Why Charitable Giving Should be a part of your financial present and future
As an investor, it’s up to you to decide what is important concerning your investment strategy. In all areas of life, decision-making boils down to Knowing your why. If your why includes giving toward a local non-profit or church, then charitable giving should be a part of your financial plan. The Bible offers a helpful illustration in Luke 8:1-3, where we see an account of three generous women who came alongside Jesus and his disciples as financial partners – funding the ministry. The book “Gospel Patrons” by John Rinehart, expounds on this idea as it highlights people throughout history whose generosity helped to change the world. I spent the last nine years working for a non-profit outreach ministry and saw first-hand the impact of charitable giving. Generous donors are the backbone of any non-profit organization and can have a high level of impact on a community. This article aims to give you just a snapshot of the benefits of including charitable giving in your plan to achieve a holistic financial strategy while supporting critical work.
Bigger Impact with a DAF
It’s always important to have a plan. Planning your Charitable giving can allow you to increase your impact by avoiding unnecessary taxes on your charitable funds. One way to do that is through a Donor Advised Fund (DAF). A DAF is a way to donate appreciated stock, and avoid paying capital gains tax on the money you’d like to donate. You receive an immediate tax deduction of up to 30% of your adjusted gross income for any gift of appreciated securities. That list includes real estate and mutual funds in addition to other assets. By simply donating long-term appreciated securities (securities held for more than one year) to a DAF, capital gains are eliminated, your marginal tax is decreased and more money will go directly to your organization of choice. The DAF then disburses funds to your designated tax-exempt organizations, and this can of course be updated as needed.
A tool known as a Designated Fund is similar to a DAF, but it designates funds to one specific organization. Utilizing either a Designated fund or a DAF allows you the peace of mind that you are making an impact, and saves you both tax dollars and time. If you want to make an impact even after you’re gone, a Charitable trust is a great way to set up indefinite giving, so that your impact can be felt for generations. It’s important to note that once money is placed into charitable accounts it can only be used for giving. Consult with a tax professional to see if a charitable account might be right for you.
Benefits of Giving
If you aren’t ready for a DAF, you can still make an impact by giving cash. Churches and non-profits benefit from your charitable giving even in modest amounts. You can also benefit financially from giving, especially with quarter four drawing near, it’s important to be thinking about how today’s dollars affect your tax status at April’s filing deadline. If you plan to itemize your deductions, you can reap real tax benefits through your charitable giving through the end of the year. There are a variety of options to fit your needs, but if you’re at RMD age you could use a Qualified Charitable Distribution (QCD) from your taxable IRA as another beneficial mode for giving.
Regardless of your income level or life stage, it’s important that you know your “why?” What is your “why?” At Whitaker-Myers, we care about our clients and their goals so please reach out to your Financial Advisor or Tax Professional today to get started on your financial and charitable goals.