A great way to assist with causes that are important to you is through charitable giving. From a financial perspective, it can also have a positive impact on your taxes, making it an important part of financial and estate planning. While charitable donations often peak during the holiday season, there is no reason you have to wait until year’s end to allocate your charitable funds. Read on for the many ways to donate effectively and the reasons for doing so.
Involve Your Family
It is important to involve family in your charitable giving actions at a very early age. The best way to raise charitable children is by modeling it for them and involving them with your own charitable efforts. A great way to go about this is trying to find a connection between their passions and charitable opportunities. For example, if your kids love animals, you could help them collect toys for a local shelter. Or if they love cooking, serving food to the homeless would be a great option.
Even before your children are old enough to be involved themselves, you can instill the value of giving. When planning an early birthday party you can ask guests to bring supplies to be donated to a local school instead of gifts, and together you can drop off the supplies. You can imagine the impact that can have on your children even at such a young age.
Introducing: Charitable Remainder Trust
Charitable remainder trusts can result in three main benefits: generate income for you, decrease your taxes and allow you to pursue your philanthropic goals. This is a “split interest” type of trust wherein you can contribute and receive a tax reduction based on the assets being donated to charity. To put it simply, you make a donation to a trust. Depending on how the trust has been set up, it can provide income on a regular basis (annually, semi-annually, quarterly, monthly) to the beneficiaries for a set period of time after which the remaining money is distributed to charity. Contact your financial advisor to learn more about Charitable Remainder Trust opportunities.
Tax Benefits of Charitable Giving
Aside from the benefit to a particular charity or charities, donating can be advantageous for tax purposes. As a rule of thumb, always consult with your tax professional for how it will affect your personal taxes. To receive charitable contribution deductions, you must itemize your deductions rather than standardize them.
While itemizing may save on taxes during your lifetime, leaving your assets to a charity after you have passed saves on estate taxes. Estate taxes encourage charitable donations by decreasing the taxable amount that for which the beneficiary may be responsible.
How Charitable Giving Makes You Feel
Speaking from personal experience, donating to charity inspires a really wonderful feeling. Giving back does not strictly mean making monetary donations. For those with less disposable income, there are still ways you can get involved. For example, you can donate clothes you no longer wear or donate your time. Often you will experience a deeper connection if your donations are tied to your passions. If you are having trouble identifying a charity, there exist many websites that help guide you to find the right organization, like VolunteerMatch.org.
Donating can also inspire your peers. If you notice a young person in a coffee shop, consider buying their coffee unannounced and, in turn, asking them to pay it forward. Again, it does not have to be monetary in nature but does also generate that same ‘feel good’ notion in both you and the recipient.
Endowments are monetary donations for which the investment income has a specific predetermined purpose. For those with the resources to do so, endowments are a wonderful way to leave a legacy for a lifetime of importance. Endowments are most often tied to education but can also exist with cultural institutions, religious organizations and hospitals.
Education and Extracurricular Giving Opportunities
After retirement, giving back to schools is a wonderful way to dedicate your time. There are many opportunities in education such as helping in a classroom, conducting a seminar or mentoring students in a field you have strength, even driving the school bus. Outside of the classroom you can also volunteer to coach a sports team or an individual athlete.
As you can see, there are innumerable ways to give back. Donations are not just limited to those monetary in nature. Whether you are donating your time, money or anything in between, there are many benefits to be had and we invite you to share your charitable experiences with us.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
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