Many clients consider their charitable giving to be a year-end activity, but there are good reasons to plan clients' charitable giving at the beginning of the year -- even if clients choose to actually write the checks during the December holidays.
Ronsey Chawla, a financial advisor at Per Stirling Capital Management in Austin, typically asks clients about their charitable intentions in January. The way he sees it, "The longer the runway to help answer the clients' questions, the greater the number of options available."
"For instance, instead of simply writing a check, we discuss the potential of using long-term appreciated assets in a donor-advised fund," Chawla says.
One of the best reasons to plan at the beginning of the year is that it's typically when many clients begin preparing their tax returns. That often influences how much and in which ways clients choose to give, says Michael Repak, vice president, senior estate planner at Janney Montgomery Scott in Philadelphia. As the tax code becomes ever more complicated, says Repak, it becomes even more important for people to know which tax bracket they'll be in, so they'll have a sense of the benefits of any particular planned gift.
For example, if clients expect to pay the alternative minimum tax this year, but perhaps not next year because they expect to be in a higher tax bracket, then they might want to plan a gift for 2015 rather than 2014, he says.
Claudia Mott, a planner at Epona Financial Solutions in Basking Ridge, N.J., points out that clients need to plan at the beginning of the year to make sure their anticipated charitable contributions don't affect their overall budgeting and cash flow for the year. "There are times when it might be wiser to donate non-cash items, such as real estate ... or collectibles," Mott says.
Katie Kuehner-Hebert is a freelance writer in Running Springs, Calif. She has contributed to Financial Planning, American Banker, Risk & Insurance and Human Resource Executive.