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Charitable Giving – The Tax-Wise Way

Charitable Giving – The Tax Wise Way

Giving is rewarding. It feels good to be able to help others. Americans, especially the affluent, are some of the most charitable-minded. In fact, according to a recent AES Nation survey, 74 percent of people with assets of a half million or more make annual charitable donations. You likely give to support non-profit organizations or causes that are important to you. That’s great!

And even though giving can have its own reward, tax benefits are extended to those who give. However, according to current statistics, only one in five people use effective tax strategies for their giving. I want to discuss tax-wise strategies you can use to make the most of your contributions that can help you AND your favorite charities.

What is Tax-Efficient Giving?

Let’s start with an overview of what tax-efficient giving is. In its simplest form, tax-efficient giving involves making a significant charitable gift – either while you are alive or as part of your estate plan – and setting up your giving in the most tax-efficient manner possible.

Next, I want to share some key principles of tax-efficient giving. Structuring your charitable giving according to these principles allows you to make more meaningful contributions, including giving beyond the typical checkbook donations.

Principle #1: Tax-wise giving should be part of an overall plan.

Tax-wise giving is best accomplished as part of an overall wealth plan that addresses all your key issues, such as wealth protection, wealth transfer, and cash-flow needs.

Principle #2: Tax-wise giving focuses on your giving goals

As giving is at the heart of charitable donations, your planning should start with your philanthropic goals in mind and work to meet them in the most tax-efficient manner.

Three Charitable Planning Strategies to Consider

There are many ways you can make impactful contributions to non-profit organizations beyond check writing. I want to highlight three charitable planning strategies: charitable trusts, donor-advised funds, and private foundations.

1. Charitable Trusts

There are several different types of charitable trusts you can set up. Charitable trusts are an excellent option, especially for estate planning purposes, to mitigate taxes and transfer wealth to your heirs and charities.

2. Donor-Advised Funds

Another option is to establish a donor-advised fund. This kind of fund can be set up by your financial services firm, a community foundation, or a charitable group. The overseeing entity, such as your financial professional, will manage the fund’s day-to-day operations. You decide how much and when to invest funds that grow tax-free, as they are irrevocable funds donated to your designated charity.

3. Private Foundations

A third option is to organize a private foundation, which is managed by you, the donor, your family, or a corporation. Private foundations are often established to make grants to charities on a regular basis. This option is more costly to set up than a donor-advised fund, but it offers donors the most control and flexibility, especially when it comes to succession possibilities.

I hope this information has inspired you to think about the impact you can make with your charitable giving and how to include giving as part of your overall financial plan to reap the best tax incentives for you, your family, and your designated charities.

Chris Zeches is a certified financial planner and managing partner at Zeches Wealth Management. Zeches Wealth Management has one singular focus: To use our financial planning and tax expertise to help multi-generational families and business owners achieve more of what they love. If you have questions that are specific to your family’s situation, feel free to contact us at, and we will do what we can to help.

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If you have questions that are specific to your family’s situation, feel free to contact us and we will do what we can to help.