A Five-Part Framework for Amplifying Your Charitable Giving

By Mike Smalley, CFP®, Wealth Manager, Merit Financial Advisors

Americans continue to be generous with their money, but could they be more strategic? According to the Giving USA 2024: The Annual Report on Philanthropy for the Year 2023, total giving grew 1.9% to an estimated $557.16 billion for U.S. charities in 2023 from individuals, bequests, foundations, and corporations.

With no shortage of needs stemming from natural disasters like Hurricane Milton or ongoing food insecurity, which affects 18 million U.S. households, the question is not who or what organizations need support but how to best support their mission. Today, charitable organizations have found clever ways to streamline gifting assistance by harnessing the power of technology and social media. Now, individuals must consider whether their money could be working harder for them and the causes they support.

Analyzing the current landscape

Charitable giving should always be driven by the causes closest to an individual’s heart. While the ways of gifting have increased over the years, many individuals aren’t fully aware of all the gifting options at their disposal, like Donor Advised Funds (DAFs), which allow for significant distributions to qualified charities without the administrative burden. Qualified charitable distributions from pre-taxed IRA accounts also grandfather that tax-free gift directly to the charity, offering a tremendous double whammy. 

The Tax Cuts and Jobs Act (“TCJA”) is also set to expire in 2025, kicking off a rollercoaster of market activity and potentially changing the face of charitable giving. When TCJA was initially enacted, it nearly doubled the standard deduction, which resulted in individuals rarely needing to itemize their deductions and making charitable gifting less plentiful. With the potential expiration looming, the return to itemizing may also potentially increase gifting.

Macroeconomic conditions remain under a microscope

Disposable income remains tight, and although inflation has largely stabilized, the cost of living remains high. When budgets must tighten to weather a financial storm, charitable giving becomes an easy target. Luckily, a change in mindset can help support families and charities through leaner times.

Determining corporate gift and matching policies at your disposal is an easy first and no-cost step. Or consider dividing your donations into smaller monthly allocations to keep home finances in check.

If giving financially is off the table, consider other resources like your time and expertise. Helping to walk a dog at a humane center, volunteering at a food bank, or providing strategic counsel to a board of directors are all worthwhile and needed endeavors. In-kind donations like clothing and canned goods are always appreciated and in need. Look to local resources first to see how you might immediately benefit your community.

Charitable gifting under President Trump’s New Administration

With President-Elect Donald Trump taking office in January, several policy changes will likely be enacted that affect your charitable giving strategy beginning in 2025. We’ll likely keep the current provisions under the TCJA, lessening tax incentives for charitable giving and providing additional charitable donation benefits for high-net-worth individuals.

Trump has previously expressed intentions to eliminate the Estate Tax, which will significantly impact how they are established and call into question whether individuals want to leave significant money to charity if they won’t be affected by huge tax penalties. On the whole, deregulation will also help charities as they won’t have as many restrictions, increasing their flexibility, and perhaps operational efficiency. 

Five questions to help establish your charitable gifting strategy

Establishing an effective and advantageous personal charitable gifting strategy comes down to good communication and great partners. These five questions can help provide clarity on how to best proceed with your gifting.

1. What’s important to you and your family, and where do you want your time and money to go? At the end of the day, your values will define your legacy. Given the collective resources at your disposal, determine the areas or industries where you want to establish the most impact.
2. What is your budget, and can that amount be flexible? This is all about dollars and cents. Work with your financial team, which includes your accountant and financial advisor, to determine how much money you can easily gift and if it is more advantageous for you to expand your budget based on your tax situation.
3. Which charities match your criteria, and are you compatible? Using the amount you have to give and the things you are passionate about, create a list of where your money would have the most impact. Do your research to ensure those organizations will be good stewards of your money. Ask for a meeting to better understand their vision and purpose and how it might align with yours. It’s also beneficial to understand how much they truly need to meet their goals and if in-kind donations are also helpful to benefit their cause.
4. What is the best way to fund that charity? Rely on your financial team to determine the best way to fund it: directly from your checkbook, from a highly appreciated stock or brokerage account, or through an IRA?
5. Make it a family bonding experience. Consider starting a new tradition by having each family member present a charity to discuss together during the holidays, providing a great way to have an open dialogue about shared ideals and family values. 

At the end of the day, using the financial experts at your disposal can mean the difference between a nice gesture and a knock-out charitable giving plan that benefits both charities and individuals.

Curious about working with an advisor who can help with your charitable gifting strategy? Contact Merit Financial Advisors today for a complimentary consultation.