Develop A Charitable Giving Strategy With These Three Tools

Do you wish to use your assets to help others, protect the planet, or advance research in your favorite topics? There are a variety of methods of giving to charitable causes, each of which has its pros and cons. Which method is right for your finances and your wishes? Here's a comparison of three of the most popular ways to manage your charitable giving.

Simple Donations

There are a few ways to give money or assets directly to a favorite charity. You could opt for anything from a straight donation of cash, which is generally deducible in the year in which it's made, to donating assets like vehicles, stocks, or buildings.

If you want access to some of those funds during your lifetime, you can create an arrangement where the charity receives interest on assets or uses the assets while you receive interest. This type of giving can be spread out among as many charities as you like, but the money generally can be used for any purpose that the charity wishes. This lack of control may become an issue if you're donating large amounts. 

Donor-Advised Funds

Donor-advised funds involve setting aside a sum of money into an account for the use of one or more charities. You get a tax deduction when the money is placed in the account, so you control the tax benefits. Then, you can direct grants to distribute the money to your favorite charities over a period of time.

Donor-advised funds are allowed a larger tax deduction and generally have little management costs. They're also more private than some other giving vehicles. 

Private Foundation

A private foundation gives you the most control over where your funds go. Private foundations are entities run by whomever you choose for the purpose of giving out grants as you see fit, usually to public charities, but also to other individuals or organizations.

To avoid misuse, though, you will have to file documentation with government agencies and you may get fewer tax benefits. There's more work, but you also know that your wishes are being followed and that funds are used wisely.

Your charitable giving doesn't have to be limited to any one of these donation tools. As part of your wealth management strategy, you may wish to use all three of them to achieve different purposes. Start planning today by meeting with an experienced financial planner to discuss your goals and interests.