Creating a Larger Financial Impact for Your Family and Favorite Charities Through Planned Giving

In 2021 Americans gave an estimated $484.85 Billion to charity, according to Giving USA 2022. Whether it’s religious organizations, community development organizations, arts, education, or humanities, American’s have shown a consistent desire to financially support communities and organizations in need. More often than not, this financial support is given in cash gifts without any additional thought on how to maximize the tax and long-term impact of these gifts. Although these gifts provide the intended support, this lack of planning leaves money on the table that could have created a larger financial impact for either the donor’s family, the charity, or both.

There are numerous strategies that you can use to improve the effectiveness of your gifting, but the three considerations below are a great place to start when reviewing options.

Option 1: Consider the Type of Asset You’re Gifting

As stated above, most Americans make their gifts via cash donations. These cash donations provide an additional tax deduction in the year they are made, as long as that individual is itemizing deductions on their taxes. As beneficial as that tax deduction is, it can be maximized by gifting other assets. For example, highly appreciated stock or a retired individual’s Required Minimum Distributions carry additional benefits that might be worth considering. Cash gifts are great, but they are not always the most efficient source of gifts.

Option 2: Consider How You are Structuring the Assets You are Gifting

In addition to making cash gifts, most Americans also only give during certain times. They either give consistently throughout the year as a tithe, or they give to larger campaigns or projects when asked by the organization. Rarely does anyone make their larger gifts when they personally need it most from a tax perspective. But what if you could get the best of both worlds?

Vehicles such as Donor Advised Funds or Family Foundations are great opportunities for donors to get the tax deduction when they personally need it while still giving the money to the organization when the organization needs it either in the current year or in future years.

Option 3: Review Your Estate Planning & Beneficiary Arrangements

Lastly, many donors who gift throughout their lifetime are also interested in creating a legacy for the organizations they support after their death. Leveraging various assets like life insurance and retirement accounts provide a great way to maximize the charitable benefit for the organization in a very tax efficient manner. Consistently reviewing your estate planning documents and beneficiary designations to ensure they match up with your legacy goals is another fantastic way to create a lasting impact.

At the end of the day, for someone to benefit from planned giving strategies they have to be charitably inclined and have a desire to make a financial impact primarily in the organizations they support. But assuming they do, the strategies mentioned above alongside countless others provide donors a unique opportunity to minimize money being lost to taxes and fees, which provides more wealth to be directed to the organizations they support.

Cleveland Wealth, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.