Make Charitable Gifting Your New Year’s Resolution in 2019
Date: December 2018
Authors: Senior Managing Director, Trust Services, Marietta Luellen & Advisor, Wealth Management, Ross Blount CFP®, CRPC®
2019 is around the corner and many of us are thinking about what our New Year’s resolution should be. Most of us make New Year’s resolutions to reduce negative behaviors, such as spending too much money, not exercising or eating too much. While these resolutions are important, the odds of achieving these resolutions are pretty slim. According to U.S. News, approximately 80 percent of resolutions fail by the second week of February. Instead of focusing on reducing negative behaviors, we recommend focusing your resolution on increasing positive behaviors, such as being involved in your community and focusing on charitable giving.
Getting started is as easy as establishing your personal gifting “mission” and developing goals. Think about the types of non-profit organizations you want to give to and what causes you’re passionate about. It’s also important to think about how much you want to give, how often and to what extent you want to involve your family. After establishing your “mission,” your wealth management team can help you identify what gifting strategy makes the most sense for you. In this article, we share the benefits of four different charitable gifting approaches that may help you meet your goals.
One of the simplest ways to give to charity is to give cash gifts to organizations you want to support. You can set a goal to give a certain amount on a regular basis or make a one-time donation. Gifting to qualified charitable organizations may entitle you to a charitable contribution deduction against your income taxes. It’s important to note if you want to claim your gift on your taxes, it must be a qualified organization. For example, gifts to individuals, foreign charities and certain private foundations may not be deductible. You can learn which types of non-profits are deductible by using this resource from Charity Navigator.
Donor Advised Funds
A donor advised fund (DAF) is an account that is managed as an investment portfolio for charitable purposes. With a DAF, there are no rules around how much you give or which organization you give to (as long as it is a charitable organization). Additionally, with a DAF you receive an immediate tax deduction for your contribution regardless of how much you distribute out of your DAF. When deciding which charitable gifting strategy is best for you, your wealth advisor may recommend a DAF if your assets have grown significantly over the past year. For example, if you receive an inheritance, sell a business or see high stock market returns, you may benefit from a larger immediate tax deduction as opposed to smaller deductions for ongoing annual giving. Your wealth management firm can help you open a DAF and manage your account to make charitable gifting easy.
Charitable trusts are a great way to make charitable giving part of the legacy you leave behind. With one type of charitable trust, a charitable remainder trust, you can set money aside in your lifetime and when you pass away, you can give the remainder of the money in the trust to one or more charities. With charitable trusts you receive a partial tax deduction of your contribution based on the amount of the eventual gift. A charitable trust can also create a lifetime stream of income and reduce the amount of tax your estate has to pay when you pass away.
There are numerous types of charitable trusts and your wealth management advisor can help you decide which type of trust best aligns with your goals.
If you plan on gifting large amounts and want to be heavily involved in the gifting process, you may want to establish a private foundation. Private foundations are a great way to give back while involving your family in your charitable gifting legacy. Private foundations also offer immediate tax benefits, similar to a DAF. It’s important to note however, that private foundations have more administrative responsibilities and requirements.
Creating a goal to give back to a cause that is close to your heart is a great way to keep your New Year’s resolution this year. By developing a strategy to help others, you may be more inclined to keep your resolution year round. Once you’ve thought about what your personal mission is going to be and what your charitable goals are, talk to your wealth management firm to discuss which charitable gifting strategy will best meet your goals.
About the Authors
Marietta is the Senior Managing Director of Trust Services. She is responsible for personal trust services across the division, and leading the trust teams in assisting clients with wealth and estate planning, trust administration and charitable giving. Marietta has a passion for helping people, whether that be giving back to the community through volunteering in numerous charitable organizations and schools, or helping clients create legacies for their family and communities.
Ross is an Advisor with First National Bank Wealth Management assisting individuals and families with comprehensive financial planning. Together with investment management and lending strategies, Ross can help you move towards living your best life. His business approach is to develop and maintain long term relationships built on mutual trust and exceptional service.View Services