Charitable giving in financial planning is the voluntary act of donating money or other assets to organizations whose mission aligns with your values. Whether you're supporting people with necessities of daily living like food and shelter, environmental conservation, educational advancement, or humanitarian relief, your contributions can make a meaningful impact - while playing an important role in your financial plan. To qualify as a charitable gift, the receiving organization must be registered in the United States as a charity, generally as a “501(c)(3).”
Why Is Charitable Giving in Financial Planning Important?
For many, charitable giving is not only a personal value but a strategic element of long-term financial planning. A thoughtful giving plan may provide tax benefits while allowing you to support causes that are meaningful to you and your family. When aligning people’s money with their values, many find it important to use their abundance to give back and advance the wellbeing of a cause important to them. This could range from a $20 check to a multi-million-dollar endowment; they all make an impact.
In addition to supporting large, well-known organizations, charitable giving can help further a lesser-known cause with deep personal meaning. For example, having a family member diagnosed with a rare genetic condition might spur financial giving. This can have the additional effect of raising awareness, particularly if it is mentioned in social circles. Through financing and awareness, the donor can seek to improve the lives of others because of their resources.
How can charitable giving help you?
Although the primary purpose of charitable giving is to help others, there are also benefits to the donor. Part of this benefit is the intangible goodwill received through the process of donating and seeing the improvement and impact of your resources. More tangibly, there are charitable giving tax strategies that may help lower your tax bill, ranging from simple to extremely complex. These charitable giving tax deductions vary based on the type of assets you have available to give (for example cash, stocks, etc.), your income level, the amount you’re giving, and other case specific facts.
Charitable gifts come in many forms. Some people give cash, while others donate appreciated securities, such as stocks or mutual funds, which may allow them to avoid capital gains tax. Others may choose to give through qualified charitable distributions from an IRA or establish more formal giving vehicles like donor-advised funds or charitable trusts.
Each of these approaches carries potential tax advantages. For instance, charitable giving tax deductions can reduce your taxable income, depending on your overall financial picture and how you structure your gifts. Working with a financial advisor can help ensure your giving strategy is both impactful and tax-efficient.
Aligning Giving With Your Financial Goals
If you are interested in charitable giving, the first step is identifying a few areas you are passionate about supporting. We believe your financial plan should reflect what matters most to you, and can help direct you to resources to identify specific charities that might be a good fit. Our team helps you identify opportunities for charitable giving that align with your personal values, tax strategy, and overall wealth management goals. Contact one of our advisors today to learn more about charitable giving in financial planning.
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