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Making an Impact with Your Financial Planning

Making an Impact with Your Financial Planning

January 02, 2024

When it comes to charitable giving, there are various ways to make an impact. You have the option to directly donate money to a charity, which not only supports a cause but can also provide tax benefits if you itemize deductions. Additionally, donating clothing to organizations like Goodwill can also be a great way to contribute, as they provide tax receipts for deducting a portion of the donation. However, what many people may not be aware of are the alternative ways to make a financial impact for the charity of your choice.

One option is a Donor-Advised Fund, which allows you to donate to the account and distribute it to chosen charities over a span of years. The advantage here is that you receive the charitable deduction immediately, even though the donation to the charity can be made in future years. Donor-advised funds also provide opportunities for investing the funds, allowing for potential growth without any tax complications. Furthermore, you can even gift the appreciated dollars of the fund.

Quick story.

One of our clients had amassed quite a fortune with appreciated stock positions from their years of hard work at a certain company. The challenge was, they wanted to diversify their investments to reduce risk but wanted to do so without incurring heavy tax consequences. They also had goals to give back. It turned out that a Donor Advised Fund was the perfect solution for them. By donating to this fund, not only did they receive a tax deduction, but they also gained the freedom to sell their stock and explore more conservative investment options. The best part? They had the power as the donor to distribute the funds to their favorite charities at the time of their choosing. They were able to fund a water conservancy project in their hometown, thanks to the advantages of a donor advice fund. It's truly amazing to see individuals like them making a difference in the very place they grew up in, supporting causes close to their hearts. 

One other account to consider is a Charitable Remainder Trust. This allows you to donate money to a charity of your choice. You can receive income from that donation over time during your lifetime. For example, you could donate $500,000 to a charitable remainder trust, use it as income while you're alive, and then whatever is left over would go to the charity, providing you with both a tax deduction and a steady income stream.

Now, bear in mind there are a lot of rules and regulations to navigate when it comes to trusts, so it's wise to consult an attorney. Another option to explore is the charitable lead trust, where the charity receives the money upfront and pays you during your lifetime. Additionally, there are charitable annuity trusts and various other trust options available.

So, whether you're interested in making a significant impact or simply exploring new financial avenues, there are options out there for you. Let us help you find the perfect solution tailored to your needs!