Charitable planning is often approached as a tax conversation: How much can the client deduct? Should they donate cash or stock? Would a donor-advised fund make sense?

But according to Larry Pon, CPA, EA, USTCP, PFS, CFP®, AEP®, and philanthropy advisor Rick Peck, CFP®, ChFC®, CAP®, that may be starting the conversation in the wrong place.

During a recent Financial Experts Network webinar, Larry and Rick explored how the One Big Beautiful Bill Act (OBBBA) is changing charitable planning—and why some of the most valuable conversations advisors can have with clients have little to do with taxes at first.

The starting point is much simpler:

What does the client actually want their money to accomplish?

Once advisors understand that, tax planning can help clients accomplish those goals more efficiently.

Charitable Planning Is About More Than the Deduction

Rick encouraged advisors to begin charitable conversations by asking about a client's values, experiences, community, and legacy.

What causes matter to them? What problems would they like to help solve? Are there organizations that have affected their family personally? What values would they like their children and grandchildren to carry forward?

These questions can lead to a very different conversation than simply asking how much the client gave to charity last year.

For some families, Rick suggested creating a family focus statement that identifies their most important values, causes, and desired impact.

That framework can help clients decide where to concentrate their giving—and, just as importantly, give them permission to say no to causes that fall outside their priorities.

Only after establishing the client's charitable goals does the conversation move to the tactical questions: What should we give? When should we give it? And which charitable vehicle should we use?

The OBBBA Makes Charitable Tax Planning More Important

The OBBBA adds another layer to the charitable planning conversation.

One provision discussed during the webinar is the new 0.5% of adjusted gross income floor for itemized charitable contributions. For clients who itemize, that means a portion of their charitable giving may not produce a deduction.

Meanwhile, many taxpayers continue to use the standard deduction, meaning their annual charitable contributions may provide little or no incremental federal income-tax benefit.

That doesn't mean clients should give less.

It means advisors may need to help them give differently.

One potential strategy is bunching several years of charitable contributions into a single tax year. A donor-advised fund can be particularly useful here.

Instead of giving $10,000 directly to charities every year, for example, a client might contribute several years of planned giving to a DAF in one year and potentially itemize that larger contribution. The DAF can then make grants to the client's favorite charities on the client's normal annual schedule.

The charities can continue receiving regular support even though the client has changed the timing of the tax deduction.

For Clients Over 70½, Don't Overlook the QCD

For charitably inclined IRA owners, qualified charitable distributions may be one of the first strategies advisors should consider.

A client who has reached age 70½ can potentially transfer funds directly from an IRA to an eligible charity through a QCD.

For clients subject to required minimum distributions, a QCD can count toward satisfying the RMD while keeping the qualifying distribution out of taxable income.

That can be more valuable than simply taking an IRA distribution and subsequently writing a check to charity.

Why?

Because reducing adjusted gross income can potentially affect other parts of a client's tax and retirement picture, including Medicare IRMAA surcharges and other AGI-sensitive provisions.

Larry also offered an important practical suggestion: coordinate QCDs with the client's RMD strategy early in the year.

If a client already intends to give substantial amounts to charity and doesn't need the RMD for living expenses, completing the QCDs first may prevent the client from unnecessarily taking additional taxable IRA distributions.

And remember: a client can't double dip. An amount excluded from income as a QCD isn't also deductible as a charitable contribution on Schedule A.

Stop Automatically Giving Cash

One of the simplest charitable planning opportunities may already be sitting in the client's investment account.

Consider a client who wants to give $25,000 to charity and owns stock purchased years ago for $5,000 that is now worth $25,000.

The instinct might be to write a $25,000 check.

But donating the appreciated securities directly may provide a better tax result when the applicable requirements are met. The client may potentially receive a charitable deduction based on the stock's fair market value while also avoiding recognition of the embedded capital gain.

That leads to a useful question advisors can add to the planning process:

Before this client writes a charitable check, is there a more tax-efficient asset they could give instead?

Highly appreciated securities, concentrated positions, real estate, business interests, and other assets may all deserve consideration.

But as the assets become more complicated, so do the rules.

Donor-Advised Funds Can Do More Than Bunch Deductions

Donor-advised funds have become an increasingly important charitable planning tool because they can solve several problems at once.

Clients can contribute assets to a sponsoring charitable organization, potentially receive a current charitable deduction, invest the charitable assets, and recommend grants to qualified charities over time.

But there is an important distinction clients need to understand:

Once assets go into a DAF, they are no longer the client's assets.

The sponsoring organization has legal control. The donor retains advisory privileges over investments and charitable distributions, subject to the sponsor's policies.

DAFs can also become part of a family's legacy plan.

Clients can often name children or other family members as successor advisors. Those family members don't inherit the money—the assets remain charitable—but they may continue recommending grants.

That creates an opportunity for advisors to ask clients not only where they want their money to go, but also who they want involved in carrying their charitable values forward.

Not Every DAF Is the Same

Larry and Rick also cautioned against treating donor-advised funds as interchangeable.

National DAF sponsors, community foundations, universities, and specialized charitable organizations may offer very different levels of service.

Some may be particularly strong at accepting complex assets. Others may offer greater philanthropic guidance or knowledge of local nonprofits. Fees, investment options, grant policies, minimums, and succession provisions can also differ.

For financial advisors, another consideration may be whether the sponsoring organization permits an outside advisor to continue managing contributed assets under certain circumstances.

The cheapest option isn't necessarily the best option.

The better question is: Which DAF sponsor best fits what this particular client is trying to accomplish?

Business Owners Need to Plan Before the Deal Is Done

Some of the largest charitable planning opportunities—and largest potential mistakes—can occur when a business owner is preparing to sell.

Suppose an owner has a highly appreciated business interest and wants to donate a portion to charity before selling the company.

Done properly and sufficiently early, a charitable gift may produce significant tax benefits.

Done too late, the IRS may argue that the sale had already become effectively certain and apply the anticipatory assignment-of-income doctrine.

Larry discussed a tax case involving closely held stock in which timing and appraisal issues contributed to a multimillion-dollar charitable deduction being denied.

The practical lesson for advisors is straightforward:

Don't wait until the closing table to ask whether charitable planning should be part of the transaction.

The discussion should happen well before the sale is effectively locked in.

For these transactions, the advisor may need to coordinate with the client's CPA, attorney, valuation professional, philanthropy advisor, and receiving charitable organization.

The Charity Has to Want the Asset Too

Clients sometimes assume that because they are willing to donate an asset, a charity will automatically accept it.

That's not always true.

A charity considering real estate, private business interests, cryptocurrency, or other complex property may need to evaluate:

• How easily the asset can be sold.
• Potential liabilities.
• Carrying and maintenance costs.
• Valuation issues.
• Tax consequences.
• Restrictions attached to the asset.
• Whether accepting the gift fits the organization's policies.

Rick described situations in which an asset might look valuable on paper but create substantial costs for the receiving organization.

That makes gift acceptance an important part of the planning process.

Before transferring a complex asset, confirm that the organization is both willing and capable of accepting it.

A Great Strategy Can Still Fail Because of Bad Paperwork

Perhaps one of the most sobering parts of the webinar was Larry's discussion of charitable deduction cases.

Millions of dollars in deductions have been denied because taxpayers failed to comply with substantiation requirements.

Problems can include missing qualified appraisals, incomplete Form 8283 information, improper acknowledgments, missing signatures, and acknowledgment letters that fail to contain required language.

For advisors, there's an important lesson:

Don't treat charitable documentation as an administrative detail.

For significant non-cash gifts, documentation is part of the planning strategy itself.

The larger and more complicated the gift, the earlier the advisor should involve professionals who understand charitable valuation and substantiation requirements.

DAF, Private Foundation, CGA or CRT?

There is no single charitable vehicle that's right for every client.

A donor-advised fund may be appropriate when a client wants simplicity, flexibility, bunching opportunities, and family involvement without operating a private foundation.

A private foundation may appeal to a family that wants greater control, governance, visibility, and a formal multigenerational philanthropic structure.

A charitable gift annuity may be worth considering when a client wants to support a charity while retaining an income stream.

And a charitable remainder trust may make sense for certain larger appreciated assets when charitable intent, diversification, income, and tax planning come together.

The important point is not to start with the vehicle.

Start with the client.

10 Questions Advisors Can Add to Client Meetings

A more proactive charitable planning process doesn't have to begin with complicated tax calculations. Consider adding questions such as:

1. Which charities or causes are most important to you?
2. What do you hope your charitable giving accomplishes?
3. Would you like your children or grandchildren involved in your giving?
4. Are you primarily making charitable gifts with cash today?
5. Do you own highly appreciated investments that might be better assets to donate?
6. If you're over age 70½, have we evaluated QCDs from your IRA?
7. Would bunching several years of charitable contributions make sense?
8. Do you have concentrated stock, real estate, or business interests that could have charitable planning potential?
9. Are you considering selling a business or another highly appreciated asset?
10. Do your estate plan and beneficiary designations reflect your charitable intentions?

A client's answers may uncover opportunities that touch nearly every part of the financial plan.

The Bottom Line

The biggest takeaway from Larry Pon and Rick Peck's discussion was that tax-smart charitable planning isn't simply about maximizing deductions.

It is about understanding what a client wants their wealth to accomplish and then determining the most efficient way to make that happen.

The OBBBA gives advisors another reason to revisit charitable strategies with clients. QCDs, appreciated securities, donor-advised funds, bunching, charitable gift annuities, charitable trusts, and complex-asset gifts can all have a place in the conversation.

But the order matters.

Start with the client's values. Identify what they want to accomplish. Then determine which assets, strategies, and charitable vehicles can help them get there.

That approach can turn charitable giving from a year-end tax question into a meaningful part of comprehensive financial planning.

This article is based on the Financial Experts Network webinar “Tax-Smart Charitable Giving After the OBBBA,” featuring Larry Pon, CPA, EA, USTCP, PFS, CFP®, AEP®, and Rick Peck, CFP®, ChFC®, CAP®, Impact Philanthropy Advisor. The discussion is intended for educational purposes and should not be considered individualized tax, legal, or investment advice. Charitable and tax strategies should be evaluated based on each client's circumstances and current law.