November 11, 2024
Allworth financial advisor Allison Scoggin, CFP®, shares three creative and strategic ways to make charitable giving impactful while optimizing financial benefits.
When it comes to charitable giving, there are many ways to make a meaningful impact while also achieving financial goals. As a financial planner, I love introducing clients to strategies that help them support the causes they care about in creative ways. Today, I’m sharing three charitable gifting techniques that go beyond the typical donation, letting you support your favorite organizations and make the most of your giving power.
A Donor-Advised Fund (DAF) is like a charitable investment account. You contribute assets—whether it’s cash, stocks, or even real estate—into the fund, receive an immediate tax deduction, and then recommend grants to your favorite charities over time.
DAFs allow you to "front-load" your giving when you’re in a high-income year to maximize your tax benefits while spreading out donations over several years. And because DAFs are designed for long-term giving, they allow for tax-free growth on the assets in your account. It’s a flexible, powerful tool to establish a lasting legacy and strategically manage charitable contributions.
Why It’s Great: DAFs give you the tax benefit right away and allow for gradual giving, making them perfect for those who want flexibility and a way to grow their charitable contributions over time.
If you’re 70½ or older and have a traditional IRA, a Qualified Charitable Distribution (QCD) might be a great option. With a QCD, you can donate up to $100,000 annually directly from your IRA to a charity, which counts toward your Required Minimum Distribution (RMD) but isn’t included in your taxable income. This can be a win-win if you’re already making donations and are looking for ways to minimize taxes on your retirement income.
By gifting directly from your IRA, you’re effectively lowering your taxable income while supporting the causes that matter to you. It’s a particularly beneficial approach if you’re already in a high tax bracket or don’t need all of your RMD for personal expenses.
Why It’s Great: QCDs allow you to fulfill RMD requirements without increasing your taxable income, making this technique ideal for retirees who want to balance charitable giving with tax efficiency.
Charitable Remainder Trusts (CRTs) are perfect for those who want to support a cause while still generating an income. Here’s how it works: You transfer assets into a CRT, receive a partial tax deduction, and then the trust pays you (or another designated beneficiary) a set income each year. When the trust term ends, any remaining assets are passed to a charity of your choice.
CRTs are a win-win for people who have highly appreciated assets like stocks or real estate. By transferring these assets into a CRT, you avoid capital gains tax on the sale, receive income, and ultimately support your favorite cause. It’s a wonderful way to balance personal financial needs with philanthropic goals.
Why It’s Great: CRTs allow you to continue receiving income while reducing capital gains taxes, and they create a meaningful legacy for the causes that matter to you.
Each of these strategies—DAFs, QCDs, and CRTs—offers unique benefits, allowing you to support your favorite organizations creatively and effectively. Whether you want flexibility, tax efficiency, or a mix of income and giving, these tools can help you make a positive impact. If you’re ready to explore a giving strategy that aligns with your goals, let’s chat about which approach is best for you.
Happy giving!
No matter what changes may happen in life, I believe it’s possible to refocus any situation in a way that helps to create positive change. That is why I love being a financial advisor and helping my clients listen to their inner voice and change their outcomes for the better.
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