Is It Already Time? Planning Ahead for Year-End Giving

Your August Content

Although summer isn't quite over yet, many attorneys, CPAs, and financial advisors are already thinking ahead to year-end planning. That’s smart, especially where charitable giving is concerned. The fourth quarter is an ideal time to revisit key strategies with your clients.

Gifts of stock

Too often we make the mistake of assuming clients know that appreciated stock is one of the most tax-efficient assets to give to charity. And if they do know, fewer understand how the IRS actually values those gifts. It’s useful to review the "high-low average" rule and offer practical reminders you can share before clients transfer securities to their donor advised or other type of fund at Gulf Coast.

What is “bunching” and why is it useful?

Now is the perfect time to talk with clients about “bunching” charitable gifts into a donor advised fund. Learn why early planning with Gulf Coast can help clients maximize tax benefits through bunching and other strategies, while providing consistent support to the charities they care about.

We look forward to helping you and your clients make the most of charitable planning opportunities throughout the months ahead.

Highs and Lows: Reminding Clients About Stock Gifts

As an attorney, CPA, or financial advisor, you’re well aware that your clients are typically better off from a tax perspective if they donate to charity by giving appreciated stock held for more than one year instead of writing a check. That’s because the client’s charitable deduction is calculated based on the stock’s fair market value, and the charity (unlike your client) can sell the stock without triggering capital gains tax. Indeed, many clients regularly give low basis appreciated stock to their donor advised funds at Gulf Coast.  

So what happens when one of these clients starts asking questions about what’s on their tax return? For instance:  

"Wait a minute. I distinctly remember that my stock was worth $81.95 per share when the market closed on the day I transferred 100 shares to my fund at Gulf Coast to add to my donor advised fund. But my tax return is showing a deduction amount less than $8,195. Is that a mistake?"

It's a great question, and of course you know the answer! When a client contributes publicly traded securities to a fund at Gulf Coast—or directly to another public charity—the amount of the charitable deduction is indeed based on the fair market value of the asset at the time of the gift under Internal Revenue Code Section 170 and Treasury Regulation § 1.170A-1(c). For publicly traded securities, however, "fair market value" is not ordinarily the closing price. Instead, the IRS valuation rule generally uses the average between the highest and lowest quoted selling prices on the date of the contribution. This methodology appears in Treasury Regulation § 20.2031-2(b)(1), outlining the IRS’s longstanding valuation rules.

Here's a simple example.

Suppose a client transfers shares to a donor advised fund at Gulf Coast on August 20. On that date:

High Price: $82.40

Low Price: $79.60

Closing Price: $81.95

Many clients understandably assume their deduction will be based on the $81.95 closing price. Under the applicable valuation rules, however, the value generally used is the average of the high and low prices:

($82.40 + $79.60) ÷ 2 = $81.00 per share

The difference may be relatively small in many cases, but for larger gifts—or during periods of market volatility—it can become meaningful.

And again, yes, you know this! But many clients do not. That’s why it’s a good idea to remind a client about this rule when they’re making gifts of appreciated stock. It is also important to remember that determining the valuation date itself may involve additional analysis. The relevant date is generally the date the gift is considered complete for federal tax purposes, which may differ depending on how the securities are transferred and when control passes to the charitable organization. Because of these nuances, it's wise to coordinate closely with Gulf Coast whenever timing is critical, such as at year end. It is also important to note that Gulf Coast’s policy is to liquidate all gifted securities as soon as possible upon receipt.

Fortunately, Gulf Coast works with gifts of appreciated securities every day and can help facilitate smooth transfers. Especially as the fall planning season approaches, clients often focus on maximizing charitable deductions while avoiding capital gains tax on appreciated investments. Being prepared to explain why the deduction is based on the average of the day's high and low—not simply the closing price—can be a helpful component of client conversations.

As a reminder, we receive a number of stock gifts throughout the year. If you are facilitating a transfer, please notify a member of our team in advance. This allows us to ensure we can properly track the gift, allocate it to the correct fund, and provide a timely gift acknowledgment to your client.

Getting Ahead of Year-End Planning With Bunching

A popular strategy that deserves special attention in year-end planning is "bunching" charitable contributions. The bunching concept became widely discussed when the Tax Cuts and Jobs Act of 2017 substantially increased the standard deduction for calculating income tax.

So, what is “bunching”? And why is it so useful under current tax law? Here’s how it works:

• Rather than making charitable gifts in roughly equal amounts each year, a client may benefit from consolidating two or more years of planned charitable contributions up front into a single tax year.  
• By concentrating, or “bunching,” donations into one year, the client may be better positioned to itemize deductions in that year while claiming the standard deduction in subsequent years, potentially producing greater cumulative tax savings over time.

For many of your clients, a donor advised fund at Gulf Coast serves as an effective vehicle for implementing a bunching strategy. That’s because a client can make a single, larger contribution to the donor advised fund, generally claim the charitable deduction in the year of the contribution under Internal Revenue Code Section 170(a), and then recommend grants to favorite charities now and in future years. In short, the timing of the income tax deduction is separated from the timing of charitable distributions, allowing the client’s favorite nonprofits to continue receiving consistent annual support. As year-end approaches, many clients will naturally ask whether they should “bunch,” or accelerate, charitable gifts before December 31.  

Bunching is not the only technique to be aware of well before year-end! Here are two additional important reminders for your client conversations:

• Note that Qualified Charitable Distributions (QCDs) allow IRA owners age 70½ or older to give directly to charity tax-free—up to the 2026 annual limit of $111,000—even before required minimum distributions begin, potentially lowering adjusted gross income and reducing taxes on Social Security benefits and Medicare premiums.  
• While QCDs cannot be used to fund donor advised funds, they can be used to establish or support other charitable giving vehicles, including designated funds, field of interest funds, scholarship funds, and unrestricted funds. These funds allow clients to support the causes they care about through ongoing grantmaking according to a schedule they establish, or they can be endowed to create a lasting charitable legacy for future generations.

Questions? Please reach out to us! Gulf Coast is honored to work alongside you and other advisors all year long to help structure charitable gifts in a way that advances your clients' philanthropic goals while making the planning process as seamless as possible. Reach out anytime to get a jump on year-end planning.

Recent Articles Worth the Read

Moving from Charitable Transactions to Charitable Strategy

Four recent articles make a common point: the most effective charitable planning rarely happens in response to a single tax event. Instead, it grows out of ongoing conversations about a client's values, family, financial goals, and legacy.

How to Turn Wealthy Clients' Charitable Giving Into a Cohesive Plan

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This article encourages advisors to move beyond treating charitable gifts as one-off transactions and instead help clients develop a coordinated philanthropic strategy across tax planning, estate planning, wealth transfer, and family dynamics.

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The focus of this article is that major tax events—such as business sales, retirement plan distributions, or highly appreciated assets—often create ideal opportunities to discuss charitable giving. Even though the transactional elements might spark a conversation, substantive charitable planning goes far beyond a single transaction and is most effective when it becomes part of a broader financial planning conversation.

Purpose-Driven Wealth Starts with Asking the Right "Why"

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This article outlines why technical expertise is important, but meaningful planning begins by understanding what clients hope to accomplish with their wealth. That’s why advisors should add deeper questions about values, purpose, and legacy, which naturally leads to conversations about intentional charitable planning and stronger long-term client relationships.

The High-Net-Worth Want Philanthropy Guidance

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The article reports that high-net-worth clients increasingly expect their financial advisors to provide philanthropic guidance as part of comprehensive wealth planning. In other words, this creates a big opportunity for advisors who are proactively talking about charitable giving with their clients.

If you skim these articles, you will see immediately that a pattern is emerging! Clients don't simply want to save taxes—they want their wealth to reflect what matters most to them. The team at Gulf Coast is here as a sounding board to help you begin charitable planning conversations early. Please reach out anytime!