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Bruce Dzieza, CFP, is a certified financial planner practitioner and the founder of Willow Creek Wealth Management, Inc. (willowcreekwealth.com, 707.829.1146), in Sebastopol.


Giving to a charity is easy, right? Just write a check send it off to your favorite 501(c)(3) organization, and get a full deduction for the amount on your tax return, up to 50 percent of your adjusted gross income.

However, there are more advantageous and rewarding ways to help the causes closest to your heart.

For instance, instead of giving cash, which is basically what you’re doing when you write that check, you could try a more tax-friendly approach: give stock or mutual funds that have gone up in value during your ownership. You get a deduction equal to the full value of the securities at the time of donation, rather than how much you originally paid for them, and never have to pay capital gains taxes on the appreciation.

If you want your donation to provide income during your retirement, consider a charitable remainder annuity trust or a charitable remainder unitrust, where you put money in a trust set aside for your favorite charity. Over the rest of your life — actually, up to 20 years — you receive income of at least 5 percent of the original trust value for an annuity trust or the annually recalculated actual value for a unitrust each year.

When you die, or the term of the trust runs out, the remaining trust assets are forwarded to the designated charity or even your own donor-advised fund, for which your heirs can be appointed successor donor and continue your philanthropic work. In each case, there is a tax calculation based on the assets and the income you receive, which determines how much of a deduction you will get when you make the donation to the trust. And you avoid paying capital-gains and depreciation tax recapture, if the assets happen to be real estate, on the property you contribute.

Let’s say you have $1 million worth of real estate originally purchased for $200,000. When you sold these properties, you would owe capital-gains taxes on the $800,000 of appreciation, plus recapture of the annual depreciation deductions.

Now let’s suppose you donated this property to a charitable remainder unitrust.

The unitrust would sell the properties for $1 million and reinvest that money in stocks or mutual funds. Under this arrangement, you might get income in the first year of $60,000, based on 6 percent of the trust amount, avoid $120,000 in capital-gains taxes and receive an immediate tax deduction based on IRS calculations for the expected remainder gift to charity.

If the investments in the trust were to earn 7 percent a year annually — no guarantee, obviously — then the value of the trust would increase to just under $1.5 million over the next 20 years, at which time the full amount would be donated to the charity. Overall, you might receive roughly $1.2 million in income over that same 20-year period — a figure which, again, depends on the earnings inside the trust.

Finally, some families are creating a charitable inheritance, where the parents donate to a donor-advised fund, receive their tax deduction then the fund invests the assets to grow until the fund is told where they should be distributed. The children are designated as the adviser to those assets, giving them the right to instruct the donor-advised fund where to make donations.

Bruce Dzieza, CFP, is a certified financial planner practitioner and the founder of Willow Creek Wealth Management, Inc. (willowcreekwealth.com, 707.829.1146), in Sebastopol.

It’s a simple, creative way to provide the adult children with an opportunity to determine their own charitable inclinations.

The bottom line here is that giving can be more rewarding, and more interesting, than simply writing a check.