In today’s world, philanthropy is more than just an act of kindness; it can also be a powerful financial strategy. When thoughtfully integrated into your financial planning, philanthropy can align with your personal values and create a meaningful impact while providing potential tax benefits.
By viewing philanthropy through a financial lens, you can achieve several objectives:
- Maximize Impact: Thoughtful planning allows you to support causes that matter to you while helping maximize your contributions to make a significant difference.
- Leverage Tax Benefits: Charitable giving can provide substantial tax advantages, allowing you to support your favorite causes while optimizing your financial situation.
- Enhance Personal Fulfillment: Aligning your financial decisions with your values can contribute to greater satisfaction and a sense of purpose.
At JNBA, our advisors work closely with clients to help ensure strategic philanthropy involves deliberate, well-planned charitable giving that reflects an individual or family’s values and goals. The following are considerations we review when developing a personal giving strategy.
Creating a Philanthropic Financial Plan
1. Define Your Values and Goals
Start by identifying the causes that resonate with you. Consider the following questions:
- What issues are you passionate about?
- Which organizations or movements do you admire?
- What specific outcomes do you hope to achieve with your giving?
Clarifying your values and goals will provide a solid foundation for your philanthropic strategy.
2. Evaluate Your Financial Position
Understand your current financial situation to determine how much you can allocate to philanthropy. Consider factors such as:
- Disposable Income: Assess your budget to identify how much you can afford to give without impacting your financial stability.
- Assets: Evaluate whether you have appreciated assets (like stocks or real estate) that could be donated, potentially providing additional tax benefits.
3. Choose the Right Giving Vehicle to Maximize Tax Benefits
Different giving vehicles can help you achieve your philanthropic goals while providing various tax benefits. Here are some popular options:
- Donor-Advised Funds (DAFs): These accounts allow you to make a charitable contribution, receive an immediate tax deduction, and then recommend grants to charities over time. DAFs provide flexibility in timing and can simplify your giving process.
- Gifting of Appreciated Stock: By donating highly appreciated stock, you can avoid paying capital gains tax on earnings and receive a tax deduction in the year of the donation.
4. Research and Select Charities Wisely
When choosing organizations to support, conduct thorough research to ensure they align with your values and have a track record of making an impact. Consider:
- Transparency: Look for charities that openly share their financial information and impact metrics.
- Reputation: Check reviews and ratings on platforms like Charity Navigator or GuideStar to assess the organization’s effectiveness.
- Alignment: Ensure the charity’s mission aligns with your philanthropic goals and values.
5. Engage Beyond Financial Contributions
Consider engaging with the organizations you support in ways beyond financial donations. This could include:
- Volunteering: Your time and skills can often be as valuable as monetary donations.
- Advocacy: Use your voice to raise awareness about the causes you care about, influencing others to get involved.
- Networking: Connect with other philanthropists and organizations to amplify your impact through collaborative efforts.
6. Regularly Review and Adjust Your Strategy
As your financial situation and personal goals evolve, so should your philanthropic strategy. Regularly review your giving plan alongside your financial advisory team to help ensure it remains aligned with your values and objectives. Be open to exploring new causes and adjusting your approach based on life changes or new opportunities.
By thoughtfully defining your goals, evaluating your financial position, and choosing the right giving vehicles, you can create a philanthropic financial plan that could maximize impact to the causes you care about but also may enhance your overall financial health. Embrace the opportunity to make a difference in the world while enjoying the potential tax benefits that come with thoughtful giving. In doing so, you’ll leave a lasting legacy that reflects your values and aspirations.
If you have any questions about philanthropic financial planning, connect with your JNBA Advisory Team.
Due to various factors, including changing market conditions and/or applicable laws, some of the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from JNBA Financial Advisors.
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