3 Charitable Giving Strategies to Reach Your Philanthropic Goals - Trust Point

3 Charitable Giving Strategies to Reach Your Philanthropic Goals

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Trends in family philanthropy shows that charitable giving continues to increase in America. A large majority of this giving is done by individuals. These individuals may choose to give due to the various benefits that themselves and the charitable recipient both receive from doing so:

  • Provides significant emotional, psychological and financial advantages
  • Allows one to pass on their values of wealth to family members while also helping others
  • Offers tax benefits while also doing good for others around them
  • Supports philanthropic goals while providing an income stream in certain situations

While a direct contribution to charitable organizations is the most common method for donations, that are a variety of giving strategies which can help you achieve your philanthropic goals. Here are three strategies to consider:

  1. Donor-Advised Fund (DAF): This is a charitable investment pool which offers families a way to give to IRS-qualified public charities, including the option to give anonymously. Gifting to a DAF results in immediate tax deductions (60% for cash and 30% for appreciated assets), while outgoing charitable grants can be made in subsequent years. DAF’s are a turn-key giving solution with low costs and the potential to grow tax-free over time.
  2. Private Foundation: This is a customizable pool of investment funds designated by a family for gifting. When using the private foundation strategy, you must file an annual IRS 990 form, which includes public disclosures including charities supported, fees paid etc. Private foundations are a charitable gifting strategy to consider if you operate a charitable organization, potentially employ a staff, hire investment mangers, actively manage grant-making, or sponsor charitable events
  3. Charitable Remainder Trust: This is a trust which provides an income stream to the charitable donor, with the remainder of the assets passing to an IRS-qualified public charity and most private foundations. These trusts have flexibility over charitable beneficiaries, while still providing lifetime income to support retirement.

If charitable giving is something that could work for you, the best place to start is by taking a step back to consider values you want to reflect through your giving. This can often be achieved by looking at your past volunteer experience and giving activities to identify specific themes or values. This can help create more personal fulfillment through your donations and can help sustain a continued pattern of philanthropy.

When considering what type of asset(s) to gift, it is important to consider more alternatives besides cash/credit cards. By using long-term appreciated securities from a taxable account or possible making a Qualified Charitable Distribution (QCD) from an IRA, you may be able to provide a larger contribution to charity while also possible enhancing the tax benefit for you and your family.

Lastly, tax benefits are an important component in choosing a charitable vehicle, but it is also important to consider the complexity and administrative burden associated with each option. Taking the time and energy to find the approach which best fits your situation can maximize the effectiveness and efficiency of charitable gifts.

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