Making Your Wealth Reflect What Matters Most
By Jenna Vitosh CFP®/AAMS®
As the year begins to wind down, many of us start thinking about the holidays, family traditions, and the people and causes we want to remember. It is also a natural time to reflect on the year behind us, and on what we want our resources to accomplish in the year ahead. For me, that is where thoughtful financial planning becomes especially meaningful. Wealth is not just about what we have. It is about what our resources make possible. For many of us, that includes giving.
If charitable giving is part of your year-end tradition, December can be a good time to look beyond simply writing a check and ask: "Is there a more intentional way to give?"
Give From Your IRA
If you are age 70½ or older and charitably inclined, a Qualified Charitable Distribution, or QCD, may be worth considering. A QCD allows you to transfer money directly from your IRA to a qualifying charity. The distribution can satisfy all or part of your required minimum distribution (RMD), while the amount transferred directly to charity can generally be excluded from your taxable income, provided the IRS requirements are met.
That can be a meaningful distinction. You do not receive a charitable deduction for a QCD, but the distribution itself can generally be excluded from income. And if you already need to take an RMD, you can essentially redirect dollars you would otherwise have to withdraw toward an organization you care about.
There is one very important detail: the money must go directly from the IRA to the eligible charity. Taking the distribution yourself and then writing a check to the charity does not make it a QCD.
If this strategy interests you, do not wait until the last few days of December. Your financial institution may need time to process the request, and the distribution must be completed by year-end to count for that calendar year.
Give From Your Investment Portfolio
Cash is not the only way to make a charitable gift. If you own stock or another investment that has appreciated significantly, donating the asset directly to a qualified charity may be another strategy to consider. When the rules are met, you may generally be able to make a charitable contribution based on the asset's fair market value while avoiding the capital-gain tax that could have resulted if you had sold the investment yourself and then donated the cash.
This is one of those areas where a little planning can make a big difference. Instead of automatically selling an appreciated investment, consider whether it could be a better charitable gift. You can then potentially use the cash you would have otherwise donated (or the proceeds from selling another investment) to rebalance your portfolio.
Of course, this is not a one-size-fits-all strategy. Cost basis, holding period, the type of asset, your tax situation, and the charity's ability to accept the asset all matter. A financial advisor and tax professional can help determine whether it makes sense for you.
Create A Charitable Giving Fund
For those who want to make charitable giving a more intentional part of their overall financial plan, a donor-advised fund (DAF) can be another option. A DAF allows you to contribute cash or eligible assets to a charitable fund, receive the applicable charitable tax treatment when the contribution is made, and then recommend grants to qualified charities over time. The sponsoring organization maintains legal control of the assets while you retain advisory privileges regarding charitable distributions.
I particularly like the way a DAF can turn charitable giving into a family conversation. Rather than deciding in December where to send a check, you can sit around the table and ask:
What do we want our giving to accomplish?
What organizations reflect our values?
What do we want our children and grandchildren to learn about generosity?
That conversation can become part of your family's legacy.
Give With Intention
There is a tendency to think about charitable giving as a tax strategy. And certainly, there are important tax considerations. But I think we miss something when we start there.
Giving is ultimately about purpose.
Maybe it is the organization that helped your family through a difficult season. Maybe it is your church, a local nonprofit, an alma mater, or a cause you have supported for decades. Maybe you want to create a tradition of generosity for your children and grandchildren. Whatever the motivation, your charitable giving should reflect what matters most
to you.
That is one of the things I love about financial planning. At its best, it is not simply about maximizing numbers. It is about creating clarity around what you have, confidence in the decisions you make, and a plan for using your resources in a way that reflects your values.
As you move toward the end of the year, take a moment to look at the bigger picture. Review your RMD. Look at your investment portfolio. Think about the organizations you want to support. And before you write that year-end check, ask yourself whether there may be a more intentional way to give.
Your wealth has the potential to do more than support your life. It can reflect your values, strengthen your community, and create a lasting impact.
And that, to me, is wealth with purpose.
Jenna Vitosh, CFP®/AAMS®
Chloey Wealth Founder and Advisor
5550 S. 59th St., Ste. 26, Lincoln, NE
(531) 249-0170
ChloeyWealth.com
Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.