All the Good You Can Do
5 Ways to Make 2016 Your Giving Year
By Richard Kalfayan Jr.
You made it through the holidays once again. In hindsight, you probably wish you hadn’t waited until the last minute to grab a gift for some of your friends and family. In fact, you swore you wouldn’t do it again. The best strategy would have been to keep your eyes and ears open year-round, getting ideas and input and then pouncing when you see that perfect present. Your annual gifting strategy should be similar.
Now that 2016 is upon us, make your New Year’s resolution a promise to be patient and prudent in your gifting. Here are some best practices to ensure that your annual end-of-year rush and questionable choices are a thing of holidays past…
Meet with your professional team
This is where the year must start. With the help of your professional team, determine what your charitable and personal gifting budgets might be, taking into consideration gift tax limits and limits on the income tax charitable deduction. Setting a gifting goal will help you and your team focus on minimizing your tax burden and maximizing your gifting. Gather with your tax accountant, investment professionals, attorney and others who contribute to your financial success, and start putting together a plan for the coming year. Take a look at your projected income for the year, your business plans and your projected taxes. It is also important that you determine early on which assets you plan to use for your charitable and family giving, and which you will be keeping in your personal portfolio. Will gifts be coming from currently funded cash accounts? Or perhaps you have other assets that have appreciated (or depreciated) that you plan to use.
Convene with your family
Once the numbers and possibilities are pulled together, now bring the family together to make sure that everyone is on the same page with items such as educational or internship expenses, and events such as weddings, graduations or other significant occasions. Additionally, consider how your children and grandchildren may assist in your philanthropic plans and donations. Much like creating a holiday shopping list, figure out what everyone is looking for in the coming year.
Determine your charitable giving strategy and budget
Is there a particular charity you plan to support for the year? A particular area of the world you want to focus on? Settling on this early in the year will allow you to be strategic with your giving, allowing for the most impact. The next step after establishing where to focus your philanthropic efforts is to determine how much you want and/or need to give away. Some families have a particular number in mind for their yearly charitable giving, and foundations generally have a specific federal requirement to give away five percent of their net worth. Having the expected budget set up early will make things much easier come year-end. Taking into account the advice of your professional advisors about how much you can give, make a plan and stick to it.
Create or fund your philanthropic vehicle
Has your family set up a donor advised fund or private foundation? Are you planning to? Often, families rush to set up charitable vehicles in December, when this could easily be accomplished earlier in the year. Even if you are not creating a new charitable fund, now is the time to consider funding of your existing vehicles to ensure maximum impact throughout the year. Don’t forget that appreciated assets can be tax-efficient property to satisfy those planned donations.
Align family member gifts
The maximum lifetime gift exemption has been increased for 2016 to $5,450,000 from $5,430,000, which means an extra $20,000 that can be used this coming year. The annual gift exclusion remains $14,000 per person from each donor, meaning that together a couple can gift $28,000 to each child and grandchild. Rather than waiting until December, determine the gifts you’re planning for this year and get them off your balance sheet early. By making the gifts early you can remove the assets’ future income and appreciation from your balance sheet, too. Also talk to your tax professionals about whether you should consider making taxable gifts. Taxes on such gifts are due in April of the following year.
Now is the time to set yourself up for a tax-efficient and enjoyable year. The more you can take care of now, the less stress you’ll face in December. Start the conversation. Get input from the right people. Identify opportunities you can foresee and embrace new ones as they present themselves during the year.
Richard Kalfayan is Managing Director and New Jersey Market Investment Team Leader for J.P. Morgan Private Bank. The information expressed in this story is being provided for informational and educational purposes only. It is not intended to provide specific advice or recommendations for any individual. You should carefully consider your needs and objectives before making any decisions. For specific guidance on how this information should be applied to your situation, consult the appropriate financial professional.