The holiday season is here, and that means it’s the giving season for many Americans. According to a recent survey, 63 percent of all Americans donate to charity in the final two weeks of the year. Most of those donations go to religious, poverty, and childrens’ organizations.1
There are a variety of ways to make your charitable donation this holiday season. It could be a cash donation to your favorite organization. You might donate old clothes, furniture or other items. You could also contribute your time.
Of course, you may want to make a donation that has a long-term impact. Perhaps you want to gift significant assets that leave a lasting legacy. Before you start writing checks, it’s helpful to develop a strategy so your donations have an impact that aligns with your wishes.
Below are a few questions to get you started on developing your charitable strategy. You also may want to meet with a financial professional to help you identify the best tools and methods for supporting your favorite cause.
What are your goals for your donations?
Every good plan has to start with a list of goals. You may know which organization you want to support, but do you have goals for what you want to happen with the donation? What kind of impact do you want to make?
You may be able to discuss your donations with the charity in advance to find out how they plan to use them. Research the charity’s efficiency to see how much is spent on overhead, salaries and administrative costs. Find out if you can specifically direct how you want your money to be used.
Also think about the timing of the donation. Do you want to make the donations while you’re alive so you can see how the funds are used? Or would you like to leave the donation as a legacy after you pass away? If the latter is the case, you may have more options available, such as using life insurance or a trust to facilitate your donation.
Are there tax benefits?
Your primary goal is probably to help others. However, you also may be able to benefit from your donation, especially with regard to taxes. For example, you can usually deduct charitable donations on your tax return. However, there is a cap on the amount you can deduct each year. You may be able to reduce gains taxes on certain assets by donating to charity or using a charitable remainder trust. A tax or financial professional can help you determine which types of donations would provide the greatest tax benefit.
What assets are available to gift?
The simplest way to support a charity is usually to write a check. It’s not the only way, though. In fact, you may already own assets that could be used as a charitable donation. As mentioned, if you have assets that have appreciated significantly in value, you might consider donating them to charity through the use of a trust. The trust can sell the assets and avoid gains taxes, then pass the funds on to the charity upon your death.
You could also donate your life insurance policy to charity. If you have a policy that you no longer need, consider making a charity the new owner and beneficiary. You get a tax deduction for your paid premiums, and the charity gets the death benefit after you pass away.
Ready to develop your charitable strategy? Let’s talk about it. Contact us today at Trinity Financial. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.
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