For many people, charitable giving starts with a simple desire to support a cause they care about. But as wealth grows and financial circumstances become more complex, there can be value in thinking about charitable giving as part of a broader financial plan.
The question isn’t simply how much you want to give. It’s also how, when and from which assets you give.
A thoughtful charitable giving strategy can help you support organizations and causes that matter to you while considering the impact on your taxes, investments, estate and family.
Charitable giving doesn’t have to be separate from financial planning
It’s common to make charitable donations independently of other financial decisions. You might write a cheque at the end of the year, respond to a fundraising campaign or support an organization when the opportunity arises.
There’s nothing wrong with that approach. But for people who give more substantially or regularly, there may be advantages to looking at giving alongside the rest of their financial life.
For example, charitable giving can intersect with:
- Income tax planning
- Investment decisions
- Retirement income
- Estate planning
- Business ownership
- The sale of a business
- Wealth transfer to children or grandchildren
A financial plan can help you understand those connections before deciding how to give.
The asset you donate can matter
Giving doesn’t always have to mean donating cash.
Depending on your circumstances, you may own investments or other assets that have increased significantly in value. In some situations, donating eligible securities directly to a registered charity can produce a different tax result than selling the investment yourself and then donating the proceeds.
That makes it worth considering where a donation should come from rather than automatically reaching for cash.
The right choice depends on your individual circumstances, which is one reason charitable giving can benefit from coordination between your financial planner, accountant and other professional advisors.
Giving can also be part of retirement planning
Retirement often changes the way people think about their money.
During your working years, the focus may be on accumulating wealth. Later, the questions become different. How much do you need to support your lifestyle? How much should remain invested? What would you like to leave to your family? And how much would you like to use to make an impact during your lifetime?
For people who have accumulated more than they expect to need, charitable giving can become part of the conversation.
A financial plan can help determine how much you may reasonably be able to give without compromising your own long-term needs.
That can make charitable decisions more deliberate. Instead of wondering whether you can afford to make a significant gift, you can see how it fits within your projected retirement income, expenses and estate.
Your estate plan is another opportunity to give
Some people want to support charities today. Others want charitable giving to form part of the legacy they leave behind.
Charitable gifts can potentially be incorporated into an estate plan through a will, beneficiary strategy or other planning approach.
But estate decisions rarely exist in isolation.
A charitable bequest can affect how much is ultimately left to family members. Tax liabilities may also arise when someone dies, particularly where registered assets, investments, real estate or business interests are involved.
That means charitable giving should ideally be considered alongside the rest of the estate rather than added as an afterthought.
Families can use giving to start important conversations
Charitable planning can also be about more than tax.
For families with significant wealth, giving can create an opportunity to talk about values, responsibility and the purpose of wealth.
Parents or grandparents may choose to involve younger generations in selecting causes to support or deciding how a family charitable budget should be used.
Those conversations can help family members think about what the family’s wealth is intended to accomplish, both now and in the future.
For some families, that can become an important part of broader intergenerational planning.
Look at the entire financial picture
A charitable strategy is strongest when it is considered as one part of a larger plan.
For example, a person approaching retirement may be simultaneously deciding when to draw income from different accounts, how to manage taxes, whether to help adult children financially, how to structure their estate and how much they want to donate.
Those decisions influence one another.
This is where a comprehensive planning approach can be valuable. Firms such as McInroy & Associates Private Wealth Management, for example, place a strong emphasis on looking at a client’s full financial picture rather than focusing on investments alone. That broader view can help identify how charitable giving fits alongside tax, retirement, estate and other financial priorities. Learn more: https://www.mcinroypwm.com/
Start with what you want your money to accomplish
There isn’t one charitable giving strategy that’s right for everyone.
For some people, giving means making smaller annual donations to several organizations. For others, it could involve a substantial gift, a long-term charitable strategy or a legacy built into an estate plan.
The starting point should be the same: deciding what you want your wealth to accomplish.
From there, financial planning can help you explore how to support the causes you care about while still accounting for your own financial needs, your family and the legacy you want to leave.
