If you’re thinking of charitable giving, there are several different avenues you can choose to take. Each type of charitable giving can benefit those in need, so it’s really just a matter of finding the best fit for you and your family.
As we explore 8 different types of charitable giving, you can determine which one or combination of giving types will benefit those in need while helping you reach your charitable goals.
Types of Charitable Giving
1. Cash
Monetary donations are the easiest ways to give to charity. Rather than giving cash, you can make your donation by credit card or personal check. This makes it easier to document and gives you a paper trail of your donation. When giving cash as a donation, you may be asked to turn your one-time gift into a monthly contribution. This can give organizations more stability year-round and can be easier on your budget rather than donating in one lump sum.
2. Stocks and Other Securities
You may decide to make your donation through stocks and other securities (mutual funds, etc.).Some people choose to do this because any stocks that were bought over a year ago and hold a current value greater than their original cost can not only be donated but also become eligible for a tax deduction that is equal to the stock’s full fair market value. There is also no capital gains taxes to worry about.
3. Charitable Trusts
If you are thinking about a charitable trust, there are two types to consider, a charitable lead trust (CLT) and a charitable remainder trust (CRT). With a CLT, the charitable organization of your choice gets cash flow from assets each year for a fixed period. After that time, the remaining assets can be sent to other beneficiaries.
A CRT pays annual distributions to you or other beneficiaries for a period. When that time is over, the charity of your choice receives the remaining assets. Whether you choose a CLT or a CRT, you’ll need an estate planning attorney or financial advisor to help set it up and handle annual administrative duties.
4. Assets
You may also choose to give your assets to charity. Boats, cars, artwork, and jewelry are all examples of assets you choose for charitable giving. Many organizations will either use items for their own operations (i.e. cars), give the items to someone in need, or auction them off for cash.
5. Real Estate
Real estate can also be a form of charitable giving. If you have a property you no longer use, you may consider donating it to charity. If you are still living at the property, you can set it up to become a charitable contribution and have the deed transferred after your death.
It’s important to note that the IRS requires you to report non-cash contributions of property value of more than $500. Real estate donations must also be properly documented.
6. Private Foundations
Private foundations are charities that are set up as charitable trusts or corporations. A private foundation is a great way to give to causes that are close to your heart. It is also a good way to get the family involved. There are stricter guidelines and tax laws for private foundations, but these groups can give grants and you can retain control of the assets you donate.
7. Donor-Advised Funds
Donor-advised funds (DAF’s) are a type of charitable giving where you donate a non-refundable amount to a non-profit DAF Sponsor. With a donor-advised fund, you can direct the fund’s administrator to send money to the charitable organizations you wish to support. You can also set up your contributions to continue after your death.
When it comes to charitable giving, these are just some of the options you can consider. Once you decide the type of gift you want to present and how frequently, you can determine which option best suits your philanthropic wishes.
8. Business Interests
Ownership interests in a business may also be donated to charities (including a DAF), though this type of gift may require much more planning and consideration than the other assets previously discussed. Nevertheless, gifts of business interest may qualify to avoid capital gains taxes, create a substantial tax deduction, and might be able to generate income for the donor (see CRT above). Always consult business, legal, and tax advisors when considering gifting a business interest.
The Bottom Line
When it comes to charitable giving, you can choose to leave your legacy in several different ways. Whether you choose to donate money, assets, real estate, or establish a private foundation, you are doing your part to help those in need.
No matter what type of gift you give, be sure to familiarize yourself with the tax rules and any other regulations. You want to be sure you are documenting all gifts properly to avoid any confusion or legal troubles. Donors should consult their legal and tax advisors to ensure proper compliance.
If you would like to further explore charitable giving and your current situation, send me an email @ richard@successwithpurpose.org.
