Year-End Rules

I think most spectators of sporting events will appreciate the meme image I chose for this edition of Gift Planning Tidbits, especially fans of the NFL, yikes is all I can say lest this post goes on an awful tangent. The relevance to this blog is that interpretation and application of rules that govern year-end charitable gifts can be confusing with painful repercussions. A charitable gift is considered made on the “date of delivery”, but what seems simple isn’t always so.? Today’s Gift Planning Tidbits will clear up some pesky details that become critical at year-end.

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But first…One Rule to rule them all: A gift can count as delivered in 2023 but received after 12/31 if and only if the gift is sent through the US Postal Service and post-marked by 12/31.? If using a private provider such as UPS, FedEx, DHL, etc., gifts are considered delivered only when the package is received by 12/31, without regard for delays, lost packages, etc.

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Here then are some guidelines for the most common year-end gift types from simple to less simple:

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• Checks: Misdated, incomplete, or otherwise errant check-writing will doom a last-minute gift.? Checks from all sources must be in good order.

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• Credit Card: The transaction date is what is important here, not the date the bill is paid. The card must be run with a transaction date of 12/31 or prior, regardless of when we receive the card information.

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• Donor Advised Fund (DAF) & Qualified Charitable Distribution (QCD): It is not enough to request the distribution by year-end; the check must be delivered according to the One Rule above. It can often take extra time to process requests during the year-end rush so advise accordingly. Here is a special note about last minute QCDs: Some IRAs include a checkbook that allows IRA owners to make/take distributions simply by writing a check. Checks written to a charity with this feature do qualify as a valid QCD. However, doing so at the eleventh-hour have the potential to cause havoc. Good intentions aside, the IRA owner may mail their check to a charity in late December, but the custodian may not recognize the distribution until the check is cashed, regardless of when the check is delivered. Since the custodian is not aware that you wrote the check, they could justifiably code the transaction as a 2024 RMD/QCD if it is not cashed until after 12/31. Compounding the problem, if the IRA QCD check was also intended to offset the 2023 RMD, and if the check wasn’t cashed, the IRA owner could have a missed RMD situation.

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• Stock/Security gifts: Things get tricky here.? The delivery date depends on how and to whom the delivery is made. Stocks can be in paper form, transferred electronically using DTC transfers, and even reissued in the charity's name.? Regardless of the method of transfer, the one rule remains- the transfer must be completed by 12/31, not simply initiated.

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• Mutual Funds: Even trickier- not all mutual funds can be transferred the same way.? Best advice here is act early; today at the latest, yesterday would have been better.

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• Real Estate: It’s probably too late unless it’s already in motion. Receipt of a properly executed deed is the delivery date unless local law requires the deed to be recorded to effectuate title transfer.
• One last point to ponder- Fewer donors are itemizing their tax returns due to the substantially increased standard deduction allowances. For donors who wish to take advantage of the tax benefits allowable to them but for whom their typical year-end gifts won't be sufficient to justify itemizing, you may wish to discuss the "bunching" strategy. This is accelerating multiple year's worth of giving into one tax year, elevating the amount of their deduction to an amount that compensates them enough to exceed the standard deduction allowance. They can do so by making their gifts directly to their charitable interests and give less often, OR they can use a Donor Advised Fund and spread out their annual gifts accordingly.

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Good Luck with your last-minute donors.? If there is something I can do to help, please reach out!