After decades of building wealth, you may wonder how your assets can support the causes you care about, whether that’s your local children’s hospital, alma mater, or food bank, creating a legacy you’re proud of. The big question is: Does your charitable giving strategy align with the legacy you want to leave while ensuring your family’s future financial success?
Shifting from reactive giving to strategic charitable planning can minimize taxes and preserve wealth for your family while maintaining your legacy. This is how we’ve guided thousands of people through thoughtful philanthropic planning to strengthen future security rather than threaten it.
What Does a Charitable Giving Strategy Look Like?
Charitable giving often comes at times of heightened emotions (like the holiday season), where organizations appeal to sentimentality to encourage you to support them. This type of “checkbook charity,” while not invalid or wrong, is reactive and not necessarily the most optimal form of giving.
Instead, we focus on proactive, strategic philanthropic planning that considers your long-term values, wealth transfer goals, family dynamics, and tax strategy. The goal is to make your generosity sustainable and optimized for your financial situation, supporting both purpose and planning.
Giving vs. Security: A Balancing Act
Families often wonder how much they can give without jeopardizing their financial security. While the answer differs for everyone, a comprehensive cash flow and balance sheet analysis can help stress test different giving levels and scenarios.
This analysis can help you better understand how your giving could impact:
- Future liquidity needs (keeping in mind things like increased healthcare costs)
- Legacy goals for children and grandchildren
- Tax exposure during retirement and for estate planning purposes
- Investment growth potential of your retained assets
Finding the Right Charitable Vehicle
You might think that no matter how you give, it’s all the same. However, each charitable giving vehicle comes with benefits and limitations. The right giving strategy for you will depend on your goals and specific financial situation.
Before looking at how to give, consider your:
- Desired level of control and involvement with the charity to which you’re giving
- Size of your intended gifts
- Desired family involvement (if any)
- Willingness to pay fees for easier management
- Time horizon for gifts now vs. at death
- Privacy preferences
Here are three examples of charitable giving vehicles that can help you achieve your giving goals, depending on your financial situation and objectives.
Donor-Advised Funds allow you to make charitable contributions and receive immediate tax deductions while still allowing you to recommend grants to specific charities over time. You can fund a DAF with appreciated securities, avoiding capital gains taxes and maximizing your deduction.
Often best for: Families who want control and flexibility, desire a tax-saving vehicle, or want to involve children in future giving decisions (children can be listed as successor advisors for the DAF)
Drawback: While you can recommend grants, the sponsoring organization has final say over where the money is distributed.
Charitable trusts provide income streams during your lifetime while benefiting charities through a sophisticated investment vehicle. They’re particularly powerful when funded with highly appreciated assets, offering tax benefits while supporting your charitable goals.
Often best for: Individuals with highly appreciated assets who want to reduce estate taxes, generate income, and benefit charity with the ability to adapt to future gifting opportunities.
Drawback: They are complex and likely require professional management; ongoing administrative costs make them suitable only for larger giving amounts.
Private foundations provide maximum control over giving and allow for family involvement through formal governance structures. This structure creates a continuous giving vehicle that can operate across multiple generations.
Often best for: High-net-worth families wanting a formal structure, maximum control, and multigenerational involvement.
Drawback: Higher administrative costs and compliance requirements that add complexity to giving.
When to Give and What to Consider
The timing strategy of your charitable giving is just as important as the vehicle you use. When done correctly, strategic timing can save you in taxes and support your family’s financial security.
When considering a giving timeline, we factor:
- Current vs. future income levels – Charitable deductions provide the most benefit during high-income years. If you anticipate a lower income in retirement, consider spreading gifts over time.
- Potential liquidity events – A business sale or major stock vesting event can create opportunities for a significant charitable deduction.
- Estate tax projections – Larger estates can consider testamentary gifts made through your will or trust that take effect at your time of death to reduce taxes and avoid an estate planning mistake.
Get Help Reevaluating Your Charitable Giving Strategy
When done right, strategic charitable giving can enhance your financial security and amplify your impact. Choosing the right giving vehicles and timeline will depend on your financial situation. Talk to your financial advisor about aligning your giving strategies with your goals and vision for future generations.
The key is working with an advisor who understands how charitable planning integrates with tax strategy, estate planning, and your overall financial security. When all these pieces work together, your charitable giving becomes an expression of your values and a powerful tool for optimizing your family’s long-term financial well-being.
Talk to an advisor about your charitable giving strategy using the form below.