You might not think about wealth financial planning as much during the holidays, but—believe it or not—it can help you in ways beyond material saving and investing. For example, optimized philanthropy can provide both emotional and financial benefits.
Most people know that contributing to public charities can make you feel good about yourself, help those in need, and (sometimes) facilitate new networking opportunities. However, did you know that it can also help reduce your income taxes? It’s true. There are multiple possible rewards for a cheerful giver.
Let’s consider these topics:
- Philanthropy can take many different forms
- There are many benefits to charitable giving
- Holiday philanthropy can be especially rewarding
- You can make a difference in someone’s life
Philanthropy Can Take Many Different Forms
Philanthropy is often defined as acts of generous giving, typically to support various causes, such as feeding the hungry, clothing the needy, providing a scholarship, or funding mission trips. It can come in many different forms and have far-reaching effects, depending on its magnitude and intent.
The financially independent may choose to dedicate a portion of their wealth to charitable organizations, either directly or through foundations that generate income and direct the funds toward those in need. However, if you’re inclined to give more than money, volunteers often provide their time and talents, as well.
Sometimes simply running your business and family financially can mean barely having the time to make monetary donations before trying to get in a few hours of sleep at night. Thankfully, there’s no set requirement or limit, and—when it’s done effectively from the heart—philanthropy can lead to profound positive (and sometimes lasting) change in our community.
A donor-advised fund (DAF) offers an attractive opportunity to help make positive changes in the world around you. These charitable gifting vehicles can be established at community foundations and other charitable organizations, allowing you to make contributions and claim a tax deduction upfront.
At the same time, you still have the flexibility to direct your money’s allocation over time. Those on the receiving end of donor-advised funds may wonder: Can a private foundation donate to a donor-advised fund?
The answer is “Yes.” Private foundations are eligible to contribute, just as any individual would be able. However, it’s important to understand that all contributions from private foundations must meet certain requirements dictated by Internal Revenue Services code 4945.
In other words, they must involve programs or activities external to the foundation itself. This is necessary in order for a contribution to qualify as tax deductible. Ultimately, it also means that you have another tool at your disposal when deciding how best to deploy investable assets to meet the needs of the community.
Are You Ready for the 2023 Changes to the Tax Code? We Are—And We Can Help You To Be.
There Are Many Benefits to Charitable Giving
The idea of giving selflessly has never been more important than now. By working together in meaningful ways, we can provide wealth management that capitalizes on the season’s uplifting spirit of generosity in as many ways as possible. At the same time, there are numerous potential benefits for both donors and those impacted by our charitable gifts.
When we donate strategically, philanthropy can also serve as an excellent tool for wealth preservation within generations due to its tax deductibility. It may sound odd to be able to get more, ultimately, through giving, but it’s a fact we are extremely fortunate to be able to enjoy.
On the other side of this equation lies a range of positive outcomes for causes and communities receiving philanthropic support. Marcus Aurelius is often quoted as saying that “what we do now echoes in eternity.” In the here and now, our donations can also, for example, help provide access to healthcare services in remote parts of the world where there may be limited or non-existent government aid available.
Depending on how it is approached and managed, philanthropy offers countless benefits to its donors as well as countless communities in Utah and across the globe. It’s a great feeling knowing that you are contributing positively and helping facilitate a better world for others. That’s why it remains an important part of many people’s wealth allocation strategies today.
Holiday Philanthropy Can Be Especially Rewarding
Giving during the Christmas season holds many unique benefits. During these times of abundant celebration, we often feel especially charitable due to the generous spirit in the air. That’s why it makes a wonderful means of spreading goodwill throughout the world around us.
Again, there are many other ways of participating in holiday philanthropy besides monetary donations; you can volunteer your time or donate items directly to those in need. Regularly making these contributions can also have positive side effects within your community by inspiring neighbors to get involved in their own charitable efforts.
If you’re inclined, you can also be a sort of hero, coming to an organization’s rescue: Many need significant help (sometimes just to keep their doors open) during the holidays. For maximum benefit, we can help you select a donor-advised fund(s) that the IRS approves.
You Can Make a Difference in Someone’s Life
Donating your time, money, or both can help make a phenomenal difference for multiple people. In fact, if you utilize a financial advisor to optimize your estate plan, it can also benefit your descendants. We often advocate establishing and protecting generational wealth; however, I’m referring to something else entirely in this case.
The best family legacies encompass far more than just money or assets; they pass on traditions and values. One of the best ways to do this is through, for example, a DAF or trust designed to thrive long after you’ve passed away. A child or grandchild that you model seasonal philanthropy for today can help assure that your family’s giving continues when they’re an adult.
At Scott Marsh Financial, we specialize in legacy planning, tax planning, and retirement planning for high-net-worth individuals. Contact us to learn more. In the meantime, we wish you warm holidays filled with peace, comfort, and joy.
