As we enter the holiday season, now is a great time to think about your giving strategy and your contributions to the charitable organizations and causes you care about. Not only does charitable giving benefit those in need of help, but it also can benefit you personally by giving you a sense of fulfillment.
Impact Is About More Than Just Money
The commitment of affluent households to their favorite charities goes beyond financial. Volunteering is on the rebound after the pandemic.
Affluent volunteers spent an average of 135 hours with an average of two different charitable organizations in 2022, with the most common activities being helping a religious organization, collecting and distributing food, clothing, or other basic needs, and serving on an organization’s board.
Choosing a Charity to Support
With so many charities, choosing which ones to support can be challenging. By researching and preparing, you can find a charity that aligns with your values.
- Research the Charity: Use publicly available sources to understand what a charity does and who it serves. One factor to consider is the group’s transparency and accountability in financial reporting and program effectiveness. You can also get information on websites such as Charity Navigator, GuideStar, or the Better Business Bureau’s Wise Giving Alliance.
- Understand the Mission and Impact: Another factor to consider is whether the organization’s values and goals align with yours. Look for a clear and measurable impact on the community or cause they serve. Consider the scope of their programs and services.
- Your Interests and Passions: Your interests and passions can help you find a cause that resonates with you and inspires you to make a difference.
- Getting Involved May Help You Learn More: Many charities offer volunteer opportunities or ways you can participate in their events and campaigns. These opportunities can give you an even greater understanding of the charity’s impact while helping you build a deeper connection to the cause.
Charitable Giving Strategies
Charitable contributions happen throughout the year, but 30% of all giving occurs in December, with about 10% of all annual donations coming in the last three days of the year. So, if you haven’t yet decided on your giving strategy for 2024, you’re in good company.
Here are some ideas to consider. After reading the list, be sure to also check out the section called "Key Points to Remember with Charitable Giving Strategies" to learn more about the benefits and limitations of the various approaches.
- Using Your Individual Retirement Account (IRA) to Make Qualified Charitable Distributions: If you are at least 70½ years old, you can donate up to $105,000 from your IRA as a Qualified Charitable Distribution. The distribution may satisfy your annual required minimum distribution (RMD). That way, the RMD won’t be reported on your personal tax return.
- Donating Appreciated Securities: Suppose you are considering using the proceeds from appreciated securities to make a charitable donation. If that is the case, consider the tax consequences of donating the securities rather than selling the position and donating the cash. We are happy to assist you with this. Let us know if you'd like to learn more.
- Donor-Advised Funds: Donor-advised funds are registered 501(c)(3) organizations that can be funded with cash, securities, and other assets. Once your donor-advised account is set up, you can decide over time which charities and causes you’d like the funding to go towards.
Charitable Remainder Trusts: Charitable remainder trusts are irrevocable trusts that let you donate assets to charity and draw annual income for life or for a specific period. You can transfer property, cash, or other assets into an irrevocable trust. The trust pays income to at least one living beneficiary and continues for a specific term or the life of one or more beneficiaries. At the end of the payment term, the remainder of the trust passes to the charitable organization(s).5 - Charitable Lead Trusts (CLTs): A charitable lead trust (CLT) functions as a “freeze device,” effectively locking in the value of assets transferred into the trust. Any appreciation (or depreciation) in the value of these assets during the trust term occurs within the trust and is excluded from additional gifting or estate considerations upon termination of the trust. The trust makes regular payments to a designated charity for a specified period. After the trust term ends, the remaining assets are distributed to non-charitable beneficiaries, typically family members.
Maximizing Your Impact
Charitable giving can be a fulfilling and impactful way to make a difference. As financial professionals, we can help you structure your philanthropy by making it part of your overall financial strategy. We can also have high-level pro and con discussions to help you as you begin the process. Call us, and we can schedule a time to discuss your charitable giving for 2024 and beyond.