Building a Legacy: How to Integrate Philanthropy Giving into Your Wealth Strategy

November 5, 2024

Incorporating philanthropy into your wealth strategy¹ aligns your financial goals with your values, offering immediate and long-term advantages. Strategic charitable giving supports the causes that matter most to you and enhances your financial plan through potential tax benefits. By integrating philanthropy thoughtfully, you can create lasting support for your chosen causes, maximize the impact of your contributions, and establish a legacy that truly reflects your values. Discover effective strategies to weave charitable giving into your overall wealth management¹ plan.

Maximizing Your Philanthropic Impact

Successful charitable giving starts with ensuring your donations have the most significant possible impact. By thoughtfully selecting the causes you care about and utilizing the right charitable vehicles, we help you maximize the effectiveness of your contributions. With the right strategy, you can ensure that your giving aligns with your values and achieves the most meaningful results, supporting the causes that matter to you while optimizing your financial plan.

Two popular vehicles that can help you structure your giving are donor-advised funds (DAFs) and charitable trusts:²

• Donor-Advised Funds: Donor-Advised Funds are a flexible and efficient way to manage charitable giving. By contributing to a DAF, you can donate, receive an immediate tax deduction, and recommend grants to your chosen charities over time. This allows you to support the causes that matter most to you on a timeline that fits your goals while maximizing the impact of your contributions. One of the advantages of a DAF is that it gives you flexibility in your charitable giving. You can make donations to the fund during high-income years to maximize tax deductions and then distribute those funds to charities when it makes the most sense for you and your financial plan.
• Charitable Trusts: Charitable trusts,² such as a Charitable Remainder Trust (CRT)² or Charitable Lead Trust (CLT),² can offer more complex benefits, especially for estate planning. These trusts allow you to contribute assets, such as stocks or real estate while receiving income or preserving wealth for heirs. At the end of a trust’s term, the rest of the assets are distributed to a charitable organization, maximizing your support. This can be a powerful tool to balance family financial needs with long-term philanthropic goals.

Tax Benefits: Reducing Tax Liabilities through Philanthropy

One of the most appealing aspects of integrating charitable giving into a wealth strategy¹ is the tax benefits. Charitable donations offer substantial tax deductions to help you reduce your taxable income while supporting causes that are meaningful to you. Strategic philanthropy can be a key component in managing tax liabilities, especially during high-income years or when planning for significant capital gains events.

Here are some ways you can reduce your tax burden through charitable giving:

1. Charitable Deductions: When you donate cash or appreciated assets to charity, you may be eligible to receive a tax deduction based on the fair market value of your donation. This is especially beneficial for assets with increased value, such as stocks or real estate. By donating these assets directly, you avoid capital gains taxes while still receiving a deduction for their total market value.
2. Estate Tax Reduction: For individuals with large estates, charitable donations can reduce the size of the taxable estate, thereby lowering estate tax liabilities. Contributions to charitable trusts² can also help manage estate taxes while preserving income for heirs.
3. Timing Donations for Maximum Impact: Charitable giving can be timed to coincide with high-income years or during major financial events, such as a business or property sale. This allows you to maximize the tax benefit of your donations. A donor-advised fund, for example, enables you to make a substantial contribution in a single year to take advantage of tax benefits while giving to charities over time.

First Western Trust offers philanthropic financial planning services to help you understand how charitable giving can fit into your broader tax strategy. By developing a personalized plan, you can reduce your tax burden while supporting causes that matter to you.

Legacy Building: Aligning Giving with Family Values

Philanthropic giving is not just a financial strategy; it’s a powerful way to build a legacy that reflects your personal and family values. Many seek to create a lasting impact through charitable giving that extends beyond their lifetime. By integrating philanthropy into your wealth strategy,¹ you can ensure that your wealth contributes to the betterment of society for generations to come.

One effective way to build a philanthropic legacy is by involving your family in decision-making. Establishing a family foundation or using a donor-advised fund as a family tool can encourage discussions around shared values and charitable goals. This strengthens family bonds and helps pass down important lessons about the responsibilities that come with wealth.

Incorporating philanthropy into your estate planning can ensure your charitable legacy lives on. Charitable trusts², endowments, and bequests are all mechanisms that can allow your giving to continue long after you’re gone. By developing a charitable wealth planning strategy,¹ you can provide for your family while supporting the causes that have shaped your life.

How First Western Trust Can Help

At First Western Trust, we understand the importance of integrating philanthropy into your overall wealth strategy.¹ Our dedicated associates take the time to get to know you, your family, and your values, ensuring that your philanthropic goals are incorporated into your financial plan. Whether you are looking to reduce your tax liabilities, build a lasting legacy, or make a meaningful impact, we offer charitable financial planning solutions tailored to your unique needs.

If you’re ready to explore how philanthropy can become a key component of your wealth strategy,¹ schedule an appointment with our team today.

Conclusion

Philanthropic giving is a powerful tool for high-net-worth individuals looking to maximize their impact while building a lasting legacy. By incorporating strategic charitable giving into your wealth strategy,¹ you can enjoy tax benefits, support causes that align with your values, and create a legacy that will benefit future generations. Partnering with a financial institution like First Western Trust ensures your giving is optimized to meet your financial and philanthropic goals.

1. Wealth Planning Services are Not a Deposit, Not guaranteed by the Bank, May Lose Value
2. Please consider the philanthropic aims and tax implications before establishing a philanthropic trust.

Philanthropy Services are offered through First Western Trust, ensuring a strategic approach to your charitable efforts.