Ways to Maximize Your Charitable Impact - Part 3
By: Mark Boujikian, CFP®
Harris Financial Advisors, Torrance, CA
We all want to make a difference and feel confident that difference is felt by both our favorite charity, and ourselves. In Part 3 of our series, we are going to look at three ways to give that help us to make the biggest impact on our charity, while also receiving the most favorable tax treatment the tax code offers to help us build wealth:
Charitable Gift Annuity
• This strategy is one of the easiest and most popular methods of making a planned charitable gift. The donor makes a permanent gift of property to the charity; in return, the charity agrees to provide fixed payments for life to one or two beneficiaries. The payout rate is based on the age of the donor, the older you are, the higher your payout rate.
This type of gift provides an immediate income‐tax deduction for the value of the property, dependable, fixed payments for life, a competitive interest rate based on age, potential savings on capital‐gains (if the asset is highly appreciated) and eventually, savings on estate tax.
Donor Advised Fund
• A donor advised fund can be set up through many mutual fund companies, and community foundations. You get a tax deduction based on the date you contribute money to the fund. Then, you have an unlimited amount of time to decide which charities to support.
This type of donation allows you to fully control your future gifts, and get a current income tax deduction for each additional gift you make into the fund, year after year4. With a donor advised fund, you can continue to self‐direct your investments and allow your funds to grow to maximize your eventual gift to the qualified charities of your choice.
• This is simplest way to give. If you itemize deductions on your tax return, this technique will likely provide an income‐tax deduction. However, if you are looking to maximize your gifts, this is often not the best strategy.
As with any charitable giving technique, ALWAYS consult with your financial advisor, tax advisor, estate attorney, and many times, with the charities themselves to explore your options and find out how to maximize your gift and improve your bottom line, a win/win scenario for you and your favorite charity.