cash, checks, other non-cash assets?
  • To whom do you turn for advice when deciding which organizations to support and how much to give?
  • What values would you like to preserve and pass on to your family in addition to your wealth?
  • Would you like to support any charitable organizations after your death?


As expected, most charities receive the majority of their yearly donations during the last few months of the year, especially as the holiday season ramps up. Giving to a charity is not only emotionally rewarding, but it also can reduce taxes for your clients and allow them to give even more.


Tax Benefits of Giving

Charitable contributions of money or property can be deducted against income tax if itemized and larger than the standard deduction available to those who do not itemize. The standard deduction amounts for 2016 remain the same as for the previous year — $6,300 for individuals and $12,600 for couples filing a joint return.

For deductible charitable gifts made to qualified organizations, the actual cost of the donation is reduced by the donor’s tax savings. For example, a client in the 33 percent tax bracket would pay only $67 of a $100 donation. As the client’s income tax bracket increases, the real cost of their charitable gift decreases, making contributions more attractive for high-net-worth clients.

When helping clients with charitable giving, it’s important to keep the timing in mind. All contributions are tax deductible in the year they are made. If a client puts a contribution on their credit card before the end of the year but doesn’t pay the bill until 2017, it’s still deductible for that particular year. The same goes for a check they write this year that is not cashed until next year.


Make Sure It Qualifies

Before clients make donations, be sure the charities they choose qualify for tax-exempt deductions. As advisors, we play a role in educating our clients about the online resources available to research charities and learn more about their overall impact. Clients may deduct a charitable contribution made to, or for the use of, any of the following organizations that otherwise are qualified under section 170(c) of the Internal Revenue Code:

  • Churches and other religious organizations.
  • Tax-exempt educational organizations.
  • Tax-exempt hospitals and certain medical research organizations.
  • A government unit, such as a state or a political subdivision.
  • Publicly supported organizations such as a community chest.
  • Certain private foundations that distribute all contributions they receive to public charities within two and a half months after the end of the foundation’s fiscal year.
  • A private operating foundation that pools all of its donations in a common fund.
  • Certain membership organizations that rely on the general public for more than a third of their contributions.


Limitations on Deductions

The average annual household contribution to charity is $2,974, according to the National Philanthropic Trust. For the majority of clients, there is no limit on how much they can deduct. The general rule is that clients should not contribute more than 50 percent of their adjusted gross income computed without regard to net operation loss carrybacks. Additionally, contributions made to certain private foundations, veterans organizations, fraternal societies and cemetery organizations are limited to 30 percent.

Clients who donate property other than cash to a qualified organization generally may deduct the fair market value of the property. If the property has appreciated in value, some adjustments may be required.

When talking with clients about their current and long-term goals for their wealth, charitable giving should be a natural part of the discussion. Explain how better understanding their interest in charitable giving will help you give the best possible investment and financial planning advice. After evaluating and selecting a giving strategy, your clients get to experience the joy of giving back with confidence, knowing their donations were made strategically and with their long-term financial goals in mind.


Brian Tarpey is the president of The Tarpey Group, an employee benefit services and solutions firm in Fairfield, N.J. He is a 13-year member of MDRT and has been awarded 10 Top of the Table honors. He also is the treasurer for the MDRT Foundation. Brian may be contacted at [email protected].

Brian Tarpey, president of The Tarpey Group, is a widely recognized insurance and financial services professional, having been awarded Top of the Table honors by the Million Dollar Round Table. Contact him at [email protected] [email protected].

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