A Guide to Choosing the Ideal Charitable Giving Account

Welcome to our latest blog post. We’ll be exploring the world of charitable giving accounts and how they can help you become a more strategic, effective, and impactful philanthropist. 

As a highly accomplished individual, you’re no stranger to seeking ways to expand your charitable contributions and make a lasting difference in your community, faith-based organizations, or university. However, with countless charitable giving account options, finding the perfect fit can take time and effort. 

That’s where a knowledgeable wealth manager in Utah, like Cogent Strategic Wealth, can provide personalized advice and sophisticated tax planning strategies to help you make the best decisions for you and your family, including future generations. 

This blog will discuss the following topics:

• What types of charitable giving accounts are right for you?
• Paying taxes: how to protect your heirs
• The benefits of working with a Personal CFO

What types of charitable giving accounts are right for you?

Charitable giving is a way for successful high-net-worth individuals like yourself to create a lasting impact on the world and support causes dear to your heart. As a fiduciary wealth manager, our mission at Cogent Strategic Wealth is to guide you through various charitable giving accounts and help you make suitable investment and tax decisions to maximize the impact of your donations. 

Donor-Advised Funds (DAFs)

Donor-Advised Funds (DAFs) have gained popularity among philanthropists due to their flexibility, convenience, and significant tax advantages. With a DAF, donors can contribute cash, securities, or other assets to a sponsoring organization that invests the funds and distributes them to other 501(c)(3) charities at a later date..  

This allows donors to enjoy an immediate tax deduction for their contributions and to minimize or eliminate your capital gains taxes on donated, highly appreciated securities, even if they have not selected the charities they want to support. Additionally, DAFs offer anonymity, as donors can make their grants anonymously to their selected charities. Furthermore, DAFs are known for their simplicity and cost-effectiveness, often requiring less paperwork and lower administrative fees than private foundations. 

A fiduciary wealth manager can assist you in establishing a DAF.

Charitable Trusts

Charitable trusts are another popular vehicle for charitable giving, combining potential tax benefits with the ability to customize your giving strategy. There are two main types of charitable trusts:

Charitable Remainder Trusts (CRTs): CRTs provide income for you, your spouse, or your designated beneficiaries for a specified term or their lifetimes. At the end of the term, the remaining assets are transferred to the designated charitable organization. CRTs can help you reduce your taxable estate, avoid capital gains taxes on appreciated assets, and receive a current charitable tax deduction.

Charitable Lead Trusts (CLTs): These work in reverse of CRTs. They provide a stream of income to a designated charity for a specified term. At the end of the term, the remaining assets are transferred back to you or your beneficiaries. CLTs can help you reduce your taxable estate and significantly benefit your chosen charities while you are still alive.

Private Foundations

Private foundations are independent legal entities offering substantial control and flexibility in managing your charitable giving strategy. You can create a private foundation by establishing a nonprofit organization and funding it with your assets. As the founder, you can define the foundation’s mission, appoint board members, and oversee its activities. Private foundations require a substantial amount of administration. 

They are subject to strict regulations but can be a powerful tool for creating a lasting legacy and significantly impacting your chosen causes.

Community Foundations

Community foundations are not-for-profit organizations that pool and manage charitable donations from multiple donors to address the financial needs of a specific geographic region. By contributing to a community foundation, you can leverage the expertise of local leaders to identify and support the most pressing needs in your community. Community foundations offer a simpler, more cost-effective alternative to private foundations while still providing tax benefits and the opportunity to create a lasting impact.

As you can see, there are a variety of options when it comes to selecting charitable giving accounts. As fiduciary financial advisors, the Cogent Strategic Wealth team can help you navigate these options and make informed decisions that align with your values, tax planning, and financial goals. 

Paying Taxes: Protecting Your Heirs

Proper charitable giving planning is a critical aspect to consider when you want to protect your heirs from hefty tax burdens. By thoughtfully organizing your charitable contributions, you’re supporting causes that matter to you and ensuring that your loved ones receive their inheritance without unnecessary financial strain. 

The key is to use the right tax planning strategies and charitable accounts for your giving, such as donor-advised funds or charitable trusts, which can provide significant tax benefits for you and your heirs.

Imagine this: instead of leaving a considerable portion of your estate to the government in the form of taxes, you can direct those funds towards making a real difference in the world through your favorite charities. 

This way, your heirs receive their rightful share of your assets without a large tax bill burdening them. Taken even further, you may build a multi-generational legacy of giving for you and your heirs. Plus, you’ll be remembered as someone who cared deeply about making a positive impact.

Remember, proper planning is essential to protect your family and support the causes you believe in. So, consult with a professional advisor to develop a tailored charitable giving plan that maximizes the benefits for everyone involved.

The Benefits of Working with a Personal CFO

In today’s complex financial landscape, partnering with a Personal CFO is essential for successful high-income earners who want to nurture and protect their wealth. One area in which a Personal CFO can be particularly beneficial is in creating and managing charitable giving accounts, allowing you to make a lasting, positive impact on the causes you care about while maximizing your tax benefits.

Cogent Strategic Wealth employs a Design | Build | Protect process to manage your assets, ensuring they align with your long-term vision and values. 

In the Design phase, we work with you to create a comprehensive, personalized financial plan that considers your wealth accumulation goals, risk tolerance, and philanthropic aspirations. 

We then move to the Build phase, creating and managing a customized charitable giving account structured to maximize your asset’s financial and societal benefits.

Lastly, in the Protect phase, we continually monitor your financial situation and the performance of your charitable giving account(s), making adjustments to ensure your wealth is protected for the rest of your life and your spouse’s life.

Cogent Strategic Wealth offers personalized management and oversight services tailored to your unique financial goals and circumstances. With our expertise and guidance, you can focus on what truly matters to you, knowing your wealth-giving aspirations are being achieved in the most efficient manner possible. 

For informational and educational purposes only and should not be construed as specific investment, accounting, legal or tax advice. Cogent Strategic Wealth provides investment advice only through individualized interactions. Certain information is based upon third-party data, which may become outdated or otherwise superseded without notice. Third-party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio nor do indices represent results of actual trading. Information from sources deemed reliable, but its accuracy cannot be guaranteed. Performance is historical and does not guarantee future results. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency have approved, determined the accuracy, or confirmed the adequacy of this article. © 2023, Cogent Strategic Wealth®