Each year, Giving USA publishes a report called The Annual Report on Philanthropy, which outlines the state of charitable giving in the United States. In the 2023 report, they stated that Americans gave over $550 billion to charity in 2023 —over $50 billion more than in 2022.

Americans usually give to charity for two main reasons: to support a cause they care about, or to leave a legacy through their support. However, many recognize that giving to charity can do more than just support a cause.

Did you know that a strategically designed charitable giving plan can actually generate tax benefits? Tax-savvy investors use strategies that can both maximize the gifts to charity, and harness tax benefits for their portfolios.

Let’s dive into a few of the advanced charitable giving strategies you can use to achieve these ends.

Advanced Charitable Giving Strategies That Maximize Impact and Tax Efficiency

There are several charitable giving strategies that are more sophisticated than simply writing a check to a cause. As you’ll see, the potential benefits are worth the planning effort.

Charitable Trusts Explained

There are two primary types of charitable trusts: CRTs and CLTs.

• Charitable Remainder Trusts (CRTs) allow you to donate assets while receiving an income stream from them for a set period (or for life). Once the term ends, the remaining assets pass to charity. For tax purposes, you may receive an immediate charitable deduction based on the estimated value of the remainder that will eventually go to charity, while also deferring or even eliminating capital gains taxes on the donated assets.
• Charitable Lead Trusts (CLTs) operate oppositely to CRTs: The charity receives income for a specified period, after which remaining assets transfer to your heirs. While providing immediate support to charity, you may simultaneously reduce your taxable estate, ensuring more of your wealth passes to your heirs with minimized tax burdens.

Speak to a Wealth Enhancement advisor about charitable trusts.

Flexible Charitable Funds Explained

Another common type of advanced charitable giving instruments are flexible charitable funds, which can help you retain control over your gifts while also providing tax benefits:

• Pooled-income funds pool contributions from various donors into a fund, which is invested by the charitable organization. Income from the fund is distributed to the donors according to their share of the fund, and the charity receives the assets after the investors pass away. Contributions to pooled-income funds may qualify for an immediate partial charitable deduction, and can potentially defer capital gains taxes on the donated assets.
• Donor-Advised Funds (DAFs) provide flexibility for those looking to manage charitable donations over time. You can contribute assets to a DAF, take an immediate tax deduction, and recommend grants to charities at your discretion.

If you’re ready to add charitable giving to your comprehensive financial plan, schedule an introductory meeting with a financial advisor today.

Increase Your Charitable Impact With Professional Guidance

The potential benefits to charitable giving are obvious: Provide for causes that are meaningful to you, and receive tax benefits that allow you and your family to intelligently manage your financial future. However, advanced charitable strategies also come with complexities.

Even the most advanced strategy falls flat if you can’t navigate changing tax laws, select the right assets to donate, and ensure your timing is correct. In fact, a poorly structured charitable giving strategy can end up causing more harm than good.

That’s why it’s essential to work with people who have been through it before. Experienced financial advisors can guide you in making the most of your options:

• Charitable strategies crafted for you. Every financial situation is unique, and no single strategy fits all. Whether it’s a CRT, CLT, pooled-income fund, DAF, or something else entirely, a professional can help you determine the best charitable vehicle for your needs.
• Working directly with specialists. When your advisor is supported by a RoundtableTM of financial specialists, you’ll know that they’re never too far from a tax specialist, estate advisor, and investment manager.

If you’re interested in learning more how charitable giving can help transform your portfolio, reach out and schedule a meeting today.

Some content provided by FMG Suite.

This information is not intended to provide individualized tax or legal advice. Discuss your specific situation with a qualified tax or legal professional.