Explore these client scenarios

Current Year Planning

Solution & Benefits

When discussing current year planning and reflecting on the outcomes of the previous tax year, you can help your clients better meet their financial and philanthropic goals by identifying missed opportunities and recommending the best strategies for the future.

The tax benefits of charitable giving are an important discussion point, but research shows that your high-net-worth clients prefer an advisor to approach this subject in a more personal manner.

Start the conversation asking about clients' philanthropic goals, then offer solutions to lessen their tax burdens for the current year. Integrating charitable planning into your practice gives you the opportunity to:

  • Deepen existing client relationships
  • Reach new clients, including the next generation
  • Reinforce your position as a broad financial expert

A donor-advised fund is a simple and effective way for your clients to give. No other charitable giving vehicle allows them to do ALL of the following:

  • Take an immediate tax deduction
  • Donate long-term appreciated securities and illiquid assets and generally deduct the fair market value
  • Potentially give more through the investment of charitable contributions
  • Simplify record keeping as they recommend grants to their favorite charities

Conversation Tips

  • Don't wait until it's too late. Have the charitable conversation now to avoid a rush at the end of the year.
  • Remember, start with a discussion around your clients' philanthropic goals and then lead into how using DAFs could help them streamline their giving while helping solve tax situations they may have incurred the previous year.
    • Ask your clients about their passions and philanthropic goals
    • Find out how they give today
    • Determine if they think their current financial plan reflects their values
    • Discuss your own philanthropic activities
  • If working through an estate planning strategy with a client, ask about the legacy the client wants to leave with charitable giving—then explain the benefits of a DAF with regards to legacy planning.
  • Review the other scenarios in this tool for conversation tips around specific tax scenarios.

Eliminate/Offset Capital Gains

Solution & Benefits

Rather than selling securities first and donating after-tax proceeds, your client can donate appreciated securities with unrealized long-term capital gains directly to Fidelity Charitable®. Help your client further by identifying long-term assets with the largest appreciation in their portfolio.

Appreciated securities are one of the most tax-efficient ways your client can give.

  • When securities are donated rather than sold, capital gains taxes from selling the securities no longer apply. The more long-term appreciation the securities have, the greater the tax savings.
  • Your client is able to take a tax deduction for the fair market value of the long-term appreciated securities, up to 30 percent of his or her adjusted gross income.
  • Donating long-term appreciated stocks or mutual funds with an unknown or hard-to-find cost basis may eliminate your need to research the basis.

If your client has already liquidated their appreciated asset, they can still make a donation in the form of cash to offset their capital gains, but with more limited benefits.

For your more generous clients who meet certain contribution minimums, you may be able to actively manage the charitable assets on your platform—and report them as assets under management. Call us to find out more about our Charitable Investment Advisor Program.

Conversation Tips

  • You're likely already talking to your client about capital gains considerations—you can easily include this charitable strategy as part of the conversation.
  • Help your client understand that by donating rather than selling the securities, they may be eligible for all of the immediate tax benefits associated with their donation, plus gain the flexibility to support many charitable causes over time with one contribution.
  • Let your client know how for some charities, receiving and liquidating shares of a security is too much of an administrative burden. This solution eliminates that burden.

Offset Income in a High-income Year

Solution & Benefits

Contributing cash equivalents helps offset your client's income and is a simpler, more effective way to give compared to traditional checkbook giving.

  • With a donor-advised fund, your client can give now, when they have the money to do so—and contributions are invested and may grow tax free, which may result in additional dollars for charitable grants.
  • Your client will be eligible to take an immediate tax deduction for each contribution.
  • All contributions and grants are tracked and available online. These activities are also summarized in quarterly statements sent to your client.
  • For cash donations, your client can deduct up to 50 percent of their Adjusted
    Gross Income
    .

Also consider a scenario in which your client has had a high-income year and owns long-term highly appreciated securities. A smart strategy to consider is to recommend your client donates the securities instead of cash.

For your more generous clients who meet certain contribution minimums, you may be able to actively manage the charitable assets on your platform—and report them as assets under management. Call us to find out more about our Charitable Investment Advisor Program.

Conversation Tips

  • Help your client understand that using a donor-advised fund will allow them to simplify their recordkeeping and tax preparation.
  • Tell your client that by donating rather than selling long-term appreciated assets, they may
    be eligible for all of the immediate tax benefits associated with their donation, plus gain the flexibility to support many charitable causes over time with one contribution.

Planning a Business Exit

Solution & Benefits

There is a growing trend of contributing complex assets, such as privately-held C- and S-corp stock, limited partnership interests and certain publicly-traded stock, to public charities.

Your client can leverage the value of a seemingly illiquid asset and provide immediate and ongoing support to multiple charities on their own timetable. By contributing such assets to Fidelity Charitable®, your client:

  • Will potentially minimize capital gains tax exposure on the sale of the asset.
  • Is generally entitled to a tax deduction of the full current market value* (not just the original cost basis as in the case for a contribution to a private foundation).
  • Can make the most of their donation. By making a contribution in this tax efficient
    manner, the highest possible percentage of the funds from the sale is available for grant recommendations.

Fidelity Charitable's team of experts provides you the guidance to help navigate the specific requirements and avoid potential pitfalls related to the contribution of these assets, including back-office support to help eliminate the administrative burden.

Conversation Tips

  • Start the conversation as early as possible when considering charitable donations of business interests. For business owners nearing a transition point, timing is critical because of all of the considerations involved, including understanding at what stage the firm is in the sale.
  • Let your client know that some of the charities they want to support do not have the resources to accept or liquidate these type of closely-held business interests, so a donor-advised fund is the best solution.
  • Review how contributions are processed so that the highest possible percentage of the funds from the sale is available for your client to make grant recommendations.

* In accordance with a qualified, independent appraisal.

Owns Illiquid Assets

Solution & Benefits

Your client can monetize seemingly illiquid assets and minimize potential tax implications by donating them directly to Fidelity Charitable®. In fact, there is a growing trend of contributing complex assets, such as appreciated, debt-free residential real estate, and privately-held C- and S-corp stock to public charities. By contributing these types of assets, your client:

  • Will potentially minimize capital gains tax exposure on the sale of the asset.
  • Is generally entitled to a tax deduction of the full current market value*
    (not just the original cost basis as in the case for a contribution to a private foundation).
  • Can make the most of their donation. By making a contribution in this tax efficient manner, the highest possible percentage of the funds from the sale is available for grant recommendations.

Fidelity Charitable's team of experts provides you the guidance to help navigate the specific requirements and avoid potential pitfalls related to the contribution of these assets, including back-office support to help eliminate the administrative burden.

Conversation Tips

  • Let your client know that some of the charities they want to support do not have the resources to accept or liquidate these types of assets, so a donor-advised fund is the best solution.
  • For a client who wants to give, and has a concentrated and restricted position in company stock, donating a restricted stock can help maximize the overall contribution—and eliminate capital gains tax on the sale of the stock.
  • If a client has a property that has appreciated and is currently debt-free, in some cases they can transfer the market value.
  • Review how contributions are processed so that the highest possible percentage of the funds from the sale is available for your client to make grant recommendations.

* In accordance with a qualified, independent appraisal.

Uses Another Charitable Vehicle

Solution & Benefits

Your client can use a national donor-advised fund like the Fidelity Charitable® Giving Account®
in addition to their private foundation—it's not an either/or decision. Your client can also consider collapsing their foundation or terminating their Charitable Remainder Trust and establishing a
Giving Account®.

Complement a Private Foundation

If your client wants to donate non-publicly traded assets, a donor-advised fund can serve as a complement to their private foundation. Generally, when your client donates these assets to a public charity with a donor-advised fund program, your client is able to take a tax deduction of
the full market value of the donated asset* and eliminate capital gains taxes. Typically these contributions made to a private foundation are only deductible at basis.

Collapse a Private Foundation

The administrative burdens and costs of running a private foundation can be significant. In
those cases, collapsing a private foundation into a donor-advised fund like a Giving Account can
be beneficial.

Terminate a Charitable Remainder Trust

A client sometimes chooses to terminate their Charitable Remainder Trust (CRT) for a variety of reasons, including a need to immediately secure a lump sum of income, or even due to divorce.
In those scenarios, it may be possible for a donor-advised fund to be set up as the charitable remainder beneficiary of the CRT before terminating, which gives your client the ability to provide immediate and ongoing support to their charitable causes.

Conversation Tips

  • Ask your client about the administrative tasks associated with a private foundation. Are they becoming burdensome or is there a desire for simplicity? Is there a desire for anonymity?
  • Look at their portfolio, is there an illiquid asset or appreciated security that they'd want to use as a donation? If so, it may be most beneficial to complement their current charitable vehicle with a donor-advised fund—so they give more to charity while minimizing tax implications.

* In accordance with a qualified, independent appraisal