A Guide to Managing Your Charitable Giving

Charitable giving is an excellent way for individuals to give back to their community and support causes they care about. In addition to the satisfaction that comes from helping others, charitable giving can also provide significant tax benefits. Here are some charitable giving techniques that can help maximize the impact of your donations.

Donor-Advised Funds
Donor-Advised Funds (DAFs) are an increasingly popular charitable giving technique. With a DAF, you contribute to a charitable organization and receive an immediate tax deduction. You can then recommend grants from the fund to other charities over time.

DAFs offer several benefits, including making a large charitable contribution in a single year and the flexibility to recommend grants to multiple charities over time. They also provide an opportunity to involve your family in charitable giving, as you can name successors to manage the fund after you pass away.

Charitable Remainder Trusts
Charitable Remainder Trusts (CRTs) allows you to make a charitable gift while retaining an income stream from assets in the trust. With a CRT, you transfer assets to the trust, which then pays you a fixed or variable income for a set number of years or for your lifetime.

When the trust term ends, the remaining assets are transferred to the charitable organization of your choice. CRTs offer several benefits, including the ability to receive a tax deduction for the charitable gift, receive income from the trust during your lifetime, and support a charitable cause that is important to you.

Charitable Lead Trusts
Charitable Lead Trusts (CLTs) are the opposite of CRTs in that they provide income to a charity for a set number of years, with the remaining assets eventually passing to your beneficiaries. With a CLT, you transfer assets to the trust, which then makes annual payments to the charity of your choice for a set number of years.

When the trust term ends, the remaining assets are transferred to your beneficiaries. CLTs offer several benefits, including the ability to support a charitable cause during your lifetime, transfer assets to your beneficiaries while minimizing estate and gift taxes, and provide a significant charitable gift.

Private Foundations
Private foundations are another charitable giving technique that can provide significant tax benefits. With a private foundation, you establish a nonprofit organization and make charitable donations to the foundation. The foundation then makes grants to other charitable organizations.

Private foundations offer several benefits, including the ability to involve your family in charitable giving, make grants to a variety of charitable causes, and receive a tax deduction for the charitable gifts made to the foundation.

Donating Appreciated Assets
Donating appreciated assets, such as stocks, mutual funds, or real estate, is another charitable giving technique that can provide significant tax benefits. When you donate appreciated assets to a charitable organization, you avoid paying capital gains taxes on the appreciation and can receive a tax deduction for the full fair market value of the asset.

Donating appreciated assets is an excellent way to support a charitable cause while minimizing your tax liability. It’s important to work with a financial advisor and tax professional to ensure that the asset is appropriate for donation and to maximize the tax benefits.

Bunching Charitable Donations
Bunching charitable donations involves making larger charitable gifts every other year, rather than making smaller gifts each year. By doing so, you can maximize the tax benefits of charitable giving by exceeding the standard deduction in the year of the donation.

For example, if you typically donate $5,000 per year to charity, you could instead donate $10,000 every other year. By doing so, you maximize your itemized deductions in the year of the donation, providing a higher tax benefit than if you took the standard deduction.

Charitable giving is an excellent way to support causes you care about while also providing significant tax benefits. By taking advantage of these charitable giving techniques, you can maximize the impact of your donations and support the organizations that are important to you. It’s important to work with a financial advisor and other professionals to ensure that you’re making the most of these strategies and maximizing your charitable giving.

To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this document is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter that is contained in this document.