By Paul Ludacka, CLU®, ChFC®, CFP®, Northwestern Mutual Wealth Management Advisor based in Omaha, NE
Charitable giving – to Grace University or another beloved nonprofit – is a top priority for many of us. These causes are extensions of who we are. And often times, these organizations helped make us who we are.
Anne Frank once said, “No one has ever become poor by giving.” That is true – but there are strategies to make your charitable gift go farther for an organization.
Many people ask me for advice before they give, because they want their financial contribution to make a lasting and meaningful effect. It’s wise to pause, think and plan before you give. As part of a full-picture financial plan, you can understand your options, identify and prioritize your long-term goals, and ensure that your charitable giving doesn’t sacrifice any other financial goals.
That’s the main difference between “giving” and “planned giving.” Through planning, you may be able to minimize the impact of income taxes, capital gains taxes and estate taxes – and give even more to charity.
As part of a comprehensive financial plan – I recommend three giving strategies to today’s philanthropic families:
- Be direct
Giving directly to a charity can make a lot of sense, especially if you already have a planned charitable giving strategy in place and if it’s important to send your gift to the nonprofit immediately. However, what you give and how you contribute matters. Generally, gifts to a public charity are eligible for a larger tax deduction in comparison to a private foundation. Additionally, gifts of cash may be eligible for a larger deduction than gifts of stock or retirement savings. It’s wise to work collaboratively with a financial advisor and a tax professional to identify that most efficient and effective giving plan for you.
- Give life
For many, life insurance is often an overlooked and underestimated strategy for charitable giving. Through this strategy, a donor can gift a policy or name a nonprofit as a beneficiary, helping to provide a sizeable donation to a beloved cause. This may allow the giver to make a more substantial contribution than would otherwise be possible. As an added benefit, a charity that owns a life insurance policy has the option to access the policy cash value with loans or withdrawals, if needed. These benefits are generally tax-free for the charity.
- Trusts and foundations
For some givers, a charitable trust helps them to give and also keep their more complex estate plans intact. For others, a private foundation may be of interest, enabling them to build a lasting legacy of giving for generations to come.
Giving is great – but “planned giving” may help you to maximize your charitable gift. Consider working with a financial expert and a tax expert so you can leave behind the kind of legacy you want.
Article prepared by Paul Ludacka, CLU®, ChFC®, CFP® with the cooperation of Northwestern Mutual.
Ludacka is a Wealth Management Advisor with Northwestern Mutual, the marketing name for The Northwestern Mutual Life Insurance Company (NM), Milwaukee, Wisconsin, and its subsidiaries. Ludacka is an Insurance agent of NM based in Omaha, NE. To contact Ludacka, please call 402-891-2304, email him at email@example.com or visit his website at paulludacka.com.