The Power of Planning: Bundling, Bunching, and Bequests

The significant community needs arising from the events of 2020, coupled with recent tax law changes, make it very important that you help your clients plan their charitable giving strategies.
For the last couple of years, your clients likely have been hearing about a tax-efficient charitable giving strategy called “bundling” or “bunching.” The popularity of this tool increased significantly under the Tax Cuts and Jobs Act provisions that reduced the incentive for taxpayers to itemize deductions on their income tax returns, starting with tax year 2018, because of the now doubled standard deduction. In other words, your clients now have to give a lot more to charity to reap the tax benefits.

“Bundling” or “bunching” can involve using a donor-advised fund to separate the tax event of the charitable gift itself from the financial support of charities. Because contributions to a donor-advised fund at the community foundation are immediately deductible for tax purposes–but not required to be granted out of the fund to charities right away–your clients can “frontload” donations into a donor-advised fund at a level where they will be able to take advantage of itemizing deductions. Then, your client can recommend grants from the donor-advised fund to their favorite charities according to the timeframe that aligns with their targets for providing philanthropic support to community organizations.

Finally, as you are assisting your clients with their charitable plans, now is no time to forget about bequests! A report issued by FreeWill cites a 400 percent increase in the number of wills with bequests in March 2020 compared with March 2019. Encourage your clients to think about their legacies, especially as they reflect on the ways 2020 has put a spotlight on just how important it is for communities to be able to rely on sustainable nonprofit organizations to help people in need.