End-of-Year Charitable Giving Strategies

End-of-Year Charitable Giving Strategies

December 08, 2023

As the end of the year approaches, many high-net-worth investors may be considering ways to impact the world through charitable giving. Charitable giving benefits the causes you care about and offers potential tax advantages.

In this blog, we'll explore some valuable tips for high-net-worth investors (HNWI) looking to enhance their end-of-year giving strategies. Here’s what you need to know.

Assess Your Goals and Values

Before diving into charitable giving, reflecting on your values and philanthropic goals is essential. Think about the impact you aspire to create and whether you lean towards supporting local, national, or international charities.

Driven by their deeply-held values and beliefs, affluent households maintain their prominent role in charitable giving, with a remarkable 85% actively contributing to charitable causes in 2022. Additionally, 54% of affluent households in the United States emphasized that their giving is closely tied to the issues they care most about.

While financial contributions are essential, consider getting personally involved with the charities you support. Serving on the board of a nonprofit organization or volunteering your time can be just as valuable as monetary donations. Your experience and knowledge can help charities achieve their goals more effectively.

It's crucial to research charities and organizations thoroughly. Look into their financial transparency, effectiveness, and track record. Ultimately, your giving strategy should be aligned with your passions and beliefs.

Create a Sustainable Giving Plan

Developing a sustainable giving plan is a thoughtful and purposeful approach to charitable contributions, allowing individuals and organizations to make a lasting and meaningful impact on the causes they care about. At its core, a sustainable giving plan is a well-structured roadmap that guides your philanthropic efforts so that your donations are effectively utilized and continue to make a difference over time.

Diversifying your support among various causes or organizations can provide a more balanced approach to your giving, allowing you to address multiple issues that matter to you. Establishing a giving schedule can create consistency in your contributions. A clear giving plan helps charities plan their activities more effectively and makes your support ongoing. 

Working alongside a fiduciary advisor can help you evaluate how well your contributions align with your goals. Be open to adjusting your giving strategy as your circumstances and priorities evolve.

Maximize Tax Benefits

Charitable giving can be a tax-smart strategy, particularly for retirees with substantial assets. It can lower withdrawal taxes from your tax-deferred retirement accounts, including Required Minimum Distributions (RMDs). Additionally, it can help reduce your taxable estate and minimize the tax liability for your account beneficiaries. However, it's important to note that generally, you should be over the age of 59½ to avoid early withdrawal penalties.

To make the most of these tax benefits, consider seeking advice from a financial advisor. They can provide insights into optimizing your tax advantages. Strategies such as grouping charitable donations into a single year, donating appreciated assets, or establishing a charitable remainder trust are effective ways to enhance the tax benefits of your charitable giving.

Explore Donor-Advised Funds

Donor-advised funds (DAFs) are a popular charitable giving vehicle for high-net-worth individuals. They allow you to contribute assets such as cash, stocks, or real estate to a tax-advantaged fund, which can be distributed to multiple charities over time. DAFs offer flexibility, potential tax deductions, and the ability to centralize your giving. Some options to consider include:

  • Direct Donations: This involves making one-time or recurring cash donations to charitable organizations of your choice. It allows you to impact and support specific programs or initiatives immediately.
  • Planned Giving: Planned giving involves making charitable donations as part of your overall financial and estate planning. It often includes strategies like bequests in wills, charitable gift annuities, and charitable remainder trusts. Planned giving allows you to support causes you care about while potentially providing you or your beneficiaries with income or tax benefits.
  • Donor-Advised Funds: Donor-advised funds (DAFs) are philanthropic vehicles that allow you to contribute to a fund, receive an immediate tax deduction, and recommend grants to charitable organizations over time. DAFs provide flexibility and strategic giving opportunities, especially for those who want to involve their family in philanthropy.
  • Charitable Trusts: Charitable trusts, such as charitable remainder trusts (CRTs) or charitable lead trusts (CLTs), provide unique ways to give while offering potential tax advantages and estate planning benefits. These trusts allow you to provide income to beneficiaries during your lifetime while leaving a lasting legacy for charitable causes.
  • In-Kind Donations: In-kind donations involve giving non-cash assets, such as stocks, real estate, or valuable items, to charitable organizations. These donations provide tax advantages and allow you to contribute assets that may benefit the organization’s mission.

Each method has advantages and considerations, and the best choice depends on your circumstances and philanthropic goals. It is recommended to consult with financial advisors or professionals with experience in charitable planning to determine the most suitable gifting method for your specific situation.

Review Your Giving Plan Annually

Charitable giving is not a static endeavor but an evolving and dynamic process. As such, conducting an annual review of your giving plan is crucial so that it remains in sync with your financial goals. If your giving plan has become more complex or you're considering substantial contributions, seek advice from a fiduciary to optimize your strategy.

Fiduciaries can assess and manage the risks associated with your charitable giving.  At Agemy Financial Strategies, our fiduciaries can oversee your charitable giving and provide peace of mind. Here are just some of the ways our advisors can help you optimize your giving plan: 

  • Risk Management: We meticulously vet and evaluate potential beneficiaries to secure your contributions to reputable and financially stable organizations. This thorough due diligence minimizes the risk of your funds being misappropriated or misused.
  • Customized Strategies: We understand that each giver has unique financial circumstances and philanthropic goals. Our team works closely with you to develop a personalized giving strategy that aligns with your values, maximizes the impact of your contributions, and optimizes your tax benefits.
  • Legacy Planning: If you aspire to create a lasting philanthropic legacy, our fiduciaries can guide you. We assist in setting up trusts, endowments, or foundations that perpetuate your giving beyond your lifetime.
  • Compliance and Reporting: Agemy Financial Strategies is well-versed in the complex regulations and reporting requirements associated with charitable giving. We handle all compliance matters so that your donations adhere to legal guidelines and that you receive the full range of tax benefits available to you.

Final Thoughts

End-of-year charitable giving is a powerful way for high-net-worth individuals to impact society while enjoying potential tax benefits. As you plan for retirement and consider the legacy you want to leave behind, remember that every contribution can significantly impact, no matter how big or small. 

Agemy Financial Strategies is dedicated to providing knowledgeable guidance on charitable giving on your road to retirement. We understand the importance of your generous contributions and the lasting impact they can have.

Our team advisors are here to help you every step of the way, helping ensure that your retirement years are filled with immense fulfillment. With our guidance, you can leave a meaningful legacy that will endure for years, and save a few tax dollars in the process. 

Contact us today to get started and schedule your complimentary strategy session here.