Three Clients and Three Solutions

As the calendar year draws to a close, charitable giving is not only important to clients first and foremost as an act of generosity, but also as a powerful tool in tax planning.

Consider the following hypothetical client situations:

Your client, Emily Harper, wants to benefit from itemizing deductions.

Dr. Emily Harper, a 62-year-old physician, has long supported many local charities with annual donations totaling around $20,000. While generous, her giving has not exceeded the standard deduction under the current tax law, which means she has received little to no tax benefit for her contributions. You have counseled Emily that 2026 will bring even more limitations on her ability to deduct charitable contributions.

Working with the East Tennessee Foundation, you are arranging for Emily to contribute $100,000 of appreciated stock this December to establish a donor advised fund. This large, single-year contribution will allow her to itemize deductions for 2025 and maximize her tax savings, while still preserving the flexibility to recommend grants of $20,000 per year to her favorite charities over the next five years. By front-loading her philanthropy, Emily not only secured a significant deduction even under the higher standard deduction thresholds in place, but she also avoided potential exposure to the upcoming IRS “floor and cap” rules under the One Big Beautiful Bill Act.

You are worried about Jonathan Lee’s concentrated stock positions.

Jonathan Lee, a 58 year old business executive, has accumulated a significant position in a favorite stock over the past two decades. As Jonathan’s advisor, you have grown increasingly concerned about the concentration risk in his portfolio and the steep capital gains tax bill he would face if he sold shares outright. You also discovered that Jonathan has consistently supported a handful of local charities with annual cash gifts. (This made you cringe; you wish Jonathan had consulted you about giving stock versus cash.)

Working with the East Tennessee Foundation, you arranged for Jonathan to donate $250,000 worth of his highly appreciated stock to establish a donor advised fund. This move accomplished two critical objectives: it allowed Jonathan to bypass the capital gains tax on the gifted shares and made him eligible for a full fair market value charitable deduction for the stock’s value on the date of the gift.

Now, instead of writing annual checks from after-tax dollars, Jonathan can recommend grants from his donor advised fund over time, maintaining his giving pattern while enjoying significant tax efficiency. What’s more, by contributing stock instead of cash, Jonathan transformed a concentrated holding into diversified charitable capital.

Margaret Davis has more money in her IRAs than she’ll ever need.

Your client, Margaret Davis, is 74 years old. She continues to receive royalty income from several books she wrote over the course of her career as a successful romance novelist. Margaret also owns several IRAs. Her royalties are more than enough to cover her living expenses; she simply does not need the Required Minimum Distributions from her IRAs. You have counseled her, though, that she has to take those distributions under IRS rules.

Recently, Margaret sent you an article she read in the Wall Street Journal about Qualified Charitable Distributions, or QCDs. She tells you that she is interested in using her IRAs to support the local animal shelter but is curious as to how best to do this.

Because she is over the age of 70 ½, Margaret can direct up to $108,000 (the 2025 limit) to qualified charities. Instead of giving the entire amount to the animal shelter now, Margaret is interested in making sure that they are supported for years to come.

You have reached out to the East Tennessee Foundation to set up a designated fund to receive Margaret’s QCDs. The designated fund, in turn, will support the local animal shelter, where Margaret has volunteered for decades, even after Margaret dies. What’s more, the QCD dollars are excluded from Margaret’s income and still satisfy a portion of her RMD. The QCD also reduces Margaret’s exposure to Medicare IRMAA surcharges—benefits that would not have accrued if she’d simply donated from after-tax cash.

If your client base includes people like Emily, Jonathan, and Margaret, please reach out to the East Tennessee Foundation. We can help you help your clients fulfill their charitable objectives, making our region and the lives of the people who live here even better for generations to come.

The team at the East Tennessee Foundation is honored to serve as a resource as you assist your clients in  building their charitable plans and pursuing their philanthropic objectives for making a difference in the region. This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.