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Maximizing the Impact of Your Charitable Giving: Government Incentive Monetization™

Maximizing the Impact of Your Charitable Giving: Government Incentive Monetization™

March 12, 2024

Winston Churchill is credited as saying, “we make a living by what we get, we make a life by what we give.”  This sentiment helps explain why so many successful individuals and families make charitable giving a part of their lives and their overall planning.

Successful people did not get that way by accident, and therefore many of these individuals are seeking ways to make their charitable donations go further. To that point, while cash donations are the most common method of giving, they might not always be the most tax-efficient or impactful way to support causes we care about. 

That's where Government Incentive Monetization™ (GIM™)* may come into play.  This strategy might be able to offer proactive and thoughtful donors the opportunity to amplify their contributions, make a more significant difference, and assist with their personal tax planning.

Let's briefly look at GIM™ and then delve into some key strategies and considerations for maximizing the impact of your charitable giving.

What is GIM™?

GIM™ is a process ASE Private Wealth developed and refined that identifies incentives in the tax code that seek to help our clients reduce their overall tax burden.  Working with professional tax advisors, you can identify specific code provisions that apply, or may apply, to you and your financial situation and allow you to reduce your overall tax burden.  

To learn more, you can read our past blog on the topic at this link.

Applying the fundamentals of GIM™ to charitable giving, you may identify strategies that allow you to support causes you care about with greater impact while also providing benefits to your tax planning.

Potential Charitable Giving Strategies

While cash is the most common means by which charitable donations are made, there are other strategies that can be implemented to help fulfill charitable goals in a manner that may help to magnify the impact of the gift while also benefiting the donor.  Here are a few to consider.

Highly Appreciated Stock: One powerful way to give is by donating highly appreciated stock instead of cash. By donating appreciated assets, such as stocks, bonds, or mutual funds that have grown in value, you can avoid paying capital gains tax on the appreciation while still receiving a tax deduction for the full fair market value of the asset.

Qualified Charitable Distribution: Similar to donating highly appreciated stock, Qualified Charitable Distributions allow individuals who are 70½ years old or older to donate up to $100,000 annually directly from their IRA to qualified charities without having to count the distribution as taxable income.

Donor Advised Funds: Donor Advised Funds (DAFs) offer a flexible and tax-efficient way to manage charitable donations. By contributing to a DAF, donors can receive an immediate tax deduction while retaining the ability to recommend grants to their favorite charities over time. This strategy allows donors to take advantage of tax benefits upfront while strategically distributing funds to causes they care about.

Stacking for Larger One-Time Deductions: Stacking involves bundling multiple years' worth of charitable donations into a single tax year to exceed the standard deduction threshold. By strategically timing your donations, you can maximize your tax savings and provide a more significant impact to the organizations you support.

Keep These In Mind When Giving

Now, let's consider some key points to building a structured approach to your giving:

  1. Be Intentional with Your Giving. Take the time to research and identify causes that resonate with you on a personal level. Consider the impact your donations can have locally and in your community. By aligning your giving with your values and priorities, you can ensure that your contributions make a meaningful difference where it matters most to you.
  2. Plan Ahead. Start your charitable planning at the beginning of the year rather than waiting until the last minute. By mapping out your giving strategy early on, you can avoid being caught up in year-end rushes and ensure that your donations are allocated strategically for maximum impact.  Learn more about beginning of the year planning here.
  3. Evaluate Efficiency. When choosing organizations to support, consider their operational efficiency and the percentage of funds that go directly to those in need versus administrative or overhead expenses. Look for charities with a high percentage of funds allocated to program services, as this indicates that your donations are being used effectively to support the cause.

Make A Real Difference

By incorporating these strategies and principles into your charitable giving approach, you can make a more significant impact and optimize the tax benefits of your donations. 

Government Incentive Monetization™ provides a valuable framework for proactive donors to leverage their resources for the greater good. So, whether you're passionate about supporting education, healthcare, environmental conservation, or any other cause, consider exploring these innovative giving strategies to amplify your impact and make a difference in the world.

And remember, at ASE Private Wealth™, we work with our clients and their professional advisors, such as tax and legal professionals, to identify and navigate opportunities and obstacles to create a bespoke action plan to most effectively meet their goals.

*Government Incentive Monetization™ (or GIM™) is a proprietary concept created by ASE Private Wealth and not industry terminology.