As the year comes to a close, many of us find ourselves reflecting on how we can make a meaningful impact — not just in our own lives, but in the lives of others. It’s important that we understand the options we have available to us to help us create an impact on the things we truly care about.
Charitable giving offers a unique opportunity to align your resources with your personal values, creating a legacy of generosity that resonates far beyond the holiday season. While year-end giving is often associated with tax benefits, the true reward lies in its ability to shape our hearts so that we begin to care about the things we value and believe in.
A mindful approach to charitable giving can be a powerful way to maximize your impact while creating efficiency in your financial plan. Donating appreciated stocks or property allows you to avoid capital gains taxes and support meaningful causes, while qualified charitable distributions (QCDs) offer retirees a tax-efficient way to give directly from their IRAs. Thoughtful strategies like these can help ensure that your generosity creates lasting value, both for the causes you support and for your own financial goals.
Year-end giving isn’t just about the dollars donated — it’s about leaving a meaningful mark on the communities and missions that matter to you most. Let’s talk about how you can make this season one of purpose and impact.
Why Charitable Giving Matters
Charitable giving is more than a transaction to give yourself a tax break — it’s a reflection of your values and priorities. Whether you’re supporting local community programs, contributing to global initiatives, or funding a cause close to your heart, giving allows you to make a tangible difference in the world and fulfill your calling to care for others.
The Emotional Impact of Giving
At its core, charitable giving is deeply personal. It’s about aligning your resources with your beliefs and making an impact that resonates with your sense of purpose. For many of us, having this alignment can foster a sense of fulfillment and connection, making generosity a source of joy.
The Financial Benefits of Giving
Beyond the emotional rewards, charitable giving offers significant financial advantages when used strategically. For donors who itemize deductions, contributions to qualifying charities above the standard deduction can reduce taxable income, easing the overall tax burden. Strategies like donating appreciated stocks or making qualified charitable distributions (QCDs) can amplify these benefits, helping you achieve more with the resources you already have.
Giving With Meaning, Not Just Tax Efficiency
While the financial perks are valuable, they shouldn’t overshadow the importance of meaningful giving. The most impactful contributions come from the heart, driven by a desire to create change rather than simply reduce taxes. Balancing financial strategy and emotional intent helps to ensure that your giving is both purposeful and impactful.
By incorporating charitable giving in your overall financial plan, you can make a difference in ways that resonate with your values and bring lasting rewards to both you and the causes you support.
Often Overlooked Giving Strategies
When we think of charitable giving, cash donations are often the first thing that comes to mind. While giving cash is a simple and effective way to support causes, it may not always be the most efficient option. By leveraging the right giving strategies, you can deepen your impact and reap the financial advantages.
These approaches not only make the most of your generosity but also work in tandem with your overarching financial goals.
Donating Appreciated Assets
One of the most tax-efficient ways to give is by donating appreciated assets, like stocks or real estate. When you donate assets that have increased in value since you purchased them, you avoid paying capital gains tax on the appreciation.
On top of this, if you itemize deductions, you can claim the asset’s full fair market value as a charitable contribution. This makes it much more efficient than giving cash and is almost like receiving a double tax deduction.
For example, say you purchased stocks for $5,000, and they have become worth $50,000. You want to make a donation of $50,000 to your favorite charity, so you decide to donate the shares of stock. By donating the shares of stock, you get to deduct the full $50,000, instead of owing capital gains tax on the $45,000 profit. The charity will then get to sell the stock with no tax.
Donating stocks that have grown significantly in value allows you to support your valued causes without reducing your portfolio or donation’s overall value because of the tax implications of selling the investment. This method is particularly effective for those with diversified portfolios who want to rebalance their investments while giving back.
Examples of assets you can donate include Stocks, Bonds, ETFs, Real Estate (full properties and fractional interests), business interests, mineral rights, and even crypto-currencies.
You can donate stocks by providing your financial advisor with the organization’s account number and the DTC number of their investment firm. Be sure to let them know to expect your donation so they can provide you with the appropriate gift receipts. For other types of assets, reach out to the charity ahead of time to discuss your gift to make sure they can accept the gift.
Qualified Charitable Distributions (QCDs)
If you’re 70 ½ or older, qualified charitable distributions (QCDs) can be a great way to give directly from an IRA or an Inherited IRA. A QCD allows you to transfer funds from your IRA to a qualifying charity, satisfying your required minimum distribution (RMD) without adding to your taxable income. Since QCDs do not hit your income, you essentially receive the benefit of a charitable deduction even if you do not itemize and the donation does not count for income for purposes of determining your medicare premiums.
This approach is especially useful for retirees who want to support charities while managing their tax obligations. By using QCDs, you can reduce your taxable income and help your chosen organization, all while fulfilling your RMD requirements.
Donor-Advised Funds
Donor-advised funds (DAFs) can also provide flexibility for those looking to make a long-term charitable impact. DAFs allow you to contribute assets, receive an immediate tax deduction, and distribute funds to charities over time. This strategy may be worth exploring with your trusted financial advisor if you’re looking for a structured approach to giving.
There are many advantages to donating to a Donor Advised Fund here are just a few of them:
- DAFs are sophisticated enough that they can generally accept your complex gifts (i.e. shares of a closely held business). Many of them provide some level of support as well. If you want to make a gift at the end of the year and your charity can’t facilitate that gift, donate it to a donor-advised fund, which can sell the asset and give cash to the charity.
- Sometimes charities aren’t equipped to handle a massive donation. A Donor-advised fund can help you receive a large deduction and help the organization use it over time.
- Funds in your DAF can be invested, and there are several great ways to invest in high-impact business ventures around the globe. These tend to be higher risk and are usually only available to qualified purchasers and/or accredited investors. Some of these investments fund important work like creating infrastructure in developing nations or creating technology to combat human trafficking.
- When you donate to a DAF, you may be able to invest in high-impact initiatives and donate the profits to fund other charitable work. If these impact investments lose money, those losses occur with funds you’ve already given away for the purpose of changing the world.
Embracing Generosity
Charitable giving often comes with questions about financial security and whether you can afford to give without jeopardizing your long-term goals. It’s natural to feel cautious, especially when balancing current needs with your future objectives. However, with thoughtful planning, you can move past these fears and experience the fulfillment that comes from making a meaningful impact.
Overcoming Your Hesitations
Many people hesitate to give because they worry about all of the “what if” scenarios — unexpected expenses, market downturns, or changes in income. While these concerns are valid, they often lead to holding onto resources far beyond what’s necessary for your financial security. Working with the right financial advisor can help you identify how much you can safely give, allowing you the clarity and confidence to contribute without compromising your stability.
Shifting Your Perspective
Charitable giving is not about depleting your resources; it’s about using them intentionally to create positive change in the world. Take a moment to think about the financial flexibility you already have. Are there areas where you’ve saved more than enough? Could reallocating some of those funds toward causes you care about bring greater purpose to your financial plan?
We are all called to use our resources to help others and make a difference in the world. By reframing your surplus as an opportunity to give, rather than something to hoard, you can change your greater approach to managing your assets. Giving becomes less about obligation and more about empowerment.
Questions to Consider When Giving
If you’re worried about whether charitable giving is the right strategy for you, ask yourself:
- How have I been blessed and in what ways can I share that with others? When we recognize our abundance, we can begin to understand how we might impact others.
- How can my resources create the most meaningful effect? Consider ways you can align your giving with personal passions or community needs.
- What breaks my heart? We create the future of our world together. What power do your resources have to shape the world around you for the future?
Giving with Value
Charitable giving becomes powerful when it reflects who you are and directs your heart to what you care about most. By making sure that your contributions align with your values and passions, you can create a deeper connection to the causes you support, while ensuring your generosity can have the greatest possible impact.
Personalized Giving: Focus on What Matters Most
Everyone’s values are different, and your giving should reflect what resonates most with you. Maybe you’re passionate about supporting education programs, protecting the environment, or empowering traditionally underserved communities. Whatever your priorities, you want to take the time to identify causes and organizations that coincide with your vision for a better world.
Partner with the Organization
Don’t let your connection with a charity begin or end with writing a check. Ongoing involvement in the charity’s work will connect you deeply with the organization, provide important non-financial support and encouragement to the organization, amplify the power of your gift, and inform future giving decisions.
Reach out to the organization directly to learn about its mission, goals, and specific needs to determine if those align with your charitable intent. The development staff for the organization can share impact reports, budget goals, future strategic initiatives, and information about how they would steward your donation.
Consider how you can volunteer on the front end of the organization’s work, in the background, or engage with the organization’s leadership. If you are supporting a local organization, you may even consider serving on the board or assisting in fundraising.
Making Giving a Family Affair
Charitable giving can also be an opportunity to involve your family. Discuss the causes you care about with loved ones and consider making these decisions together. This not only deepens your impact but also fosters meaningful conversations about values, priorities, and legacy, which can be an incredible relationship-building tool.
Even young kids and grandkids can be brought into the giving conversation. Consider asking them where they would like to give, discussing the challenges children in your community and around the world face, and exploring the organizations that provide hope. You may be surprised and encouraged by their youthful thoughts, perspectives, and engagement.
The Role of a Financial Plan in Values-Driven Giving
When your financial plan incorporates your charitable goals, it helps ensure your giving remains intentional and sustainable. By working with a CoCreate financial advisor to structure your contributions to align with both your values and your broader financial goals, you can make sure that you are making the most of every single dollar.
Financial Planning for Maximum Impact
Charitable giving isn’t just about the actual act of giving, it’s about doing so in a way that aligns with your unique financial situation. Working closely with your financial planner can help you maximize the impact of your contributions while ensuring they fit seamlessly into your financial plan.
Integrating Giving Into Your Financial Plan
Your charitable contributions should complement your long-term financial goals, not compete with them. By incorporating giving into your financial strategy, you can:
- Ensure donations align with your cash flow and investment strategy.
- Balance your charitable efforts with other priorities, like retirement or family milestones.
- Identify the most tax-efficient ways to give, such as donating appreciated stocks or using qualified charitable distributions (QCDs).
A skilled financial advisor can help you understand your giving capacity and design a strategy that reflects your values while maintaining your confidence in your future.
Year-End Action Steps for Effective Giving
As December 31 approaches, it’s important to take proactive steps that ensure your charitable giving is both impactful and efficient. Start by discussing your plan with your financial planning team to identify the best opportunities for your strategic giving. Beginning the process early is crucial, especially for non-cash contributions like stock or real estate transfers, which may require additional time to process.
The end of the year is also a great time for setting clear goals for your giving, like deciding which causes or organizations to prioritize and how much to contribute. Just remember to keep thorough documentation, including receipts, appraisals, and transfer records, to remain compliant and optimized for all potential tax benefits.
Avoiding Common Mistakes
Even with the best intentions, there are common mistakes that can undermine the impact of your charitable giving if you’re not aware of them.
Procrastination and Missed Deadlines
Waiting until the last minute to execute your giving strategy can lead to rushed decisions, missed opportunities, and logistical challenges. Non-cash contributions, such as donating stocks or property, often require additional time to process, and rushing could result in failing to meet the December 31 deadline for tax benefits. Starting earlier in the year can help you make thoughtful and seamless contributions.
Ignoring Eligibility Rules
Not all charities qualify for tax-deductible donations, so you must verify that the organizations you support are eligible. By that same token, strategies like qualified charitable distributions (QCDs) come with specific rules, like age and contribution limits. Understanding and adhering to these requirements will help you avoid unintentional errors and make the most of your giving’s financial benefits.
Final Thoughts
Charitable giving is one of the most meaningful ways you can use your wealth to engage your personal values. By using strategies like donating appreciated assets and leveraging qualified charitable distributions, you can maximize the impact of your contributions while optimizing your financial plan.
As you reflect on your goals and priorities, remember that giving is about making a lasting difference for the causes and communities you care about. Whether you’re supporting local initiatives, global efforts, or personal passions, your generosity can ripple outward to create a lasting change, no matter how small or inconsequential it may seem.
This year, we urge you to take the time to plan your giving intentionally. Work with your trusted financial planners to develop a strategy that aligns with your values and ensures your resources are used effectively to serve your greater purpose.
