Philanthropy is so much more than a charitable donation. By being philanthropic, you join an altruistic effort to better the world around you.
If giving aligns with your personal values, have you considered how you can incorporate the same goal into your financial plan?
We’ve compiled information to help you understand the value of planned philanthropy and how it can help you increase the impact of your giving and create a stronger legacy.
What is Philanthropic Planning?
Planned giving allows you to embed charitable goals and values within your financial strategies and goals.
Another aspect of philanthropic planning is educating yourself about specific causes and issues and developing relationships to ensure that your gifts make the greatest impact on the problem you’re trying to address.
You can do this by working with a financial professional who will help you develop an approach to philanthropy that is right for your family, aligns with your values, and pushes you toward your personal and financial goals.
Making A Difference In Many Ways
Planned giving benefits donors and the charitable organization they support.
One of the most helpful things you can do for a charitable organization is to make them feel secure in their funding sources. By having a consistent, reliable funding stream, they can more efficiently and effectively fulfill their missions.
Being Engaged in the Philanthropic Process
Being an engaged donor can help ensure your donations and efforts go in the direction you desire and identify where additional help is needed.
Websites like Charity Navigator can help you decide where you’d like to give. They lift up charities that use their resources well in terms of operating costs and addressing the issues they strive to solve.
By being engaged in the charity’s processes, you can help fill in any funding gaps or people power. This, ultimately, helps you and the charity reach their goals.
It’s important to remember that while charities always welcome funding, they also may need help in other areas that don’t involve finances.
If you find yourself in a place where you want to give to a charity, but don’t necessarily have the funds to do so yet, don’t let that discourage you. Get in touch with your desired charity to see how else you can help!
An organization may need volunteers or part-time staff members in certain areas that you may excel in (project management, marketing, finance, fundraising, etc.), assistance securing physical donations for a silent auction they are planning, or even just lending a helping hand to help package food for the community food shelf.
Involve Your Whole Family
It’s never too early to start developing philanthropic habits within your children.
If you are passionate about a particular cause as a family, get everyone involved! Call on your personal values or family mission statement if you need inspiration on where your family should start.
Let’s say your family is passionate about reading and literacy. With that goal in mind, there are endless opportunities to give – you could make a monetary donation to your local library, an older child could read to children at the community center, or your entire family could hold a book drive to donate to the local children’s after school program.
Philanthropy is so much more than money. In addition to instilling a love of giving back within your children, you’ll grow together through new relationships, community engagement, and making a difference side by side.
The Relationship Between Philanthropy and Taxes
The IRS authorizes tax deductions for financial contributions that serve a charitable purpose and qualify for tax-exempt status. If you aren’t sure if your desired charity qualifies, you can use the IRS Tax Exempt Organization Tool.
There are limits on how much you can deduct charitable contributions from your adjusted gross income (AGI). In 2022 the limit is at most 50% of your AGI for cash contributions and 30% for non-cash contributions, like shares of stock.
There are a few common ways to make financial contributions to charity. Let’s take a look at a few!
Common Options For Giving
You can give to charity in whatever way fits your needs. Let’s review common ways to support charitable causes while giving you some tax benefits financially.
- Donor Advised Fund: A private fund administered and managed by a third party to distribute charitable contributions.
- They carry immediate tax benefits. Whenever you choose to distribute the assets in the account, you will receive a tax benefit, and the funds in the account will grow tax-free.
- Donor Advised Funds aren’t just for cash, you can utilize other forms of financial contributions like shares of stock (which can help you avoid paying capital gains tax).
- Sustaining Donations: Allows you to provide regular support to charities without the burden of a large donation at one time.
- Bunching: Involves consolidating your tax-deductible contributions into one year rather than over multiple years. During the giving year, the donor would receive an immediate tax deduction.
- Appreciated Assets: By donating assets other than cash (like gains on investments) you can avoid paying capital gains tax if you donate them to charity. While the charity will receive the full benefits of the appreciated asset, you can save on your tax bill.
Remember, there are numerous ways to support meaningful causes. Your financial advisor can help guide you in the right direction.
Establishing Your Legacy
Having a planned philanthropy plan sets you up for a lifetime of giving. In multiple ways, you leave a legacy on the charity or cause you support and your family.
Your family will never forget the experiences they have volunteering and serving others. Giving back gives an intense feeling of fulfillment from knowing that you are contributing to something bigger than yourself.
How Chladek Wealth Can Support Your Giving Goals
Our expertise extends beyond creating basic financial strategies. We work with clients to move past immediate financial needs and discover their higher purposes. Our goal is to help you and your family define your personal values and support you during your philanthropic journey.
If you’re ready to leave your legacy, please contact us today. We will help you find the right charitable partner and create a giving plan that works for you and your family.
The contents of this article are for general information and educational purposes and should not be construed as specific investment, financial planning, tax, accounting, or legal advice. Please consult with a professional advisor before taking any action based on the contents of this article.
All investment and financial planning strategies involve risk of loss that you should be prepared to bear. We cannot guarantee any investment performance whatsoever, and past performance is not indicative of potential future returns.