By creating and monitoring a charitable strategy, you can help protect yourself against making risky giving decisions at the expense of your own financial stability.Īvoiding charity fraud: Research is a huge part of any charitable giving strategy, and getting to know the charities you donate to can help protect you against legal liability as a result of charity fraud. This will likely require you to hire an investment advisor and up your investment knowledge so you feel confident in how the foundation’s charitable dollars are being handled.ĭonating appreciated securities: By choosing to donate part of your portfolio, you can both give a valuable asset to charity and reduce portfolio risk by diversifying, without having to sell stocks and incur capital gains tax.Ĭharitable strategy helps avoid overspending: While a charitable giving strategy can help you maximize your donation to charity, it also forces you to set a charitable budget and avoid donating more than you can give or using charitable vehicles that don’t make sense for your net worth. Private foundations and investment experience: Choosing a private foundation as your mode of charitable giving means gaining the responsibility of managing and investing the foundation’s principal fund. A 2010 study of high net worth philanthropy by The Center of Philanthropy at Indiana University found that donors were less risky with a philanthropic portfolio than with their personal portfolio, with over 25 percent saying they were completely risk averse with their philanthropic investments. For donors that would otherwise have to sacrifice their charitable goals to protect their own finances, trusts and annuities can be an appealing option.Ĭhanging investment objectives: When managing a philanthropic portfolio, your asset allocation and risk tolerance may be vastly different from your personal portfolio. Providing retirement income: Charitable gift annuities and charitable remainder trusts allow you to give a sizeable amount to charity while still providing you with a retirement income through annuity payments or annual distributions. Since charities can avoid income taxes on retirement accounts while your family cannot, it often makes sense to leave your IRA or 401(k) to charity and your non-retirement assets to your family. Before choosing this option, you should check to see if your plan has any restrictions on designating charities as beneficiaries. Gifting retirement accounts: Rather than naming a relative or friend as the beneficiary of your retirement account, another option is to name a charity. That’s to say that if you’re nearing retirement and find yourself with insufficient retirement savings, you will likely want to donate to your own retirement fund before donating a large amount to charity. A comprehensive financial plan should address 6 main areas: retirement, investments, insurance, estate, taxes, and cash flow. Learn more about some of the points to consider when implementing charitable giving strategies into your plan.īudgeting for charitable funds: The size of your retirement funds, as well as how near you are to retirement, will likely play a role in the amount and the ways you are able to give.
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