You’ve worked hard to accumulate wealth and find success throughout your life. Giving back to important causes can be great, fulfilling way to use some of that money. Tax savings are just an added bonus on top of the personal satisfaction of helping others. We share with our clients the belief that wealth creation is not just about ever bigger portfolios. The money you earn empowers you to make deeply meaningful life decisions such as making a commitment to charitable giving. Doing these types of things allows our clients to enjoy the money that they worked so hard to earn.
Here’s a list of some great ways we recommend to give back that will also lower your tax bill:
Donor Advised Funds
These funds are options that allow you to make charitable contributions today and determine where to donate to later. Your contribution is invested in stocks until you decide where you’d like the appreciated value of your donation to be given. This is a great way to take advantage of tax savings in the current year even if you’re unsure what organizations you want to support right now.
Donating Appreciated Stock
Donating appreciated stock to charities allows you to donate more because you avoid capital gains tax. On top of that, your contribution qualifies you for an additional income tax reduction. It’s a win win for both parties. Just be sure that your charity of choice is a qualified organization.
Qualified Charitable Distributions
This form of charitable giving is done by turning an otherwise taxable IRA distribution into a tax free donation. The only downside here is that you must be at least 70.5 years old to take advantage of this.
Charitable Remainder Annuity Trust
If you’re looking for a way to make a charitable donation and to guarantee yourself some income later in life, you can use a CRAT. This is a trust that you contribute a lump sum to now and pays you a fixed annuity later. In the meantime, your initial contribution will be used to support charitable causes and to reduces your taxes.
Charitable Remainder Unit Trust
A “CRUT” as most people call it, is very similar to a CRAT except for one difference. It pays out variable payments based on market performance instead of a fixed annuity. Be warned though, both CRUTs and CRATs are irrevocable trusts so once you contribute them, there’s no going back.
Of course, our team is happy to have a conversation with you to decide which option suits you best. Contact us today!
