Morgan Stanley
  • Wealth Management
  • Oct 26, 2022

Your 2022 Guide to Holiday Giving

As you reconnect with loved ones for the holidays, consider these impactful ways to give.

Giving gifts to loved ones remains a cherished part of the holiday routine for many, but it’s also a chance to plan how you’ll give to important causes and charities—and even to yourself. 

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As we look towards the new year, consider these ways to support the people and causes you value. 

Give to Others in Need

There are many creative and traditional ways to give back. One strategy is to contribute to a donor advised fund (DAF), such as MS GIFT, which also accepts “complex” assets such as private stock, artwork and cryptocurrency—just to name a few. Administered by a 501(c)(3) public charity, a DAF offers a simple, tax-advantaged way to support your favorite charities. When you contribute these assets to a DAF, you may take a federal income tax deduction in the year the donation is made, subject to certain limitations.1 Additionally, these assets can stay invested and potentially grow, tax-free, until you recommend which charities you want to receive a cash donation, giving you and your family time to decide where your gift could have the greatest impact. Moreover, if you’ve been investing for a while, you may hold securities that have appreciated significantly. Donating securities reduces the potential tax hit from capital gains which could be generated by selling the securities and subsequently donating the cash.

If you’re retired, consider donating your retirement distribution to charity. If you’re at least 70½ and are the owner of an IRA or Inherited IRA, you can usually make a Qualified Charitable Distribution (QCD) to an eligible organization of up to $100,000 per year directly from your Individual Retirement Account (IRA). QCDs generally come with no tax costs to you or the charity receiving the donation—allowing you to count a QCD toward your required minimum distribution for the year, if certain rules are met, reduce your taxable estate and feel good about supporting a cause you care for.2

Donating securities reduces the potential tax hit from capital gains which could be generated by selling the securities and subsequently donating the cash.

Reflecting upon the COVID-19 pandemic, many are considering the changes society went through and what matters most moving forward. According to Morgan Stanley’s 2022 Investor Pulse Poll among U.S. investors, 38% of respondents say access to mental health care suffered because of COVID-19.  Additionally, investors are expressing a growing need for companies to take mental health seriously; for example, 84% of respondents agree businesses should ensure access to quality mental health care.

Coupled with broader research about pandemic-related mental health strains, Morgan Stanley has taken strides to address mental health concerns in our community and beyond. Morgan Stanley’s Alliance for Children’s Mental Health brings together a diverse set of nonprofit organizations that aim to address the growing crisis in children’s mental health, reaching 11 million students, families and teachers globally since February 2020. The Alliance also helps fill the funding gap in the under-resourced youth mental health sector and provide runway for inventive ideas through its Innovation Awards program.  

“The past two years have presented significant challenges to the mental well-being of youth and families,” says Joan Steinberg, President of the Morgan Stanley Foundation and CEO of the Alliance for Children’s Mental Health. “Now more than ever, we encourage everyone to learn more about the issues that youth are facing, rethink your giving and become advocates for the change that is critically needed in bettering their mental well-being.” For more information, including how to contribute, visit the Innovation Awards program.

Give to Loved Ones

Giving gifts to family members remains a cherished part of the holiday routine for many families, and the chance to reconnect may have you considering how to best give to family. These simple questions can help: 

  • Do you want to give family members a financial gift? If so, remember that you can give up to $16,000 per individual this year without having to file a gift tax return. However, gifts exceeding $16,000 per individual count against your lifetime gift and estate tax exemption of $12.06 million per individual (and $24.12 million per married couple) in 2022. 
  • Does your loved one need money to pay bills or fund other basic necessities? 

—If Yes: Do they need it more this year than other years? Should you increase the amount? This might be the year to think closely about how your generosity can best help.

—If No: Are they saving toward something (education, a house, a passion project) that you could contribute to? If you know a loved one who struggles to save, funding an initiative directly, such as college tuition which is not subject to the gift tax limitations, might make a great gift.

  • Have you considered opening or contributing to a 529 plan? A 529 plan is a multi-faceted investment vehicle with multiple benefits, including, but not limited to investing for future education expenses. Earnings grow tax-free, and as long as you use the funds for qualified education expenses, they are generally exempt from tax. Anyone, including grandparents, can contribute up to $16,000 per year ($32,000 for married couples electing to split gifts) to any individual’s 529 plan per beneficiary, without reducing one’s lifetime gift and estate tax exclusion amount. In addition, you can bundle five years of contributions into one $80,000 contribution ($160,000 for married couples electing to split gifts) per beneficiary, provided you make the required election on a gift tax return for the year of the contribution. If you have the means, you could even contribute one year’s worth of gifts in December, followed by five years of contributions in January. 529 plans are also an excellent wealth management tool offering estate, income and gift tax-planning benefits that can help families build more robust family legacies.
Staying focused on your goals can help you regain a sense of control and avoid getting too anxious about volatility.

Give Yourself the Gift of Financial Wellness

After a period of strong performance for the markets, 2022 has seen significant market volatility, leaving many investors uncertain and stressed. Indeed, Morgan Stanley’s 2022 Investor Pulse Survey found that, while 82% of respondents felt very or somewhat confident they are on track for long-term financial goals, that number has decreased from 87% in 2021. Furthermore, only about half (52%) expected the investment climate to be the same or better in the months ahead.

In times like this, staying focused on your goals can help you regain a sense of control and avoid getting too anxious about volatility. Your Morgan Stanley Financial Advisor can help. 

Questions to Ask Your Morgan Stanley Financial Advisor:

  1. What does the timeline look like between contributing funds to a donor advised fund and choosing a charity to donate to?
  2. Is it better to donate year-round or as a lump sum at the end of the year?
  3. What are the best ways for me contribute to my charitable goals?

1 The federal income tax deductibility of contributions to a donor-advised fund are subject to certain limitations. These may include but may not be limited to: Donating long-term appreciated securities may be eligible for an income tax deduction of the full fair-market value of the asset, up to 30 percent of adjusted gross income (AGI). Donating cash may be eligible for a maximum federal income tax deduction of 60% of AGI. For long-term appreciated gifts of artwork, antiques, books and other tangible personal property, the deductibility rules depend on how the qualifying charity uses the gift. There are additional asset classes and types of contributions which may have additional and/or different limitations. Clients should consult with their tax advisor on the income tax implications and tax planning around gifting activity.

2 One thing to keep in mind is that the Setting Every Community Up for Retirement Enhancement (SECURE) Act, effective in 2020, raised the starting required minimum distribution (RMD) age to 72 for individuals born after June 30, 1949. As a reminder, only certain IRAs are eligible for QCDs. If you make a tax deductible IRA contribution after age 70 ½, the amount you can exclude from your taxable income as a QCD generally will be reduced. Work with your Tax Advisor to ensure that you satisfy all the QCD requirements and that QCDs have been correctly reported on your tax return. 

Disclosures:

The Morgan Stanley Global Impact Funding Trust, Inc. (“MS GIFT, Inc.”) is an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended. MS Global Impact Funding Trust (“MS GIFT”) is a donor-advised fund. Morgan Stanley Smith Barney LLC provides investment management and administrative services to MS GIFT.

While we believe that MS GIFT provides a valuable philanthropic opportunity, contributions to MS GIFT are not appropriate for everyone. Other forms of charitable giving may be more appropriate depending on a donor’s specific situation. Of critical importance to any person considering making a donation to MS GIFT is the fact that any such donation is an irrevocable contribution. Although donors will have certain rights to make recommendations to MS GIFT as described in the Donor Circular & Disclosure Statement, contributions become the legal property of MS GIFT when donated.

The Donor Circular & Disclosure Statement describes the risks, fees and expenses associated with establishing and maintaining an MS GIFT account. Read it carefully before contributing.

If an account owner or the beneficiary resides in or pays income taxes to a state that offers its own 529 college savings or pre-paid tuition plan (an “In-State Plan”), that state may offer state or local tax benefits. These tax benefits may include deductible contributions, deferral of taxes on earnings and/or tax-free withdrawals. In addition, some states waive or discount fees or offer other benefits for state residents or taxpayers who participate in the In-State Plan. An account owner may be denied any or all state or local tax benefits or expense reductions by investing in another state’s plan (an “Out-of-State Plan”). In addition, an account owner’s state or locality may seek to recover the value of tax benefits (by assessing taxes and/or penalties) should an account owner rollover assets from an In-State Plan to an Out-of-State Plan. While state and local tax consequences  or transfer and plan expenses are not the only factors to consider when investing in a 529 Plan, they are important to an account owner’s investment return and should be taken into account when selecting a 529 plan.

Tax laws are complex and are subject to change. This information is based upon current tax rules in effect at the time this was written. Morgan Stanley Smith Barney LLC and its Financial Advisors do not provide tax or legal advice. Individuals should always check with their tax or legal advisor before engaging in any transaction involving 529 Plans, Education Savings Accounts and other tax-advantaged investments.

Investments in a 529 Plan are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so an individual may lose money. Investors should review a Program Disclosure Statement, which contains more information on investment options, risks factors, fees and expenses and possible tax consequences. Investors should read the Program Disclosure Statement carefully before investing.

The 529 Plan Program Disclosure contains more information on investment options, risk factors, fees and expenses, and potential tax consequences. Investors can obtain a 529 Plan Program Disclosure from their Financial Advisor and should read it carefully before investing.

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