As we approach the end of the year, it’s an opportune time to consider your charitable giving ideas and how they align with your overall financial strategy. America’s generosity continues to shine, with an estimated $557.16 billion given to U.S. charities in 2023, marking a 1.9% growth from the previous year.1 Trends in Charitable Giving Affluent Americans (a net worth of $1 million or more–excluding their primary home–and/or an annual household income of $200,000 or more) are leading the charge in philanthropy: - 85% of wealthy households gave to charity in 2022.
- The average gift value rose 19% above pre-pandemic levels.
- Affluent households gave an average of $34,917 to charitable organizations.2
Interestingly, women are the primary decision-makers in household charitable giving, while Millennials and Gen Z are emerging as critical groups in philanthropy, often focusing on causes like environmental issues.2 Financial Strategies for Charitable Giving Here are some ideas to consider. - Qualified Charitable Distributions (QCDs)
If you're at least 70½ years old, you can donate up to $105,000 from your IRA as a QCD, which may satisfy your annual required minimum distribution.3
- Donating Appreciated Securities
Instead of selling appreciated securities and donating the cash, consider donating the securities.3
- Donor-Advised Funds (DAFs)
DAFs allow you to contribute assets and decide over time which charities and causes you’d like the funding to go towards.3
Some donor-advised funds are considered mutual funds and are sold only by prospectus. The prospectus will provide information on charges, risks, expenses, and investment objectives and should be reviewed carefully before investing. Investment companies can provide a prospectus, or you may prefer to ask your financial professional. Please read it carefully before you invest or send money.
- Charitable Remainder Trusts
These irrevocable trusts let you donate assets to charity while drawing annual income for life or a specific period. The remainder is then passed to qualified charitable organizations.4
- Charitable Lead Trusts (CLTs)
CLTs can be an effective "freeze device" for estates, locking in the value of transferred assets while making regular payments to a designated charity.5
Maximizing Your Impact
As financial professionals, we can help integrate your philanthropic goals into your overall financial strategy. We can work alongside your tax, legal, and accounting professional to explore the pros and cons of various giving approaches before making a contribution or implementing a strategy. This collaboration can help you align your philanthropic aspirations with your broader financial strategy.
Key Points to Remember
Once you reach age 73, you must begin taking RMDs from a traditional IRA in most circumstances. Withdrawals from traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Charitable remainder trusts and charitable lead trusts involve a complex set of tax rules and regulations. Before proceeding with either trust, remember that we can work alongside other professionals who are familiar with the relevant rules and regulations. Next Steps
Don't hesitate to reach out if you have any questions or would like to discuss this further. |
Sources: 1. Giving USA, June 25, 2024 2. Bank of America Institute, November 10, 2023 3. Nasdaq, March 4, 2024 4. Internal Revenue Service, August 2024 5. The National Law Review, July 19, 2024 |
