Maximize Your Impact: A Complete Guide to Smart Charitable Giving

As Thanksgiving approaches, we often turn our thoughts to assisting others in need. As someone who is successful in life and has accumulated wealth, you may be seeking ways to give back to your community through charitable giving.  

To say charitable giving is complex would be a big understatement. It is complicated because it can possibly produce numerous financial benefits for donors and beneficiaries. In fact, there are many ways to donate to organizations and causes that you care about. Just keep in mind that a sophisticated charitable giving strategy goes far beyond the simple gift of giving.

We’ll look at ten different charitable giving strategies and explain why partnering with a fiduciary financial advisor, in advisory relationships, in New Jersey will help you maximize the value of your gift. 

As a New Jersey CFP®, we can assist you in maximizing the impact of your philanthropy while potentially optimizing tax benefits for you and your family. 

Charitable Giving Strategies

We will describe ten charitable strategies that can help you make a meaningful impact on the causes you care about (church, hospital, university, medical research) while optimizing your financial benefits.

Donor-Advised Funds: Donor-advised funds are charitable investment accounts designed to support the nonprofit organizations of your choice. When you contribute cash, securities, or other assets to a donor-advised fund, you immediately become eligible for a tax deduction for the full contribution amount. 

Once the money is in the fund, it can be invested and grow tax-free. You retain advisory privileges over how the funds are invested and distributed to the charities of your choice. This makes it a  strategic financial option that can support your philanthropic interests while producing tax benefits now and in the future.

Charitable Remainder Trusts: A charitable remainder trust allows you to contribute several types of appreciated property (stocks, real estate, collectibles) into a trust that can sell the assets without tax consequences. You can receive an income stream for the lives of both spouses. The trust terminates when both spouses are gone. The tax savings and income make this a desirable way to sell appreciated property while benefiting a nonprofit and yourself. 

Another important advantage is that you get an immediate tax deduction for the charitable contribution while avoiding capital gains taxes and producing an income for life. If you are concerned about heirs losing the asset, you can replace the asset with a survivorship policy. This is a win-win, offering you tax benefits and a consistent income while supporting a nonprofit cause you care about.

Direct Giving: Make direct, tax-deductible donations to non-profit organizations you care about with no strings attached. They can spend the donation any time they want to.  You should expect the charities to do that.

Appreciated Assets: There are multiple benefits when you donate appreciated assets like stocks or real estate to a charitable organization:

1. You can write off the current market value of the gift, not limited to your original purchase price, on your income tax return. This allows you to maximize your charitable contribution deduction. 
2. You avoid the capital gains tax that would apply if you sold the asset yourself and then donated the cash proceeds. Essentially, you and the charitable organization benefit more than what would happen with a cash donation. 

Charitable Gift Annuities: In exchange for a gift to the charity of your choice, you receive a fixed income for life. This annuity serves dual purposes: it allows you to support a cause you care about while providing a reliable income stream for the lives of both spouses. Typically, part of your initial contribution is tax-deductible, and the income you receive is partially tax-free. 

Legacy Planning: Legacy planning should be integral to your comprehensive wealth management strategy. It typically involves creating a detailed estate plan that outlines how your assets should be distributed when you pass. By thoughtfully including charitable organizations in your estate plan, you can have a lasting impact beyond the lives of both spouses.

Corporate Giving: If you own a business, consider corporate philanthropy, like matching employee donations or sponsoring charitable events.

Impact Investing: Impact investing allows you to invest in companies or funds that align with your values.  

Volunteer Time: Don’t underestimate the value of your time. Many charities welcome volunteers to help their causes directly.

Charitable IRA Distributions: A charitable IRA distribution, or Qualified Charitable Distribution (QCD), directly transfers funds from your IRA custodian to a qualified charity of your choice. If you’re 70.5 years or older, you can contribute up to $100,000 per year without recognizing the distribution as income, which could be beneficial from a tax planning perspective. 

Remember that these contributions count toward your required minimum distributions for the year. Not all IRAs are eligible for QCDs, and adhering to IRS guidelines is crucial to taking full advantage of this giving strategy.

Working with a Paramus CFP®

Choosing to give to charity is a noble endeavor and a complex financial decision that can impact your tax situation, estate plan, and legacy. This is where working with a New Jersey financial planner can possibly produce desired dividends. 

Unlike traditional financial advisors, a fiduciary, in advisory relationships, must always act in your best interest while practicing full disclosure and complete transparency.                                                                                                                                                     

Get to Know Integra Wealth Management

As someone who has attained significant success, you understand the value of planning and hard work. At Integra Wealth Management, we recognize the critical need to help keep your hard-earned wealth intact and seamlessly pass it on to future generations.

With over 30 years of expertise in creating customized wealth management solutions for individuals and families, we dig deep to understand your unique financial ambitions, crafting plans that empower you today and seek to safeguard your tomorrow. 

There are no one-size-fits-all solutions, only strategies that fit you. We invite you to connect with us to learn more about our charitable giving services. 

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

More about the author: Richard Dragotta

Founder, Wealth Advisor - Rich is an esteemed 30+ year leader in the wealth management industry. His skill set includes all areas of wealth management execution, from practice development and compliance to operations, service delivery, workflow efficiency, marketing strategies, technology innovation, and human resources.

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