Forward Bank

Did you know… with thoughtful, advanced planning, you can extend your legacy of charitable giving beyond your lifetime, creating lasting benefits for the organizations you care about? And if you have a desire to give back to society (or a special cause) as part of your legacy, there are many ways you can do so. Besides feeling good about giving back, a bonus of giving is that when you include giving in your financial plan you can make an impact while also receiving tax benefits.

One type of giving is philanthropic giving, which addresses the root cause of social issues and requires a more strategic, long-term approach. Here are tips to help guide you as you work towards including philanthropic giving as part of your goals in your financial plan:

1. Identify your values

Determine your reason for giving and what you want to change. Since philanthropy is giving over time, determine how long you want to give and if you want it as part of your family’s legacy (for the next generation to manage).

2. Define your goals

Our financial team can help you define your goals and implement a giving plan as part of your overall financial plan. Each year, you’ll evaluate how much you intend to give and when. Depending on your circumstances, you may include a giving schedule, such as quarterly or a one-time contribution each year. Other things to consider when defining your philanthropic goals include the following:

• Your giving in retirement
• Giving through your estate plan
• Including giving as part of a business-exit strategy

3. Select your charities

To ensure a charity is legitimate, ask the charity for details about their mission and how they’ll use your donation. The charity should also provide proof that it’s a 501(c)(3) public charity or private foundation so that your contribution is tax-deductible. As a second fact check on the charity, visit the IRS Tax Exempt Organization Search list to ensure it is a reputable, tax-exempt charity. 

4. Maximize your Giving

Our team can work with your tax professionals to help you determine how to maximize the tax advantages of giving. As tax laws change, your financial plan and giving plan may need to be revised so that you receive the tax benefits of your gift. Here are a few ways to maximize your giving:

• Qualified Charitable Distributions (QCDs) - If you’re age 70 1/2 or older, you can use a QCD to donate directly from your IRA to the charity of your choice. This strategy allows you to deduct the amount transferred to the charity from your taxable income. You can use a QDC each year versus taking the distribution and paying taxes.
• Bunch your donations - By making charitable contributions for several years at one time, the total of your itemized deductions may exceed the standard deduction and offer some tax benefits. 
• Itemize your contributions - Charitable contributions can reduce your tax bill if you choose to itemize when filing your taxes. Work with your tax professional to determine how to itemize your giving if the total of your deductions plus charitable gifts equals more than the standard allowable deduction. 

5. Determine which strategies to use 

There are strategies you can utilize to help you organize your giving within your financial plan, such as:

• Charitable Trusts - A charitable trust allows you to donate assets to a chosen tax-exempt organization to help you minimize taxes. Consult your legal professional (and our team) to help you understand how trusts work and if you intend to include giving securities as part of your giving plan.
• Private Foundations - A private foundation (PF) is a nonprofit charitable entity created by an individual or a business. An initial donation, known as an endowment, is used to generate income to make grants to charities per the foundation’s charitable purpose. It’s important to consult with financial, legal, and tax professionals to determine if a PF is appropriate for your situation.
• Donor-Advised Funds - A donor-advised fund (DAF) allows you to donate cash or securities (which are non-refundable) to a nonprofit organization. You may claim a tax deduction for the year you contribute to the DAF rather than the year your contribution goes to the charity. (Side note, if a DAF sounds appealing to you, stay in touch with our office and your legal professionals because proposed legislative changes may impact when donors can receive the tax deduction.)  

6. Consider giving other assets

There are other assets you can give to charity that are not associated with securities:

• Real Estate - If you have a property you no longer need, you can donate it to charity. 
• Cash - With a cash gift, you may receive a tax deduction equal to the amount of money you donated minus the value of any products or services you received.
• Life insurance - You can name a charity as the beneficiary on your life insurance contract or choose to donate the cash value accumulation each year.
• Art and collectibles - Often, gifted art and collectibles are auctioned to raise money at charity events. To use either as part of your giving, have a certified appraisal completed with reporting. This is done so that you can submit the appraisal information and the donation documentation at tax time, indicating the value of your donation. Consult your tax professional regarding how to value and report these specific assets.

Please don’t hesitate to contact Forward Investment Services to learn more about how we can help you develop a strategy that includes philanthropy in your financial plan. Our financial team is happy to work with your legal and tax professionals. And together, we can help ensure that your goals are listed and the progress towards meeting your giving goal is reviewed regularly. Contact us if you have questions or want to schedule a meeting.