Charitable Giving

How to Bring Charitable Giving Into Your Financial Plan

October 05, 2021

If helping others is one of your financial goals, consider tools and strategies that may help you maximize your charitable gifts.

Selecting a Charity and Giving Strategy

In addition to cash contributions, consider donating appreciated assets, including securities if you've owned them for at least a year. The donated asset is assessed at full fair market value. You can take a tax deduction and avoid payment of capital gains taxes on the security.

Another way to give is through a donor-advised fund. Here's how it works: You contribute cash, stocks, or certain other assets, which are in turn invested in one or more mutual funds or other investment options. The investment company manages the funds or investment options to potentially increase the value of the initial contribution and produce a steady income stream. You can recommend eligible charities for grants from the fund over a period of time while taking an immediate tax deduction.

Trusts may also play a role in a giving plan. They could help charities while benefiting you now and your heirs later. One popular option is a charitable remainder trust (CRT), which is an irrevocable, tax-exempt trust that can be funded with a variety of assets, including stocks, bonds, mutual funds, and real estate. The trust provides you with income for a specified time period, after which assets are transferred to a charity. You'll receive a tax deduction based on the amount the charity is estimated to receive after expenses.

With an annuity CRT, you receive either a fixed monthly or annual payout for the trust's duration based on the value of the initial assets in the trust. A unitrust CRT also generates regular income, but you receive a fixed percentage based on an annual valuation of the assets. Although a unitrust CRT takes on more market risk than an annuity CRT, it may outpace inflation and you can transfer additional assets to it, unlike with an annuity CRT.

Another possibility: a charitable lead trust. It provides a stream of income to a charity for a specific period. Upon dissolution of the trust, your heirs would potentially receive the remaining assets free of estate taxes.

There are other ways to leverage your assets to benefit others while helping you pursue your financial objectives. Speak with your financial advisor, as well as your estate planning attorney and tax professional, about these and other possibilities.

For additional information, call Washington Trust Wealth Management at 800-582-1076 or submit an online contact form.

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This material is presented for informational purposes, and nothing herein constitutes legal, accounting, or tax advice. Please consult with an attorney or tax professional regarding your specific financial, legal or tax situation.

The views expressed here are those of Washington Trust Wealth Management and are subject to change based on market and other conditions. Investment recommendations and opinions expressed in these reports may change without prior notice. All material has been obtained from sources believed to be reliable, but its accuracy is not guaranteed.