With the holidays here, we often think about others who are less fortunate and organizations that help those in need. This blog will share how to elevate your giving and benefit you and your family simultaneously. There are numerous ways to give that will benefit churches, universities, hospitals, medical research, and many others.
Charitable giving extends far beyond writing a check to an organization or cause you care deeply about. For example, at Global View Investment Advisors, giving back to our community is an important part of our core values. This commitment to helping others extends to our clients.
As your financial stewards, we focus on guiding you to make smart choices to grow your wealth and secure a prosperous and secure future for you and your loved ones. Plus, we can help you make wise decisions when you choose to benefit others.
In this blog, we’ll look at ways you can develop a meaningful, effective, strategic charitable giving plan.
“Happiness doesn’t result from what we get, but from what we give.”
Source: Ben Carson
Donor-Advised Funds
Think of a donor-advised fund (DAF) as your charitable savings account: you contribute assets to the fund, receive a tax deduction, and then allocate the money to qualified charitable organizations when ready.
One of the main advantages of using a DAF is the immediate tax benefit. When you contribute cash, stocks, or other assets to a donor-advised fund, you're generally eligible for a tax deduction in the year of the contribution. This can be particularly useful when you have a higher income and want to offset part of your tax liability. The tax benefits can be substantial, especially if you're contributing appreciated assets like stocks, subject to substantial capital gains taxes.
As Greenville CFPs®, we can provide tailored advice to determine if a DAF is right based on your financial circumstances, timelines, goals, and charitable inclinations.
Charitable Remainder Trusts
Charitable Remainder Trusts (CRTs) are sophisticated financial tools designed for people who want to make a significant charitable impact while addressing their tax planning concerns.
The essence of a CRT is quite simple: you transfer the ownership of assets (stocks, real estate, collectibles), often highly appreciated—into a trust. The trust then sells these assets tax-free, and the proceeds are reinvested. You and your designated beneficiaries receive income from the trust for a designated period, which could be for life, after which the remaining assets go to a charitable organization that is the named beneficiary of the trust.
Why does this matter to you?
First, let's talk about tax benefits. Transferring assets into a CRT allows you to bypass capital gains taxes on selling appreciated assets. Additionally, it allows you to receive an upfront charitable deduction based on the projected future value of the gift to charity, all based on IRS formulas for this type of trust.
Additionally, the continuous income from the CRT can be a significant part of your retirement income. This income stream can be tailored to fit your financial situation.
Our Greenville fiduciary advisors can assist with the creation of a Charitable Remainder Trust for you and your spouse.
Charitable IRA Distributions
A Charitable IRA Distribution is another powerful tool to consider as part of your gift-giving strategy. A Charitable IRA Distribution allows you to donate directly from your Individual Retirement Account (IRA) to a qualified charity.
The immediate tax benefit here is that the amount you distribute directly to the charity will not be taxable. Normally, IRA withdrawals count as taxable income and can bump you into a higher tax bracket, potentially affecting the tax status of your Social Security benefits. By utilizing a Charitable IRA Distribution, you effectively sidestep these issues.
Do you have a question about RMD’s? Watch our video!
There's a second layer of benefit for those 72 or older and subject to Required Minimum Distributions (RMDs). The amount you give through a Charitable IRA Distribution can satisfy your RMD for the year without increasing your taxable income or tax bracket.
However, please note that because you're not claiming the distribution as income, you can't claim it as a charitable deduction. That's a trade-off worth considering in your overall tax and charitable giving strategy.
Estate and Legacy Planning
We recommend incorporating a charitable giving strategy into your estate or legacy plan. It isn't just an act of generosity; it's a smart financial move for you that benefits others - the proverbial win-win.
Including a charitable giving strategy in your estate plan allows you to allocate your assets that align with your values while simultaneously generating potential tax benefits and income for you.
What About My Heirs?
At this point, you might be concerned about the impact on your heirs. If an asset of substantial value goes to a charity, it is not going to your heirs.
There is a simple solution. Talk to your Greenville CFP® about a survivorship insurance policy. This policy replaces the gift amount in your estate. The policy premium is paid by the income produced by the trust or tax savings.
The policy terminates with the demise of the surviving spouse - just like your estate. The proceeds of the policy go to your designated heirs.
About Global View
Let's be honest: the stakes are high when dealing with substantial assets. A misstep can be costly, and a failure to plan can put your wealth at risk.
Understanding the complex matrix of choices before you—and making the right decisions—is a challenge that most investors fail to fully address early enough in their retirement years.
Why? Every decision you make today shapes your financial picture for tomorrow. But combining all aspects of your financial affairs might feel like a Herculean task.
That's where we come in. We need to look at the pieces of the puzzle. We examine how your charitable giving strategies fit with the other parts of your plan for a comfortable, secure lifestyle.
Not only do we focus on maximizing the good that comes out of your donations, but we also help you sidestep or eliminate capital gains taxes on appreciated assets and produce a lifetime income. Beyond that, we help you turn your philanthropy into a family legacy, creating a lasting effect for multiple generations.
Connect with us to learn more about Global View’s charitable giving strategies for affluent families.
