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Make Charitable Contributions To Benefit You & Your Favorite Charity

Charitable contributions can be an effective wealth management tool. Learn the advantages & how you can effectively benefit from using these strategies.

There are many different reasons why people choose to give money to charitable organizations. Often, the reasons are very personal — for example, you want to support a particular cause or organization you’re passionate about, or you desire to leave a personal or family legacy.
But did you know that charitable giving can also be an effective tool in your overall wealth management strategy? There are strategic ways to make charitable contributions that can benefit both you and your family and your preferred charities at the same time. 

Financial and Tax Savings

According to Rachel Watkins, senior vice president with Cadence Bank Trust, affluent individuals and families in particular can often reap big financial and tax savings and enjoy more flexibility by implementing sophisticated charitable giving strategies. 
“Depending on your income and the type of gift you’ve made, you may be entitled to a charitable income tax deduction,” she explains.* “You also could reap estate tax benefits by using gifting strategies to remove assets and their appreciation from your estate.”
Watkins says that gifts to tax-exempt charitable organizations may be given outright during a donor’s lifetime or as a bequest through his or her will. “And these gifts can take many forms,” she adds, “including cash and securities, tangible assets like art or jewelry, and even life insurance.”
One of the most popular and effective charitable giving strategies is to donate appreciated assets (such as common stock or real estate) to charity instead of donating by cash or check. “The charity will receive credit for the current market value of the asset while you can potentially avoid capital gains taxes due on the appreciation,” says Watkins. 

More Charitable Giving Strategies

Another effective charitable donation strategy is to utilize a Donor Advised Fund. This is a pool of money that is managed by a charitable organization on behalf of many donors.
“As a donor, you can direct how the money you contribute is invested, which charities will receive donations from your piece of the fund, and when they will receive them,” Watkins explains. “The charitable organization will handle setup of the fund while you pay an annual administrative fee. Meanwhile, you will receive a deduction in the year the donation is made.” 
In some instances, donations can be transferred directly to a charitable organization through an IRA Charitable Rollover if the donor is 70½ years of age or over. However, state laws differ so be sure to talk to your tax advisor about this strategy.
Yet another strategy is to utilize a Charitable Gift Annuity. This is a contract in which a charity agrees to give a fixed amount of money to one or two individuals throughout their lifetime. The charity, in turn, will receive cash, securities or other assets given irrevocably. The payments are the charity's obligation and continue for the lifetime of the beneficiaries, regardless of how the Charitable Gift Annuity fund performs.

The Role of Trusts

Trusts can also serve as a valuable charitable giving tool. Watkins mentions two kinds of charitable giving trusts in particular:

Charitable Remainder Trust— This trust is a private fund that you as a donor will set up and make donations to. “This type of trust provides you or your designated beneficiaries with taxable income for a certain number of years, including throughout your lifetime if you desire,” says Watkins. “Whatever money is left over after you die will pass tax-free to one or more charitable organizations that you've chosen.”


Charitable Lead Trust— This trust will provide fixed payments to one or more charities that you've designated for a predetermined number of years, thus giving the charity a reliable income stream. “After a specified period of time or upon your death, the remainder of the trust will transfer to your chosen beneficiaries,” Watkins explains. “A Charitable Lead Trust may reduce your tax liabilities as well as the taxes incurred by your beneficiaries.”

Read also: Bring Charitable Giving Into Your Estate Plan
To learn more about these and other charitable giving strategies, contact a Cadence Wealth Services advisor. Cadence Wealth Services has helped many affluent individuals and families implement sophisticated charitable giving strategies that have benefitted themselves and their favorite charities. Along with your attorney, accountant and financial advisor, we can serve an integral role on your wealth management team.
*Be sure to consult with your financial and tax advisors about eligible charitable giving deductions as there may be some limitations. 


This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.

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