The Comprehensive Guide to Charitable Strategies
Amidst the complexities of modern life, finding a sense of purpose and fulfillment is a quest that resonates with us all. This comprehensive guide to charitable strategies provides a listing of giving strategies to help you unlock the boundless potential of generosity and the transformative power it holds. Whether you’re driven by faith, empathy, social responsibility, or a desire to leave a lasting legacy, this guide will equip you with the insights and best practices to channel your resources strategically and support the causes that you believe in.
Prior to employing any of these strategies, it is important to consider how giving fits into your overall goals and values. For a discussion on this, take a look at my article: Ways Charitable Giving Enriches Your Life – Gilbert Wealth
Charitable Giving Strategies
Donating Cash
Donating cash is the simplest form of giving charitable and can be done through giving an organization physical cash, writing a check, a debit or credit card, or ACH. When you give cash, the charity receives immediate funds, allowing them to address pressing needs and carry out their mission efficiently.
For more on this, check out my article: The Power of Cash Donations: Transforming Lives Through Charity – Gilbert Wealth
Donating Appreciated Investments
Donating appreciated investments involves contributing stocks, bonds, mutual funds, stock options, real estate, and even business interest that have increased in value since their purchase. Donors can avoid capital gains taxes on the appreciated value and receive a tax deduction for the full fair market value of the securities subject to certain tax deduction limitations.
For more on this, check out my article: Donating Appreciated Stocks to Charities – Gilbert Wealth
Qualified Charitable Distributions
A Qualified Charitable Distribution (QCD) is a philanthropic strategy that allows individuals who are at least 70½ years old to donate funds directly from their Individual Retirement Account (IRA) to eligible charitable organizations. By using this strategy, donors can fulfill their required minimum distributions (RMDs) while avoiding taxable income on the withdrawn amount. QCDs offer a tax-efficient way to support charitable causes, as the distributed funds go directly to the charity, reducing the donor’s adjusted gross income (AGI) and potentially leading to lower taxes. This approach is particularly beneficial for retirees already contribute to charitable organizations while managing their tax liabilities and ensuring a positive impact on their chosen causes.
For more on this, check out my article: The Win-Win Strategy: QCDs and Charitable Contributions – Gilbert Wealth
Donor Advised Fund
A Donor-Advised Fund (DAF) is a philanthropic tool that allows individuals, families, or organizations to establish a fund with a sponsoring charitable organization. The donor contributes assets, such as cash, securities, or other property, to the fund and receives an immediate tax deduction for the donation. While the donor no longer has legal control over the assets, they retain advisory privileges to recommend grants from the fund to specific charitable organizations over time. Donor-Advised Funds offer flexibility, allowing donors to support multiple causes, streamline their giving, and potentially grow the fund’s assets through investments. This strategy provides donors with a simple and effective way to organize their charitable giving, receive tax benefits, and make a lasting impact on their chosen charitable endeavors.
For more on this, check out my article: Charitable Giving through a Donor Advised Fund – Gilbert Wealth
Charitable Bunching
Charitable Bunching is a tax-efficient strategy used by individuals who itemize deductions on their tax returns. Instead of making smaller charitable donations each year, a donor “bunches” or groups their charitable contributions into a single tax year to exceed the standard deduction threshold. This allows them to itemize deductions in that specific year and potentially receive a larger tax benefit while benefitting from the standard deductions in future years.
For more on this, check out my article: The Art of Charitable Bunching – Gilbert Wealth
Charitable Trusts
Charitable trusts are legal and financial arrangements that allow individuals to support charitable causes while often enjoying tax benefits and potential income for themselves or their beneficiaries. There are two main types of charitable trusts: Charitable Remainder Trusts (CRTs) and Charitable Lead Trusts (CLTs).
A Charitable Remainder Trust provides income to the donor during a set period or lifetime. At the end of the specified time, the remaining assets are then fully given to the charity.
A Charitable Lead Trust donates a specified amount over a specified period to the charity first. Upon completion of the period, the assets pass on to the beneficiaries of the trust. For more on this, check out my article: Charitable Lead Trust Basics – Gilbert Wealth
Charitable Trusts are complex and should considered thoughtfully with a qualified attorney and trusted financial advisor.
Estate and Beneficiary Bequests
Estate bequests, often referred to as charitable bequests, are a philanthropic strategy where individuals include provisions in their wills or estate plans to leave a portion of their assets or property to charitable organizations upon their passing. This thoughtful gesture allows individuals to leave a lasting impact on causes they care about and support the missions of nonprofit organizations. Estate bequests can encompass various types of assets, including cash, securities, real estate, or personal property, and can range from specific dollar amounts to a percentage of the overall estate. It’s important to consult legal and financial professionals when setting up estate bequests to ensure that the wishes are accurately reflected in the estate plan and aligned with relevant laws and regulations.
Charitable Gift Annuities
A Charitable Gift Annuity (CGA) is an arrangement that allows individuals to make a charitable gift to a nonprofit organization while also providing themselves with a regular stream of income for life. The charitable organization takes the contribution and provides an annuity like stream of income from that contribution. Upon the passing of the donor, the charitable organization would keep all of the remaining account value that supported the annuity.
Private Foundations
Private foundations are charitable organizations established by individuals, families, or groups to fulfill specific philanthropic goals and support a range of charitable initiatives. These foundations are funded by a single lump sum called an endowment or ongoing contributions from donors and operate with the primary purpose of advancing social, educational, cultural, or other charitable causes. Private foundations play a crucial role in grantmaking, directing resources to nonprofit organizations and projects that align with their mission. With significant control over their activities, private foundations contribute to creating positive social change while offering donors a means to leave a lasting charitable legacy. However, their establishment and management involve legal and administrative complexities that require careful consideration and expert guidance.
Foundations can be operating which means they are directly involved in the charitable causes for which they were established or they can be non-operating which means they act as a distributor of charitable funds to other charities.
Corporate Matching
Corporate matching is when corporations pledge to match a portion of employees’ charitable contributions, effectively amplifying the impact of individual donations. As employees direct their support to eligible nonprofit organizations, the company’s matching commitment doubles or even triples the total contribution, fostering a culture of giving and community engagement.
Summary
In the world of giving back, there are various ways to make a difference through charitable strategies. Whether you’re donating directly, setting up trust funds, using donor-advised funds, or even starting your own foundation, the key is to make these moves part of your overall financial plan. By doing this, you can effectively link your giving goals with your financial objectives, optimizing tax benefits and maintaining a steady flow of support. Picking the right charitable giving strategy as part of your financial plan isn’t just meaningful, it’s also a way to leave a long-lasting impact that reflects your values and goals.
Charitable Definitions
Donor: The person who is doing the giving.
Donee: The person or organization receiving the gift.
501(c)(3): A 501(c)(3) is a specific type of tax-exempt nonprofit organization in the United States that is recognized by the Internal Revenue Service (IRS). The term “501(c)(3)” refers to the relevant section of the U.S. tax code that provides tax-exempt status to organizations formed for charitable, religious, educational, scientific, literary, or certain other purposes that benefit the public.
Non-501(c)(3): While there are not the same tax advantages as there are for giving to 501(c)(3), giving to a non-501(c)(3) may be an important part of your giving plan which can influence the strategy you choose above. Common causes that fall under this category are helping out a friend or family member directly, giving money grassroots community projects, and contributing to political campaigns.