Charitable donations are a way to benefit your community and put your beliefs and values into practice. They can also be a way of working with your family and/or like-minded individuals such as a church to build a lasting legacy.

It’s prudent to strategize methods of maximizing your charitable donations to optimize the impact and reach of your giving. 

Here are 3 of the best ways to do that according to our specialists in St Louis, MO wealth management.

1. Practice Purposeful Giving

Part of the definition of purposeful giving is charitable giving that aligns closely with your and your family’s individual goals, beliefs, and values. It’s a good idea to spend time thinking about what you most want to support. Charitable donations can benefit everything from godly stewardship to healthcare to natural resources, and from education to sports. What do you want your dollars to go toward? 

Another aspect of purposeful giving, besides leaving a legacy, is that if strategically implemented, your charitable dollar can be tax maximized. So discuss with your family and associates the nature of the legacy you want to leave and then discuss this with your financial advisors in St. Louis.

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2. Communicate Your Plans to Your Chosen Charities

Once you choose the charities you want your contributions to support, it can be beneficial to both the charity and you to communicate your plans clearly. First, although charities are nonprofits, they run on roughly the same principles businesses do. They need to strategize and they need transparency and visibility about their funding to utilize their resources in the best way possible.

The donations of affluent individuals can have a big impact on the amounts the charities can give to recipients, as well as the directions and initiatives the charities develop to serve their causes. If you plan to donate sizable amounts, knowing the extent of your plans can help the nonprofits manage.

It can be very helpful, of course, to ascertain that the charities you’re interested in are well-run by researching them, visiting, and working with financial advisors to find charities with solid financials themselves.

If you’re comfortable giving over a period of years, it can help the charities’ planning and strategy divisions to know the time frame as well.

3. Optimize Your Giving with Tax Efficiency

Charitable giving provides many tax advantages to you, as long as the recipient is an Internal Revenue Service (IRS)-approved nonprofit, a 501(c)(3) organization. Tax efficiency can be a method of increasing the money you have available for giving since the savings on taxes frees up more money. Alternatively, you can actually give less but with an enhanced impact.

First, you can often gift up to 60 percent of your adjusted gross income every year. You also may be able to carry the deductions forward for up to five years if you want to give more than the allowable amount in a given year. Consult with a tax advisor for your specific situation.

Second, you can donate noncash assets that have appreciated (such as stocks, real estate, or other noncash assets) instead of cash. This strategy gives your designated charity the appreciated funds while providing you with a reduced or eliminated capital gains tax as well as a tax deduction.

You can either donate cash or noncash assets directly to the charity of your choice or through donor-advised funds (DAFs). DAFs are funds set up by financial or other institutions specifically to manage charitable donations in a simplified manner. 

Third, you can set up a trust specifically to manage your charitable giving. There are two kinds, charitable remainder trusts (CRTs) and charitable lead trusts (CLTs). Both accept either cash or noncash assets, for which you receive a tax deduction and also benefit you or a designated beneficiary. The primary distinction between the two is when the charity will receive the funds and when you or the beneficiary will. 

In a CRT, you or the beneficiary receive payments for a specific number of years you choose or for life. After that point, the assets remaining are given to the charity you chose.

In a CLT, on the other hand, the charity receives payment for a designated period of time. After that, the assets left are given to the beneficiaries you name.

Fourth, you can name a charity as a beneficiary of withdrawals from an Individual Retirement Account (IRA), including the required minimum distributions (RMDs) that you must take in your 70s. This Qualified Charitable Distribution strategy can be tax efficient in two ways. Initially, it eliminates the tax on the withdrawals. In addition, it can lower the tax burden on your estate by lowering the amount of your estate, helping to reduce or avoid applicable estate taxes. This then results in lowering the tax burden on your beneficiaries. Note that this strategy can only be utilized on individuals who are age 70.5 or older.

Trinity Wealth Advisors: What We Do

Trinity Wealth Advisors in St. Louis, MO was established to provide financial and wealth strategies from a team that shares Judeo-Christian values. This team was assembled to aid you in achieving your individual goals in every aspect of your life – investments, general financial planning, and risk (insurance) as well as charitable contributions. We have specialists in each of these areas as well as taxation and estate planning to guide you into wise decisions. 

Contact Trinity Wealth Advisors in St. Louis, MO 

The financial professionals at Trinity Wealth Advisors have, on average, worked for more than 25 years in wealth management in St Louis, Mo. Each partner is a CERTIFIED FINANCIAL PLANNER™ Professional, a distinction that requires years of both education and experience. 

We are fiduciaries who place your financial best interests ahead of our own. We focus on strategies for wealth sustainability, wealth enhancement, wealth protection, wealth transfer and charitable giving. 

Contact us to discuss ways to maximize your charitable donations as part of an overall financial plan.