Many individuals and families are generous every day—from spontaneously helping a family in need to giving to their church monthly. Philanthropic giving is a very healthy piece of a financial plan. You’re not just spending your resources—you’re investing in causes greater than yourself and seeing returns that aren’t always financial.
In this blog, we’ll explore what integrating philanthropy in wealth management can look like, including how to give more effectively, and how your values can help you further develop your philanthropic strategy.
Why Philanthropy Matters in Wealth Management
Philanthropy is more than giving. When we use that word, we refer to systematic and strategic charitable donations, not specifically random acts of kindness (although those are wonderful!) Not only is philanthropy beneficial for the world and your community, it’s also beneficial for wealth management.
With the right philanthropic strategies, you can do two things:
- Ease your tax burden. Depending on what vehicle you use for philanthropy (more on that later), your charitable contributions won’t be taxed in the same way as your regular income—or won’t be taxed at all.
- Reflect your values through your money. Through philanthropy, you can do more with your money and your values. It’s an excellent way to pass along your values to your children and grandchildren.
Aligning Philanthropic Goals with Family Legacy
You can get a head start on your legacy through philanthropic planning. Let’s explore some ways to align your philanthropic goals with your family legacy:
- Identify personal values and charitable goals: Think through what causes you care about and would consider giving to. This can include local ministries, global missions, fine arts, or even education.
- Set giving goals within a financial framework: Your philanthropic goals can coexist with your wealth goals. Consider what you want your goals to be. They could look like donating a certain amount to a charity each month or setting up something like a donor-advised fund.
- Hold a family summit: It’s great to have your family aligned on your philanthropic goals. A “family summit” is time set aside to do just that—align on what you wish for your wealth now and in the future.
Tax Benefits of Charitable Giving
Incorporating philanthropy into your wealth strategy is a key way to help you ease your tax burden. This is great for your pocketbook, but more than that, it helps your money go further and make a greater impact.
- Charitable deductions: These are the itemized deductions on your annual taxes. The current limit for standard deductions is 60% of your adjusted gross income. Usually you need written acknowledgement from the qualified organization detailing the donation.
- Donate appreciated assets: Donating appreciated assets (like stocks, bonds, or real estate) is tax deductible. You don’t have to sell the asset before donating it, which also prevents you from paying capital gains tax on the earnings.
- Donor-advised funds: A donor-advised fund (DAF) is an account that you can contribute to at any time and recommend grants to qualified charities over time. You also receive a tax deduction immediately after contributing.
At Legacy Wealth Advisors, we’ll examine your charitable giving goals to help you develop the right strategy that helps you live out your values and make the most of your generosity.
Creating a Lasting Legacy through Philanthropy
Philanthropy can strengthen both your legacy as a donor and your legacy within your family. A wise strategy—and clear communication with your family—can help you live out your values and ensure your family is taken care of now and in the future.
- Using philanthropy to establish a legacy: Your philanthropic strategy can help strengthen your legacy by reflecting your values and make a generational impact through giving.
- Charitable remainder trusts and charitable lead trusts: Charitable remainder trusts (CRTs) and charitable lead trusts (CLTs) can be the best of both worlds when it comes to planned giving and caring for your family. With CRTs, a stream of income goes to you or a beneficiary for a set period of time and then the remainder is given to a designated charity. With CLTs, it’s the exact opposite—a charity will receive the stream of income, and you or a beneficiary will receive whatever is left over.
- Involving Family in Philanthropic Planning: Philanthropy is a family matter, and it’s important that they understand your values and wishes for your legacy. Some of our clients will even take their families on a legacy trip—a special vacation where they make lifelong memories and discuss those values.
Integrating Philanthropy Into Wealth Management is Easier with A Partner
When you integrate philanthropy into your overall wealth plan, it contributes to both your financial goals and your personal fulfillment. For us at Legacy Wealth, it’s a vital part of our financial planning process—one that we encourage our clients to think deeply about, and something we can help you with.
Are you interested in deepening your legacy and developing a financial strategy that supports what you value most? Download our Legacy Planning Workbook. It will provide you with more space to consider your legacy and how it plays into your wealth plan in unexpected ways.
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Any opinions are those of the author, are subject to change without notice and are not necessarily those of Raymond James. This material is being provided for information purposes only, is not a complete description and does not constitute a recommendation. Investing involves risk and investors may incur a profit or a loss regardless of strategy selected. Neither Raymond James Financial Services nor any Raymond James Financial Advisor provides advice on tax or legal issues, these matters should be discussed with the appropriate professional. Donors are urged to consult their attorneys, accountants or tax advisors with respect to questions relating to the deductibility of various types of contributions to a Donor-Advised Fund for federal and state tax purposes. To learn more about the potential risks and benefits of Donor Advised Funds, please contact us.
