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Want to Maximize Your Charitable Giving Impact? Consider These Strategies

Estate Planning
group of volunteers lined up arm-in-arm do charity work and take pride in their charitable giving

Charitable giving is a great habit to fall into. Are you taking advantage of a giving strategy that lets you and the charities you support get the most out of what you give? You may not know that you have more options than just writing a check.

There are many charitable giving strategies that could give you the best of all worlds:

  • Tax advantages
  • Timing
  • Control
  • Flexibility

Writing a bunch of checks at the end of the year is simple enough: You get a tax deduction, and the charities get the funds. When you have more assets, new charitable giving strategies could multiply.

Giving With Life Insurance

You know life insurance could provide your loved ones with a strong financial foundation — but did you know it can also be an excellent way to give to charity? Life insurance could play a helpful role in fulfilling your charitable wishes.

The following strategies could help you reach your giving goals:

  • Earmark your policy's death benefit for the charity.
  • Donate your life insurance policy directly to the charity.
  • Allow the charity to purchase a policy on your life and make annual tax-deductible premiums to the charity to cover the insurance policy premiums.
  • Establish a charitable remainder trust using your life insurance policy.

Speak with a financial representative who can help you explore your charitable giving options and learn more about giving to charity with life insurance. After all, additional knowledge about the giving strategies available may help you maximize your impact — and achieve your charitable giving goals.

Enhanced Charitable Giving

There are other methods of giving: Take appreciated bonds and stocks. Suppose you have $10,000 worth of stock from Apple Inc. in a regular taxable investment account. Imagine that you were lucky enough to purchase those shares when they were only $4,000. If you merely sold the shares and donated the proceeds to charity, you would give a lot less than if you donated the shares directly.

Here's why: You would pay a capital gains tax on the $6,000 increase in the value of the stock. Depending on your income tax bracket, that could take a 20 percent chunk out of the sale proceeds, and more when you add in state taxes. This means that instead of giving stock worth $10,000 to the charity and taking a $10,000 tax deduction, you would only have $8,000 to give with Uncle Sam getting the other $2,000. This should not be construed as tax advice. You should consult with your tax adviser to address your specific situation.

Donating the shares directly to the charity could give you the biggest bang for your buck. And that same strategy may apply to donating other kinds of appreciated assets. Of course, not all charities are equipped to deal with that kind of contribution, so it's important to consider this before choosing this strategy.

Timing Flexibility

With charitable giving, timing may be everything. Do you like to make regular annual contributions to multiple charities? Did your income increase — pushing you into a higher tax bracket? Do you want to sell a lot of appreciated stocks that are worth more than what you want to give? Well, you could make a sizeable charitable contribution to offset the tax hit you would otherwise take.

How? Using a donor-advised fund (DAF). A DAF is special investment account that distributes funds to charities when the donor chooses and provides him or her with an immediate tax benefit. Technically, the donor advises the trustee of the account (someone associated with the financial institution used to maintain the fund) about his or her wishes. However, it's important to note that the donor does not have absolute control.

You could also use trusts to support charities and continue to dictate the timing of the donations. For example, you may consider withdrawing some of the income produced by the assets you used to fund the trust. You could also give the income to charities now and distribute the principal of the trust to your beneficiaries when you pass away.

There are plenty of choices when it comes to charitable giving. But arguably the most important choice you make is to carefully consider the financial implications of how you give — implications for both yourself and those causes you cherish.

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Information provided is general and educational in nature. It is not intended to be, and should not be construed as, legal or tax advice. Western & Southern Financial Group and its member companies (“the Company”) does not provide legal or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. The Company makes no warranties with regard to the information or results obtained by its use. The Company disclaims any liability arising out of your use of, or reliance on, the information. Consult an attorney or tax advisor regarding your specific legal or tax situation.